August 20, 2010

Changes to the Hospital Inpatient and Long-Term Care Prospective Payment System for FY 2010

Proposed Rule
Summary

Score: 24 / 60

Additional details
Agency
Department of Health and Human Services
Regulatory Identification Number
0938-AP39
Agency Name
Department of Health and Human Services
Rule Publication Date
05/22/2009
Comment Closing Date
06/30/2009

RULE SUMMARY

We are proposing to revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems, and to implement certain provisions made by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, Pub. L. 110-275) and the American Recovery and Reinvestment Act of 2009 (ARRA, Pub. L. 111-5). In addition, in the Addendum to this proposed rule, we describe the proposed changes to the amounts and factors used to determine the rates for Medicare acute care hospital inpatient services for operating costs and capital-related costs. These proposed changes would be applicable to discharges occurring on or after October 1, 2009. We also are setting forth the proposed update to the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The proposed updated rate-of-increase limits would be effective for cost reporting periods beginning on or after October 1, 2009.

In addition, we are proposing to update the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs). In the Addendum to this proposed rule, we also set forth the proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for rate year 2010. These proposed changes would be applicable to discharges occurring on or after October 1, 2009. In this proposed rule, we also note those provisions of the ARRA that amended provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, Pub. L. 110-173) relating to payments to LTCHs and new LTCHs and LTCH satellite facilities, and increases in beds in existing LTCHs and LTCH satellite facilities under the LTCH PPS that will be implemented in the final rule issued for this proposed rule.We are proposing to revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems, and to implement certain provisions made by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, Pub. L. 110-275) and the American Recovery and Reinvestment Act of 2009 (ARRA, Pub. L. 111-5). In addition, in the Addendum to this proposed rule, we describe the proposed changes to the amounts and factors used to determine the rates for Medicare acute care hospital inpatient services for operating costs and capital-related costs. These proposed changes would be applicable to discharges occurring on or after October 1, 2009. We also are setting forth the proposed update to the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The proposed updated rate-of-increase limits would be effective for cost reporting periods beginning on or after October 1, 2009.

In addition, we are proposing to update the annual payment rates for the Medicare prospective payment system (PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs). In the Addendum to this proposed rule, we also set forth the proposed changes to the payment rates, factors, and other payment rate policies under the LTCH PPS for rate year 2010. These proposed changes would be applicable to discharges occurring on or after October 1, 2009. In this proposed rule, we also note those provisions of the ARRA that amended provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, Pub. L. 110-173) relating to payments to LTCHs and new LTCHs and LTCH satellite facilities, and increases in beds in existing LTCHs and LTCH satellite facilities under the LTCH PPS that will be implemented in the final rule issued for this proposed rule.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
0938-AP39 can be found from regulations.gov using RIN keyword searches, as well as on the Department of Health and Human Service's website. It can be found by clicking on regulations, "regulations and guidance" under "medicare," then on "Quarterly provider updates-regulations." Here, search under "QPU April-June 2009." The department offers a list of proposed rules.
4/5
2. How verifiable are the data used in the analysis?
Much of the data come from internal Medicare databases. A section explains how the public can obtain data on a CD or via Internet download.
5/5
3. How verifiable are the models and assumptions used in the analysis?
Several reports whose results affected the wage index or other HHS decisions are cited and linked. The basic "model" that determines the payments performs adjustments on case data from 2008. The only justification given for this approach is that predicting the effects o these changes is difficult.
3/5
4. Was the analysis comprehensible to an informed layperson?
It contains a huge number of acronyms, much technical language, and a great deal of discussion that assumes the reader is already familiar with the programs. An insider who follows these programs could understand the analysis, but it is rough going even for a non-specialist with a graduate degree. An appendix explains step-by-step calculations.
2/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
1/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The goals appear to be quality treatment for beneficiaries at reasonable cost: ""The primary objective of the IPPS is to create incentives for hospitals to operate efficiently and minimize unnecessary costs while at the same time ensuring that payments are sufficient to adequately compensate hospitals for their legitimate costs. In addition, we share national goals of preserving the Medicare Hospital Insurance Trust Fund . . . We believe the proposed changes in this proposed rule would further each of these goals while maintaining the financial viability of the hospital industry and ensuring access to high quality health care for Medicare beneficiaries."" The RIA does not attempt to explain how estimated fiscal impacts on the Medicare budget and on LTCHs directly affect citizens' quality of life (i.e. the incentives of hospitals to operate efficiently).
2/5
Does the analysis identify how these outcomes are to be measured?
The analysis only measures changes in payments to hospitals. Effects on beneficiaries are not measured.
1/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
Payments to hospitals are by definition assumed to be reasonable with no supporting evidence. A claim that these payments will lead to quality care is no more than an assertion.
1/5
Does the analysis present credible empirical support for the theory?
See above.
0/5
Does the analysis adequately assess uncertainty about the outcomes?
No discussion.
0/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
1/5
Does the analysis identify a market failure or other systemic problem?
The general problem is ensuring adequate but not excessive payment for quality care when the government is a large purchaser, but HHS does not explicitly analyze this. The "systemic problem" this regulation deals with is that Medicare has to figure out how much to pay for various procedures.
1/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
HHS seems to assume there is no need to discuss this in detail; the fact that Medicare pays for services apparently makes it self-evident.
1/5
Does the analysis present credible empirical support for the theory?
No relevant discussion.
0/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
No discussion of uncertainty about the problem.
0/5
7. How well does the analysis assess the effectiveness of alternative approaches?
1/5
Does the analysis enumerate other alternatives to address the problem?
No significant alternatives were subjected to regulatory analysis. The preamble indicates where HHS had discretion and mentions reasons for judgment calls: "This proposed rule contains a range of policies. The preamble of this proposed rule provides descriptions of the statutory provisions that are addressed, identifies implementing policies where discretion has been exercised, and presents rationales for our decisions and, where relevant, alternatives that were considered.
1/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
No signficant alternatives were subjected to regualtory analysis.
0/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
Outcomes were not measures or estimated.
0/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
The baseline is clear: 2008 caseload. The analysis does not account for any future projected changes in case mix.
2/5
8. How well does the analysis assess costs and benefits?
2/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Government expenditures are quantified in great detail, with the incremental effect of each regulatory change presented.
4/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
The analysis considers only federal expenditures.
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Only in the sense that the calculations determine what the government will pay. No consideration of effects on any other prices.
2/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The analysis adjusts for changes in hospital billing that HHS believes reflect only changes in coding rather than actual changes in case mix. This is the only significant behavioral issue addressed.
2/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
No analysis of uncertainty; the analysis merely states that estimating effects is difficult due to some uncertainties.
1/5
Does the analysis identify the alternative that maximizes net benefits?
Benefits are not estimated, so net benefits could not be calculated.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
Benefits are not estiamted, so cost-effectiveness could not be calculated.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
A table shows effects on payments to hospitals of various types, various geographical areas, owhership status, etc.
4/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
Benefits are not estimated.
0/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The analysis was used only in the sense that the calculations determine how much the government will pay for various procedures.
3/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Benefits are not estimated, so net benefits could not be calculated.
0/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
Hospitals must report process-oriented (not outcome-oriented) quality measures, but HHS articulates no plan to use them specifically to evaluate the effects of this regulation.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
Hospitals must report process-oriented (not outcome-oriented) quality measures, but HHS articulates no plan to use them specifically to evaluate the effects of this regulation.
1/5
 
Total 24 / 60