Medicare to pay for new technologies in hospital inpatient settings - Medical/Medicaid - Benefits Improvement and Protection Act of 2000 - Brief Article

Healthcare Financial Management, Nov, 2001 by Richard L. Gundling

HHS continues to roll out the changes mandated by the Medicare, Medicaid & SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) BIPA required the Medicare program to cover the cost of expensive new medical services and technologies furnished under the hospital inpatient prospective payment system (PPS). The law specifically required that the Centers for Medicare and Medicaid Services (CMS--formerly HCFA) develop a method to speed the incorporation of new medical services and technologies into the clinical coding system that provides the basis for determining payment, and establish a mechanism to account for the costs of these new services and technologies under the inpatient PPS.

On September 7, 2001, CMS published a final rule that establishes the BIPA requirements for new technologies. (a) The final rule defines a mechanism for expediting the assignment of codes to technologies to facilitate data collection. It also establishes eligibility criteria and payment amounts for new technologies. The new mechanism becomes effective at the start of FY02. CMS had included such a mechanism in the inpatient PPS proposed rule published on May 4, 2001, but because the proposed mechanism drew extensive comments, CMS decided to finalize the mechanism in a separate final rule rather than include it in the inpatient PPS final rule, which was published August 1, 2001.

Currently, Medicare pays for new technologies by assigning them to existing DRGs. Payment for each DRG is determined prospectively, based on the average relative costs of cases assigned to it. The technologies included in a DRG are identified by ICD-9 codes developed by an interagency committee that meets in May and November of each year.

It currently takes at least 11 months for a code to be assigned to a new technology Reducing that time, says CMS, would enable the agency to begin collecting data on the technology earlier, thereby improving its ability to track the technology's use and potentially adjust payment amounts.

In the September 7 final rule, CMS says it will reduce to six months the minimum time it takes to assign new codes by moving the annual meeting of the ICD-9-CM Coordination and Maintenance Committee from May to April, and by requiring that coding revisions approved at the meeting be adopted by October of the same year. In Addition, CMS will move the November committee meeting, at which codes for new technologies are first considered, to December.

Payment for technologies under the new codes would not begin immediately, however. Rather, payment changes would be deferred until DRG classification of the new codes could be addressed in the annual final rule.

To be eligible for the special payments, a technology must meet three criteria:

* Total charges per case for patients undergoing procedures involving the new technology must be demonstrated to be significantly more than the average charges for all cases in the DRG to which the new technology would be assigned;

* The technology must present a "substantial improvement in caring for Medicare beneficiaries"; and

* The technology must be new (ie, CMS has not yet had sufficient time to gather cost data on the technology).

CMS says that it has tried to strike a balance between new-technology payments and all other Medicare payments because Congress intended the new-technology payments to be budget neutral. Thus, Medicare payment increases for new technologies would reduce Medicare funding available for other services. While CMS maintains that it is committed to ensuring that Medicare beneficiaries have access to high-quality care, which may include new technologies, CMS also maintains that it is equally committed to ensuring that other services do not suffer from a diversion of funds. To that end, CMS has adopted the following payment approach:

* CMS will make additional payments covering 50 percent of the costs in excess of the DRG payment for cases involving new technologies, as long as the additional payment does not exceed 50 percent of the estimated average cost of the new technology;

* CMS is establishing a target limit on estimated total special payments for new-technologies of 1 percent of total projected inpatient PPS payments in any given year; and

* If GMS estimates before the beginning of a Federal fiscal year (October 1) that new technology payments will exceed the target in the coming year, it will prospectively reduce the 50 percent marginal payment.

CMS says the special payments for new technologies would be made for two to three years, until the regular payments for the appropriate DRG can be adjusted to reflect the new technology's costs.

Although the deadline for applications to begin receiving special payments for new technologies in FY02 is past, healthcare financial managers responsible for obtaining new codes can begin the process for FY03 by anticipating new technologies that may come onto the market before next year's December meeting. Requests for new technologies to be covered by the special payments must be submitted by October 2002 to be considered at the December 2002 meeting.