Medicare is revising how it pays hospitals and private insurers are following closely behind

May 12, 2008

The Centers for Medicare & Medicaid Services has added new critiera hospitals must meet in order to get optimal reimbursement

"This is a move toward value-based purchasing that has been coming for some time," said Fred Pane, senior director of pharmacy affairs at Premier Inc., a group purchasing organization in Charlotte, N.C. "Initially its impact on pharmacists may be limited, but they need to be familiar with what is happening and be aware that under some specific circumstances, their hospital's reimbursements may be reduced."

To that end, the new MS-DRG has 25 major disease categories, 745 diagnosis-related groups, and three subclasses of complications and comorbidities. It includes the same number of major disease categories as the original system adopted in 1983, but 207 additional DRGs and the new subclass designation "major complication or comorbidity," an example of which is severe sepsis.

But the biggest change in MS-DRG is that for discharges occurring on or after October 1, Medicare will no longer pay the additional costs incurred by hospitals when certain hospital-acquired infections develop or when certain medical errors occur. Specifically, "hospitals will not receive additional payment for cases in which one of the selected conditions was not present at admission," according to the new CMS rules. "That is, the case would be paid as though the secondary diagnosis was not present... CMS can revise the list of conditions from time to time." "The intent is to encourage hospitals to improve the quality of care by threatening to withhold payment," said Kasey Thompson, director of the practice standards and quality division at the American Society of Health-System Pharmacists. "We will see if this is effective. There are some studies that show that patients do get better care when health systems are financially incentivized to provide it."

The selected eight conditions that CMS will no longer pay for included hospital-acquired infections (HAIs), such as catheter-associated urinary tract infections, as well as several of what the National Quality Forum calls "never events"-errors involving death or serious medical injury that are so egregious they should never occur. CMS refers to both HAIs and never events as "conditions," but most are events that should not occur if a hospital is following evidence-based guidelines.? These conditions "are reasonably preventable through proper care and for which Medicare will no longer pay at a higher rate if the patient acquires them during a hospital stay," states CMS.

The April 14 announcement stated that comments on the proposed additional nine conditions will be accepted through June 13, and the final rule will be issued on or before August 1, 2008. The final rule will state which of the nine conditions below will be added to the eight existing conditions and will no longer be covered by Medicare if they occur after admission.