June 19,2007

Senators Express Concern over Speculative Hospital Payment Cuts

Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Republican Chuck Grassley (R-Iowa) today called on the Centers for Medicare and Medicaid Services (CMS) to base any planned cuts to certain Medicare hospital reimbursement rates on actual, not speculative, changes in coding practices by hospitals. The potential cuts are part of a proposed rule CMS plans to implement regarding Medicare’s Hospital Inpatient Prospective Payment System (IPPS), which is used to reimburse hospitals for providing inpatient care to Medicare patients. In a letter to CMS Acting Administrator Leslie Norwalk, the Senators praised the new system, which will better identify the severity of a patient’s illness. They argued, however, that cuts should not be applied speculatively.

“The financial stability of rural hospitals should not be gambled on guesses about how this new system will operate,” said Baucus. “This new method can help the Medicare program better track patient care and improve the accuracy of payment. But we need to wait and see exactly how hospitals will react to the new system before we make any payment adjustments. We can’t get ahead of ourselves and put our hospitals—especially our vital rural hospitals—in jeopardy.”

Grassley said, “CMS should take action to ensure that Medicare payments are accurate. However, given what’s at stake for many hospitals, this action should be based on reality, not speculation.”

Senators Baucus and Grassley first called for the implementation of this system to better account for severity of patient illness in February 2006. The Senators are Chairman and Ranking Republican on the Senate Finance Committee, which has jurisdiction over the Medicare Program. The text of the letter follows in the attached Printer-Friendly Version of the press release.