May 25, 2010

Prospective Payment System for Long-Term Care Hospitals

Proposed Rule
Summary

Score: 17 / 60

Additional details
Agency
Department of Health and Human Services
Regulatory Identification Number
0938-AO94
Agency Name
Department of Health and Human Services
Rule Publication Date
01/29/2008

RULE SUMMARY

This proposed rule would update the annual payment rates for the Medicare prospective payment system
(PPS) for inpatient hospital services provided by long-term care hospitals (LTCHs). In addition, we are proposing to consolidate the annual July 1 update for payment rates and the October 1 update for Medicare severity long-term care diagnosis related group (MS–LTC– DRG) weights to a single fiscal year (FY) update.

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?
The link to the proposed rule containing the RIA is five clicks from the home page. Click on "regulations" (intuitive). The rest is unintuitive: click on "other regulations," expand the "detail" list, click on "CMS regulations," and then click on "quarterly provider updates—regulations" and select the update list from the period covering the date of the regulation. It can also be found on regulations.gov using RIN.
4/5
2. How verifiable are the data used in the analysis?
Data in the regulatory analysis are apparently from an internal database. When reading the whole rule, it is more obvious that data and assumptions come from a variety of internal databases, consultant studies, and prior rulemakings, all of which are often mentioned but not always sourced in a way that a non-specialist could check their veracity. Some links are provided.
2/5
3. How verifiable are the models and assumptions used in the analysis?
There is no citation for analysis within the RIA. Calculations are explained, but without access to the original data the reader cannot verify them.
2/5
4. Was the analysis comprehensible to an informed layperson?
The RIA is somewhat more understandable than the rule itself, but much of the discussion is found in the rule and not the RIA. It is clear that spending will increase due to increased reimbursement rates. Actual calculations and analysis are very hard to follow due to a plethora of acronyms, technical terms, and assumed reader knowledge.
1/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
0/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
HHS seeks to adjust and clarify policies and payment rates for relevant hospitals to reflect accurate inflation, wages, etc. The sole focus of the rule is calculation of new payment rates, and the regulatory analysis shows how these new rates will affect payments to various kinds of hospitals. How this produces benefits that affect the public is not explained.
1/5
Does the analysis identify how these outcomes are to be measured?
It identifies federal expenditures only.
1/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The analysis does not address this topic.
0/5
Does the analysis present credible empirical support for the theory?
The analysis does not address this topic.
0/5
Does the analysis adequately assess uncertainty about the outcomes?
The analysis does not address this topic.
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?
0/5
Does the analysis identify a market failure or other systemic problem?
Yes, but only in the sense that the calculations are adjustments to a preexisting agency activity/rule.
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?
The analysis does not address this topic.
0/5
Does the analysis present credible empirical support for the theory?
The analysis does not address this topic.
0/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
The analysis does not address this topic.
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?
Calculations in the preamble occasionally consider narrow tweaks in how to calculate payments.
2/5
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)?
There are very narrow tweaks in how to calculate the payments.
1/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
Since outcomes are not discussed or measured, this wasn't done. Nor were alternative expenditure calculations presented.
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 RIA included calculations showing what the payments to hospitals would be if the rates were not changed. There is some discussion in the rule notes that trended past costs were used in order to avoid perverse incentives associated with using actual costs that reflect providers' responses to the new payment system.
2/5
8. How well does the analysis assess costs and benefits?
1/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
The analysis calculates federal expenditures due to adjustments of reimbursement rates. It is not clear if federal expenditures represent all of the incremental costs.
3/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
The analysis estimates change in federal expenditures but does not asssess any other changes that occur as a result of this.
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
The analysis dentifies how the amount the government pays will change, but nothing else.
1/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
It explicitly acknowledges that it does not assess any changes resulting from a change in the case mix. There is no assessment of any behavioral changes. There is some discussion in the rule notes that trended past costs were used in order to avoid perverse incentives associated with using actual costs that reflect provider's responses to the new payment system.
1/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
The RIA acknowledges uncertainties in estimating wages and other factors but does not explicitly do analysis to take uncertainty into account.
1/5
Does the analysis identify the alternative that maximizes net benefits?
Since outcomes were not measured, it is not possible to calculate net benefits.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
Since outcomes were not measured, it is not possible to calculate cost-effectiveness.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
The analysis calculates how expenditures will change for different types/classes of providers.
3/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
The analysis does not address this topic.
0/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The RIA essentially quantifies how payments to various providers will change. It is based on extensive calculations presented elsewhere in the preamble. These calculations determined the changes in payment rates to hospitals, which is the primary purpose of this rule. In that sense, CMS used the calculations to decide how to change payments. But it does not appear that the analysis was really used to choose among alternatives.
3/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
The preamble repeatedly states that a statutory goal was to be budget-neutral. Benefits are not quantified for the decision or the alternatives, so net benefits of competing budget-neutral alternatives are not calculated. Payments for the decision are calculated.
1/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
There is no content on tracking actual outcomes produced by the expenditures. The agency has consolidated but continued to schedule yearly updates to make sure payments reflect accurate procedures, wages, and inflation.
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?
It seems to keep track of expenditure data in a timely and useful manner. They also have yearly updates to adjust this. But the focus is on expenditures, not results.
1/5
 
Total 17 / 60