Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2004 rates. Final rule

We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital costs to implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this final rule, we are describing changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes are applicable to discharges occurring on or after October 1, 2003. We also are setting forth rate-of-increase limits as well as policy changes for hospitals and hospital units excluded from the IPPS that are paid on a cost basis subject to these limits. Among other changes that we are making are: changes to the classification of cases to the diagnosis-related groups (DRGS); changes to the long-term care (LTC)-DRGs and relative weights; the introduction of updated wage data used to compute the wage index; the approval of new technologies for add-on payments; changes to the policies governing postacute care transfers; payments to hospitals for the direct and indirect costs of graduate medical education; pass-through payments for nursing and allied health education programs; determination of hospital beds and patient days for payment adjustment purposes; and payments to critical access hospitals (CAHs).     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2006 rates. Final rule

We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs to implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this final rule, we describe the changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. We also are setting forth rate-of-increase limits as well as policy changes for hospitals and hospital units excluded from the IPPS that are paid in full or in part on a reasonable cost basis subject to these limits. These changes are applicable to discharges occurring on or after October 1, 2005, with one exception: The changes relating to submittal of hospital wage data by a campus or campuses of a multicampus hospital system (that is, the changes to Sec. 412.230(d)(2) of the regulations) are effective on August 12, 2005. Among the policy changes that we are making are changes relating to: The classification of cases to the diagnosis-related groups (DRGs); the long-term care (LTC)-DRGs and relative weights; the wage data, including the occupational mix data, used to compute the wage index; rebasing and revision of the hospital market basket; applications for new technologies and medical services add-on payments; policies governing postacute care transfers, payments to hospitals for the direct and indirect costs of graduate medical education, submission of hospital quality data, payment adjustment for low-volume hospitals, changes in the requirements for provider-based facilities; and changes in the requirements for critical access hospitals (CAHs).     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2008 rates

We are revising the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs to implement changes arising from our continuing experience with these systems, and to implement certain provisions made by the Deficit Reduction Act of 2005 (Pub. L. 109-171), the Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432), and the Pandemic and All Hazards Preparedness Act (Pub. L. 109-417). In addition, in the Addendum to this final rule with comment period, we describe the changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. We also are setting forth the rate of increase limits for certain hospitals and hospital units excluded from the IPPS that are paid on a reasonable cost basis subject to these limits, or that have a portion of a prospective payment system payment based on reasonable cost principles. These changes are applicable to discharges occurring on or after October 1, 2007. In this final rule with comment period, as part of our efforts to further refine the diagnosis related group (DRG) system under the IPPS to better recognize severity of illness among patients, for FY 2008, we are adopting a Medicare Severity DRG (MS DRG) classification system for the IPPS. We are also adopting the structure of the MS-DRG system for the LTCH prospective payment system (referred to as MS-LTC-DRGs) for FY 2008. Among the other policy decisions and changes that we are making, we are making changes related to: limited revisions of the reclassification of cases to MS-DRGs, the relative weights for the MS-LTC-DRGs; applications for new technologies and medical services add-on payments; the wage data, including the occupational mix data, used to compute the FY 2008 wage indices; payments to hospitals for the indirect costs of graduate medical education; submission of hospital quality data; provisions governing the application of sanctions relating to the Emergency Medical Treatment and Labor Act of 1986 (EMTALA); provisions governing the disclosure of physician ownership in hospitals and patient safety measures; and provisions relating to services furnished to beneficiaries in custody of penal authorities.     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2003 rates. Final rule

We are revising the Medicare acute care hospital inpatient prospective payment systems for operating and capital costs to implement changes arising from our continuing experience with these systems. In addition, in the Addendum to this final rule, we describe the changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes are applicable to discharges occurring on or after October 1, 2002. We also are setting forth rate-of-increase limits as well as policy changes for hospitals and hospital units excluded from the acute care hospital inpatient prospective payment systems. In addition, we are setting forth changes to other hospital payment policies, which include policies governing: Payments to hospitals for the direct and indirect costs of graduate medical education; pass-through payments for the services of nonphysician anesthetists in some rural hospitals; clinical requirements for swing-bed services in critical access hospitals (CAHs); and requirements and responsibilities related to provider-based entities.     

