CMS Issues 2008 Inpatient Prospective Payment System Proposed Rule

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Written by Rob Kurtz

Tuesday, 15 April 2008

CMS has issued a proposed rule to update the inpatient prospective payment system (IPPS). Under this proposal, payment to hospitals is expected to increase by 3.3 percent on average.

According to CMS, the proposed reforms

1. continue changes begun last year to improve the accuracy of Medicare?s inpatient hospital payments by using hospital costs rather than charges to set rates.

2. adjust payment under the IPPS to better recognize severity of illness and the cost of treating Medicare patients by increasing payment for some services and decreasing payment for others.

3. will help to eliminate biases in the current system that have provided incentives for physician-owned specialty hospitals to treat the healthiest and most profitable cases leaving the sickest and least profitable patients to general acute care hospitals.

The rule also proposes to create 745 new diagnosis related groups (DRGs) -- to replace the existing 538 -- to help Medicare better recognize severity of illness. Under this proposal, hospitals treating more severely ill and costlier patients will receive higher payments while hospitals treating less severely ill patients will see their payments decline.

Cardiac specialty hospitals are projected to see their payments decline by four percent with the new Medicare-severity DRGs (MS-DRGs). This reduction comes on top of the estimated five percent reductions from changes to the IPPS made in 2006 and 2007.

Read the CMS statement on the IPPS proposed rule.