This proposed rule would revise the Medicare hospital outpatient prospective payment system (PPS) to implement applicable statutory requirements and changes arising from our continuing experience with this system. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare hospital outpatient services paid under the prospective payment system. These changes would be applicable to services furnished on or after January 1, 2008. In addition, this proposed rule would update the revised Medicare ambulatory surgical center (ASC) payment system to implement certain related provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). In this proposed rule, we propose the applicable relative payment weights and amounts for services furnished in ASCs, specific HCPCS codes to which the final policies of the ASC payment system would apply, and other pertinent ratesetting information for the CY 2008 ASC payment system.
These changes would be applicable to services furnished on or after January 1, 2008. In this proposed rule, we also are proposing changes to the policies relating to the necessary provider
designations of critical access hospitals (CAHs) that are being recertified when a CAH enters into a new co-location arrangement with another hospital or CAH or when the CAH creates or acquires an off-campus location.
Further, we are proposing changes to several of the current conditions of participation that hospitals must meet to participate in the Medicare and Medicaid programs to require the completion and documentation in the medical record of medical histories and physical examinations of patients conducted after admission and prior to surgery or a procedure requiring anesthesia services and for postanesthesia evaluations of patients before discharge or transfer from the postanesthesia recovery area.
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Notes:
Prospective reimbursement, especially once adopted by Medicare in 1983, marked an important turning point in regulatory efforts to contain the growth of hospital costs. Medicare's Prospective Payment System (PPS) limits hospital revenues per Medicare patient. Under PPS, hospitals are reimbursed a fixed amount per admission, determined by the patient's diagnostic condition (Diagnostic Related Groups), regardless of the hospital's actual costs. The strategy behind PPS is simple. By limiting revenues, it provides hospitals with strong disincentives to extend lengths of stay and provide unnecessary or marginal care.
Medicare's payment system can be grouped as follows:
- Inpatient acute care in short-term hospitals annd psychiatric facilities
- Ambulatory care furnished by physicians, hospital outpatient departments, ambulatory surgical centers, and clinical laboratories
- Post-acute care furnished by skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals
- Dialysis services furnished in outpatient centers and hospice care
- Ambulance services and products furnished by durable medical equipment suppliers
- Services furnished by private health plans under the Medicare+Choice (M+C) program
DRGs define one of the primary mechanisms for prospective payment. Under PPS, patients are admitted according to their condition under one of 506 applicable DRGs. Each DRG attempts to represent a case type that identifies patients with similar conditions and processes of care.
Each DRG is given a flat payment rate calculated in part on the basis of costs incurred for that DRG nationally. These rates are modified somewhat in practice to account for differences in local wages, urban versus rural location, and other factors such as whether the hospital is a teaching hospital. The rates are flat in the important sense that they are not varied or softened for hospitals that spend more than the rate, or for that matter less.