Medicare program; change in methodology for determining payment for extraordinarily high-cost cases (cost outliers) under the acute care hospital inpatient and long-term care hospital prospective payment systems. Final rule

In this final rule, we are revising the methodology for determining payments for extraordinarily high-cost cases (cost outliers) made to Medicare-participating hospitals under the acute care hospital inpatient prospective payment system (IPPS). Under the existing outlier methodology, the cost-to-charge ratios from hospitals' latest settled cost reports are used in determining a fixed-loss amount cost outlier threshold. We have become aware that, in some cases, hospitals' recent rate-of-charge increases greatly exceed their rate-of-cost increases. Because there is a time lag between the cost-to-charge ratios from the latest settled cost report and current charges, this disparity in the rate-of-increases for charges and costs results in cost-to-charge ratios that are too high, which in turn results in an overestimation of hospitals' current costs per case. Therefore, we are revising our outlier payment methodology to ensure that outlier payments are made only for truly expensive cases. We also are revising the methodology used to determine payment for high-cost outlier and short-stay outlier cases that are made to Medicare-participating long-term care hospitals (LTCHs) under the long-term care hospital prospective payment system (LTCH PPS). The policies for determining outlier payment under the LTCH PPS are modeled after the outlier payment policies under the IPPS.     

Medicare program; provisions of the Balanced Budget Refinement Act of 1999; hospital inpatient payments and rates and costs of graduate medical education. Health Care Financing Administration (HCFA), HHS. Interim final rule with comment period

This interim final rule with comment period implements, or conforms the regulations to, certain statutory provisions relating to Medicare payments to hospitals for inpatient services that are contained in the Medicare, Medicaid, and State Children's Health Insurance Program Balanced Budget Refinement Act of 1999 (Public Law 106-113). These provisions relate to reclassification of hospitals from urban to rural status, reclassification of certain hospitals for purposes of payment during Federal fiscal year 2000, critical access hospitals, payments to hospitals excluded from the hospital inpatient prospective payment system, and payments for indirect and direct graduate medical education costs. Many of the provisions of Public Law 106-113 modify changes to the Social Security Act made by the Balanced Budget Act of 1997 (P.L. 105-33). These provisions are already in effect in accordance with Public Law 106-113.     

Medicare and Medicaid Programs; new payment methodology for routine extended care services provided in a swing-bed hospital; correction--HCFA. Correction notice

This document corrects the final rule published October 3, 1996 (61 FR 51611) that revised the methodology for payment of routine extended care services furnished in a swing-bed hospital. The final rule also revised the regulations concerning the method used to allocate hospital general routine inpatient service costs for purpose of determining payments to swing-bed hospitals.     

Medicaid program; revision to Medicaid upper payment limit requirements for hospital services, nursing facility services, intermediate care facility services for the mentally retarded, and clinic services. Health Care Financing Administration (HCFA), HHS. Final rule

This final rule modifies the Medicaid upper payment limits for inpatient hospital services, outpatient hospital services, nursing facility services, intermediate care facility services for the mentally retarded, and clinic services. For each type of Medicaid inpatient service, existing regulations place an upper limit on overall aggregate payments to all facilities and a separate aggregate upper limit on payments made to State-operated facilities. This final rule establishes an aggregate upper limit that applies to payments made to government facilities that are not State government-owned or operated, and a separate aggregate upper limit on payments made to privately-owned and operated facilities. This rule also eliminates the overall aggregate upper limit that had applied to these services. With respect to outpatient hospital and clinic services, this final rule establishes an aggregate upper limit on payments made to State government-owned or operated facilities, an aggregate upper limit on payments made to government facilities that are not State government-owned or operated, and an aggregate upper limit on payments made to privately-owned and operated facilities. These separate upper limits are necessary to ensure State Medicaid payment systems promote economy and efficiency. We are allowing a higher upper limit for payment to non-State public hospitals to recognize the higher costs of inpatient and outpatient services in public hospitals. In addition, to ensure continued beneficiary access to care and the ability of States to adjust to the changes in the upper payment limits, the final rule includes a transition period for States with approved rate enhancement State plan amendments.     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 1998 rates--HCFA. Final rule

This final rule responds to public comments received on those portions of a final rule with comment period published in the Federal Register on August 29, 1997, that revised the Medicare hospital inpatient prospective payment systems for operating costs and capital-related costs to implement necessary changes resulting from the Balanced Budget Act (BBA) of 1997, Public Law 105-33. This rule also addresses public comments on other BBA changes relating to cost limits for hospitals and hospital units excluded from the prospective payment systems as well as direct graduate medical education payments that were included in the August 29, 1997 document. Generally, these BBA changes were applicable to hospital discharges occurring on or after October 1, 1997.     

