Medicare Prospective Payment Systems

Background
The Balanced Budget Act of 1997 contains sweeping changes in Medicare. Among the most significant is the development of prospective payment systems for hospital outpatient, skilled nursing facility, and home health services.

These systems will have a clear and lasting impact on patient access to medical technology. Without proper, forward-looking design, new payment systems could have unintended consequences, including financial barriers to medically necessary care and perverse incentives for technology innovation, adoption, and utilization.

HIMA Position and Recommendations
HIMA believes that, in light of their potential to inhibit medical technology innovation and use, Medicare payment systems must include mechanisms to provide for timely adoption and appropriate utilization of medical products and related procedures.

Specifically, Medicare's prospective payment systems must:

• Provide hospitals, skilled nursing facilities, and other providers with appropriate economic incentives to invest in quality-enhancing technologies;
• Encourage the continued financing, development, and diffusion of new medical technologies; and
• Provide incentives to deliver care in the most clinically appropriate setting, using the optimal mix of inputs, including labor, technology, and other resources.

To achieve these goals, HIMA supports the following detailed recommendations for new prospective payment systems:

• Keep patient classification systems flexible and responsive to new technology.
• Homogeneous Patient Groups. HCFA should make sure patient groups are homogeneous both in their clinical characteristics and in their likely use of resources. This will ensure a closer match between payment levels and the resources needed for appropriate care.
• Updating Patient Groups. HCFA should establish a process for creating new (and revising existing) prospective payment patient groups to reflect new technology and changes in medical practice. Also, HCFA should specify the criteria for creating or eliminating patient groups.
• Temporary Patient Groups. HCFA should develop temporary patient groups to provide for the immediate integration of new and emerging technology into the payment systems.
• Atypical Cases. HCFA should establish mechanisms to pay for cases (including orphan technologies used to treat less-prevalent diseases) whose costs substantially exceed those of the group to which the cases are assigned. In addition, HCFA should consider avenues such as outlier payments, separate fee schedule allowances, and grouping of these high-cost cases.
• Adjust payment levels to ensure appropriate patient access to medical technology.
• Site of Care Differential. HCFA should maintain separate payment rates, where appropriate, for different sites of care (e.g., hospital outpatient departments and freestanding ambulatory surgery centers) so as not to discourage technology adoption in such sites.
• - Use of Other Data Sources. In instances where Medicare data are limited, HCFA should set (and adjust) payment levels based on a variety of data sources, including data from other payers and cost data from manufacturers.
• Monitor new payment systems to understand the impact on medical technology.
• Case-Level Monitoring. HCFA should establish mechanisms to monitor the impact of PPS implementation on cases with multiple interventions to treat a particular condition.
• Coding Evaluation. HCFA should look for ways to make the coding process timely and open so as to ensure that payment systems reflect current medical practice.
• Procedure Discounting. HCFA should determine how its policy of multiple procedure discounting affects technology adoption.
• MedPAC Report. Congress should require MedPAC to report on how new payment systems are affecting payment for (and diffusion of) expensive prosthetic and implantable devices, capital equipment, and medical supplies.

April 2000