On June 13, GNYHA submitted comments to the Centers for Medicare & Medicaid Services (CMS) on its inpatient prospective payment system (IPPS) proposed rule for Federal fiscal year 2009, which starts on October 1, 2008. The most important payment-related proposals centered on capital payments to teaching hospitals and quality-related policies. GNYHA’s full comment letter can be found in Member Letter Bulletin #67 on the GNYHA Web site, www.gnyha.org.

Capital payments to teaching hospitals. CMS’ most deleterious proposal to GNYHA members was to eliminate the indirect medical education (IME) adjustment in the capital PPS. CMS justified this proposal, which would yield $400 million in annual savings, by observing that teaching hospitals were not spending all of their capital PPS payments on capital-related costs. GNYHA argued that ever since the PPS replaced cost-based reimbursement, capital payments are not meant to reimburse capital-related costs. Rather, they are merely the capital share of total payments, which hospital administrators allocate to optimize patient care services at their individual facilities. In point of fact, the IME adjustment in the capital PPS is based on variation in total cost per case and is still empirically valid. Furthermore, teaching hospitals are not overpaid for capital; they are under-investing in capital because of overwhelming uncompensated care costs and other priorities. GNYHA said teaching hospitals—especially in the metropolitan New York area—needed greater, not less, access to capital.

Quality-related policies. GNYHA believes that CMS demonstrated a strong preference for cost savings over quality improvement by proposing broad expansions of its policies to deny payment for certain hospital-acquired conditions (HACs) and to require data reporting for hospitals to maintain their full annual payment update (APU). GNYHA commented that all but four of the 22 proposed HAC conditions for non-payment are inappropriate because they are not almost always avoidable. Moreover, the expansion of the APU measures from 37 to 142 (see table) would exponentially increase the reporting burden on hospitals. GNYHA strongly opposed these expansions and presented a comprehensive set of principles that should guide CMS’s policies. Furthermore, its proposed pay-for-performance (P4P) program would harm most hospitals by including virtually all of the measures for which the Agency would collect and report data and by cutting payments to any hospital that did not perform in the top tier on almost all of the measures. GNYHA proposed an alternative approach that would maximize the benefit to patients: CMS should propose to administer P4P through the Quality Improvement Organizations (QIOs) and instruct the QIOs to work with each hospital to select one approved project and one reasonable performance goal each year which, if attained, would guarantee full payment. That way, each hospital could tailor its quality improvement effort to its highest-priority need and every hospital in every community would achieve steady progress.