Politics and economics of hospital cost containment

Voluntary and regulatory efforts toward hospital cost-containment have accelerated with rapid increases in those costs and under pressures of national health insurance. Possible causes of hospital cost inflation are examined in the context of market analysis and with reference to the nature of hospitals as institutions facing special combinations of economic and political conditions and pressures. Some details of voluntary experiments and state regulatory efforts are examined in order to assess the elements of experience to date and their relationships to causes of hospital cost inflation. Federal proposals for a regulatory cap on costs are also discussed along with a view of how such proposals are related to probable causes of hospital cost inflation and of the relevance of other experience.     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2001 rates. Health Care Financing Administration (HCFA), HHS. Final rule

We are revising the Medicare hospital inpatient prospective payment system for operating costs to: implement applicable statutory requirements, including a number of provisions of the Medicare, Medicaid, and State Children's Health Insurance Program Balanced Budget Refinement Act of 1999 (Pub. L. 106-113); and implement changes arising from our continuing experience with the system. In addition, in the Addendum to this final rule, we describe changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes apply to discharges occurring on or after October 1, 2000. We also set forth rate-of-increase limits and make changes to our policy for hospitals and hospital units excluded from the prospective payment systems. We are making changes to the policies governing payments to hospitals for the direct costs of graduate medical education, sole community hospitals and critical access hospitals. We are adding a new condition of participation on organ, tissue, and eye procurement for critical access hospitals that parallels the condition of participation that we previously published for all other Medicare-participating hospitals. Lastly, we are finalizing a January 20, 2000 interim final rule with comment period (65 FR 3136) that sets forth the criteria to be used in calculating the Medicare disproportionate share adjustment in reference to Medicaid expansion waiver patient days under section 1115 of the Social Security Act.     

The impact of health maintenance organizations and competition on hospitals in Minneapolis/St. Paul

The Healthcare Educational and Research Foundation (HERF) in Minneapolis undertook a two-year research project to study the effects of health maintenance organizations (HMOs) and competition on the hospital industry in Minneapolis/St. Paul. This article summarizes HERF's major findings surrounding three key questions: (1) do the HMOs in Minneapolis/St. Paul use fewer hospital resources relative to conventional payers?; (2) do recent overall community trends in inpatient use suggest evidence of hospital utilization-reducing effects attributable to HMOs?; and (3) given the highly visible competitive process among Minneapolis/St. Paul providers, do hospital cost and revenue data suggest any evidence of cost-containment? The findings (based on data through 1982) indicate that for comparable patients, Twin Cities HMOs appear to use fewer medical care resources per hospitalized patient. There was, however, no clear evidence of community-wide, utilization-reducing effects directly attributable to the "competitive effect" of HMO introduction and development in the market. In addition, there was no empirical evidence that HMOs (which had enrolled 25 percent of the consumer market by 1982), or other large buyers of inpatient services, have selected hospitals on the basis of price as hypothesized by competition advocates.     

Medicare program; legislative changes concerning payment to hospitals for federal fiscal year 1991--HCFA. Notice of legislative changes

This notice describes changes to the Medicare prospective payment system for inpatient hospital services concerning the hospital wage index and the regional payment floor resulting from the provisions of the Continuing Resolution of October 1, 1990 (Pub. L. 101-403). Also described in this notice are those self-implementing portions of sections 4001 (a) and (c), 4002 (e) and (f), 4007, 4151, and 4158 of the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508) that affect Federal fiscal year 1991 payments to prospective payment hospitals and hospitals and units excluded from the prospective payment system. The changes required by these sections affect the following: 15 percent capital payment reduction, use of the regional payment floor, offset for physician assistant services, market basket percentage increase, standardized amounts, hospital-specific rates for sole community hospitals and Medicare-dependent small rural hospitals, target rate of increases for excluded hospitals and units, hospital wage index, payments for graduate medical education, and Part B payment reduction.     

Medicare program; changes to the inpatient hospital prospective payment system and fiscal year 1991 rates--HCFA. Final rule

We are revising the Medicare inpatient hospital prospective payment system to implement necessary changes arising from legislation and our continuing experience with the system. In addition, in the Addendum to this final rule, we are describing changes in the amounts and factors necessary to determine prospective payment rates for Medicare inpatient hospital services. In general, these changes are applicable to discharges occurring on or after October 1, 1990. We also set forth rate-of-increase limits for hospitals and hospital units excluded from the prospective payment system. This final rule also responds to comments received concerning changes to hospital payments made in an April 20, 1990 final rule with comment. These changes include mid-year changes to the inpatient hospital prospective payment system that implemented provisions of the Omnibus Budget Reconciliation Act of 1989; and adjustments applicable to prospective payment hospitals and to the target amounts of hospitals and units excluded from the prospective payment system due to the elimination of the day limitation on covered inpatient hospital days made by the Medicare Catastrophic Coverage Act of 1988 and later repealed by provisions in the Medicare Catastrophic Repeal Act of 1989. The April 20, 1990 final rule with comment also incorporated changes to these provisions made by the Family Support Act of 1988, which clarified the criteria for adjusting the target amounts and implementation date. In addition, this final rule clarifies the documentation requirements necessary to support the cost allocation of teaching physicians and the allowability of costs for rotating residents in determining payment for the direct costs of an approved graduate medical education program. This clarification is being made as a result of a September 29, 1989 final rule that made changes in Medicare policy concerning payment for the direct graduate medical education costs of providers associated with approved residency programs in medicine, osteopathy, dentistry, and podiatry.     

