2008 Proposed PPS Rules

June 7, 2007

Leslie Norwalk, Acting Administrator
Centers for Medicare & Medicaid Services
U.S. Department of Health and Human Services
Attention: CMS-1533-P
P.O. Box 8010
Baltimore, MD 21244-1850

Dear Ms. Norwalk:

On behalf of the Texas Hospital Association’s 507 member-hospitals and health systems, please accept comments regarding the proposed Medicare hospital inpatient Prospective Payment System rules identified as CMS-1533-P.

Of great concern is a provision in the rules to prospectively reduce payment predicated upon anticipated coding behavior. Once again, CMS appears to be using the regulatory process to achieve policy objectives outside the legislative process. No data exist to support CMS’ assumption of future coding behavior. THA encourages CMS to discontinue using the regulatory process to achieve policy goals; this behavior undermines CMS’ credibility.

The following comments are offered on specific provisions of CMS-1533P.

DRG Reclassifications
The significant change caused by implementation of the Medicare-Severity-DRG system requires a transition period to permit hospitals to adjust to changes in payment, which will redistribute some $800-$900 million among the nation’s hospitals. Dramatic changes to PPS require that fiscal intermediaries be well-prepared for efficient implementation. CMS has a responsibility to insure that systems function properly and that hospital payments are accurate and made without delay. Reasonable testing and assurance of system adequacy suggests use of a phased-implementation of the MS-DRG system beginning in 2009.

Capital Update
THA opposes the elimination of capital payment updates. This policy adversely will impact a growing state like Texas that requires increased hospital capacity to meet current and future needs. Congress has not directed CMS to eliminate capital payments. An action that will have such broad and far-reaching impact should be implemented only with congressional direction. Texas hospitals stand to lose $25.6 million under this proposal in 2008.

Behavioral Offset
The CMS proposed behavioral offset is not supported by any data. CMS should address its concerns about coding through a comprehensive education program for fiscal intermediaries prior to implementing the new MS-DRG system. In addition, CMS should work with its FIs to identify coding problems and resolve them quickly, especially during the first year of implementation.

Complications/Co-morbidity List
Many common secondary diagnoses that justify use of increased resources were eliminated. This broad, indiscriminate policy is inappropriate since it will reduce DRG payments that are justified by the patient’s medical condition. This provision should be revised to recognize the appropriate use of more resources and adjust payments accordingly.

Recalibration of DRG Weights
The hospital-specific relative value methodology is a flawed concept. Using cost reports to establish cost-based DRG weights appears to have caused unexpected distortions. Allowable flexibility in the development of cost reports requires increased FI and hospital training if cost reports are to be used appropriately to establish DRG weights.

Occupational Mix Adjustment
CMS is justified in seeking an approach to encourage all hospitals to provide required data. However, the inaction of one hospital within a community should not adversely impact other facilities that have submitted data. For FY 2008, the CMS proposal to use the average adjustment for non-responding hospitals is reasonable. However, for subsequent years, CMS should develop procedures to encourage hospital compliance without penalizing other community hospitals that have complied.

Replacement Devices
The CMS proposal to reduce DRG payments by the cost of recalled devices that are replaced at no cost to the hospital skews fundamental concepts inherent within PPS. The proposal artificially reduces the cost basis of how future payments are computed. Since the “free” replacement device is an anomaly, it should not be considered in computing future DRG values. This proposal should be withdrawn.

New Technology
CMS policies should encourage prompt implementation of new drugs, technology and services to the benefit of beneficiaries. Proposed policies do not support this goal. THA supports prompt implementation of ICD-10-CM with sufficient lead time for planning and execution.

Thank you for the opportunity to submit comments. Texas hospitals hope that CMS will modify this proposed rule, and refrain from using the regulatory process to achieve budget goals rather than focus on providing Medicare beneficiaries with appropriate, efficient care.