CMS signals it got message on reimbursement rule

An aggressive campaign by the medical-device and hospital industries to get Medicare to revise its controversial reimbursement plan for medical care appears to be paying off.

At the urging of these two sectors, along with physician and patient groups, at least 245 members of Congress have signed on to critical letters to the Centers for Medicare and Medicaid Services (CMS) over the last two months about its plans to reconfigure the formulas used to determine how, and how much, Medicare pays for services performed inside hospitals.

The changes would have a particularly negative effect on device makers by creating disincentives for hospitals to purchase costly new technologies, even if they could be shown to be more effective, the Advanced Medical Technology Association (AdvaMed) has argued.

In a letter delivered to Capitol Hill on Thursday, CMS Administrator Mark McClellan suggested that he had heard those complaints and taken them to heart. McClellan sent the letter to respond to a July 13 letter sent by Sen. Rick Santorum (R-Pa.) and 52 other senators. The final version of the regulation could be issued as soon as Tuesday.

CMS received similar letters from Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and ranking member Max Baucus (D-Mont.); Rep. Nancy Johnson (R-Conn.), chairman of the Ways and Means Committee’s Health Subcommittee; and Rep. Phil English (R-Pa.) and 188 House colleagues.

In an op-ed in today’s issue of The Hill, Grassley reiterates his concerns. “Implementation should be delayed because the proposed changes simply need more work,” Grassley wrote.

A Finance Committee aide said that, while there is no way to know for sure what CMS will do, “With close to 200 members of Congress requesting that CMS delay implementation of its proposed changes, perhaps we will see some type of delay.”

Even a partial retreat by CMS would represent a significant victory for the medical-device and hospital industries.

These revisions to the hospital-payment system are a high priority for the Bush administration, which has undertaken a broad strategy of reconfiguring the Medicare payment systems for most providers. The administration maintains that the existing systems are out of date and do not direct Medicare dollars toward the best, most efficient healthcare services.

In April, CMS published a proposed regulation that would enact the biggest changes to the so-called hospital inpatient prospective payment system, or IPPS, since it was instituted in 1983.

The rule would change the basis for Medicare’s payments to the cost of medical procedures, rather than the prices hospitals charge for them. CMS also proposes to rebalance the payments to direct higher fees to services for more severe ailments. The two sets of reforms would be implemented in successive years, beginning in 2007. The regulation would not change the total amount Medicare spends on inpatient hospital care for beneficiaries.

AdvaMed, the American Hospital Association (AHA), the Federation of American Hospitals and a plethora of other healthcare interest groups attacked the rule on multiple grounds.

AdvaMed has been particularly vocal, engaging in a major lobbying effort combined with an advertising and public-affairs campaign in Washington and in the home districts and states of lawmakers on key committees. Similarly, the AHA encouraged its member hospitals to become involved, which brought to bear important interests in practically every congressional district.

Although the interest groups and lawmakers involved have endorsed the concept of improving the accuracy of Medicare payments, they expressed misgivings about the way CMS proposes to do it.

The groups questioned the cost data CMS used to formulate the new payments, criticized the methodology that would calculate payment rates, maintained that the change to cost-based payments and the redirection of money to more severely ill patients be done concurrently, and contended that the entire rule should be put off a full year to hammer out the details.

The lobbyists seem to have convinced many lawmakers. The letters from Santorum, Grassley and Baucus, Johnson, and English mainly adopted the same arguments.

In his response letter to Santorum, McClellan indicated that the agency was seriously considering the message it was receiving. “We are acutely aware of the disruptions that could occur if major changes are made too quickly or inappropriately,” McClellan wrote.

CMS, in an unusual move, publicly released its response letter to Santorum.

Santorum’s communications director, Robert Traynham, expressed confidence that CMS would heed the lawmakers’ concerns. Likewise, one Senate aide said, “All of the indications that I’ve gotten back from folks is that CMS is taking steps in the right direction.”

AdvaMed President Stephen Ubl said the device group interprets the letter as a sign that CMS “intends to make significant changes in the final rule. … We were heartened to some degree.”

The AHA, too, is cautiously optimistic that the campaign has had an effect.

“We are pleased that CMS recognizes the concerns we have raised and indicates they will be making modifications to address them,” said AHA spokeswoman Alicia Mitchell.

One key element of AdvaMed’s recommendations, however, does not appear to be a part of CMS’s plans, Ubl said. According to Ubl, while the letter does not suggest that Medicare will wait until 2008 to put the rule in place, it does indicate an openness to phasing in the regulation to minimize the negative effects on device makers and hospitals.