Medicare and Medicaid Programs; new payment methodology for routine extended care services provided in a swing-bed hospital--HCFA

The final rule revises the regulations governing the methodology for payment of routine extended care services furnished in a swing-bed hospital. Medicare payment for these services is determined based on the average rate per patient day paid by Medicare for these same services provided in freestanding skilled nursing facilities (SNFs) in the region in which the hospital is located. The reasonable cost for these services is the higher of the reasonable cost rates in effect for the current calendar year or for the previous calendar year. In addition, this final rule revises the regulations concerning the method used to allocate hospital general routine inpatient service costs for purposes of determining payments to swing-bed hospitals. These changes are necessary to conform the regulations to section 1883 of the Social Security Act (the Act), and section 4008(j) of the Omnibus Budget Reconciliation Act of 1990.     

Barriers to achieving a cost-effective workforce mix: lessons from anesthesiology

As pressures to control health care costs increase, competition among physicians, advanced practice nurses, and other allied health providers has also intensified. Anesthesia care is one of the most highly contested terrains, where the growth in anesthesiologist supply has far outstripped total demand. This article explains why the supply has grown so fast despite evidence that nurse anesthetists provide equally good care at a fraction of the cost. Emphasis is given to payment incentives in the private sector and Medicare. Laudable attempts by the government to make Medicare payments more efficient and equitable by lowering the economic return to physicians specializing in anesthesia have created a hostile work environment. Nurse anesthetists are being dismissed from hospitals in favor of anesthesiologists who do not appear "on the payroll" but cost society more, nonetheless. Claims of antitrust violations by nurse anesthetists against anesthesiologists have not found much support in the courts for several reasons outlined in this essay. HMO penetration and other market forces have begun signaling new domestic physician graduates to eschew anesthesia, but, again, Medicare payment incentives encourage teaching hospitals to recruit international medical graduates to maintain graduate medical education payments. After suggesting desirable but likely ineffective reforms involving licensure laws and hospital organizational restructuring, the article discusses several alternative payment methods that would encourage hospitals and medical staffs to adopt a more cost-effective anesthesia workforce mix. Lessons for other nonphysician personnel conclude the article.     

The competitive impact of health maintenance organizations on hospital finances: an exploratory study

In this study we explore whether HMO-induced competition has contained expenditures in Minneapolis/St. Paul hospitals. Specifically, we assessed the impact of HMOs on revenue, cost, and net income per admission in Twin Cities hospitals from 1979 to 1981. Some HMOs have obtained negotiated discounts from hospitals. We found that hospitals which gave larger discounts did not have lower costs per admission. This finding suggest that discounts do not force hospitals to operate more efficiently. In addition, hospitals with a large share of patients from HMOs or government Medicare and Medicaid programs did not have lower costs per admission than other hospitals during the years from 1979 to 1981. This finding casts doubt on the claim that discounts are justified by lower costs for HMO or government patients. Finally, neither HMO market share nor discounts had an adverse effect on hospital profits. During the three years studied, hospital profits in the Twin Cities showed an upward trend. This study concludes that if competition is to succeed it must encompass more than HMOs. HMOs may be important, but they are only one agent in the market. Thus, public policy created to induce competition must go beyond the simple stimulus of HMO growth.     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 1995 rates--HCFA. Final rule with comment period

We are revising the Medicare hospital inpatient prospective payment systems for operating costs and capital-related costs to implement necessary changes arising from our continuing experience with the system. In addition, in the addendum to this final rule, we are describing changes in the amounts and factors necessary to determine prospective payment rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes are applicable to discharges occurring on or after October 1, 1994. We are also setting forth rate-of-increase limits for hospitals and hospital units excluded from the prospective payment systems. Finally, we are revising the criteria used by the Medicare Geographic Classification Review Board (MGCRB) to decide on applications by hospitals for geographic reclassification for prospective payment purposes.     

Prospective payment system for inpatient hospital capital-related costs--HCFA. Final rule

We are revising the Medicare payment methodology for hospital inpatient capital-related costs for hospitals paid under the prospective payment system. As required by section 1886(g) of the Social Security Act, we are replacing the reasonable cost-based payment methodology with a prospective payment methodology for hospital inpatient capital-related costs. Under this prospective payment methodology, a predetermined amount per discharge will be made for Medicare inpatient capital-related costs.