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As the fallout from the Balanced Budget Act of 1997 (BBA) continues to sift down, the nation’s 1,100 inpatient rehabilitation facilities will be the next to struggle with the Health Care Finance Administration’s (HCFA) prospective payment system (PPS). This means hospital case managers nationwide will be looking at new limitations and cost structures as they work with patients already in or destined for rehab facilities and units.
Rehabilitation facilities, which provide extensive occupational, physical, and speech therapy services, have been exempt from the PPS until now. But the BBA requires HCFA to implement a PPS specifically for these facilities.
"These special hospitals provide essential therapy and other care that helps Medicare beneficiaries’ recovery from serious disabling illnesses," Michael Hash, HCFA acting administrator, said in a prepared statement. "This new system continues our progress in ensuring Medicare appropriately pays hospitals and other providers that care for our 39 million Medicare beneficiaries."
The new regulations are effective April 1. According to HCFA, they are "designed to promote quality and efficient care at rehabilitation facilities including both freestanding hospitals and special units in acute-care hospitals."
The new rule, which will be phased in over a two-year period, includes these provisions:
As the clock ticks down, case managers and other rehab professionals are nervous. "It’s feeling pretty overwhelming right now," says Jean O’Leary, BSN, CCM, CRRN, MPAH, director of case management at Healthsouth New England Rehabilitation Hospital in Woburn, MA. "Some days we wonder if we will survive with the way things are being set up. Currently, we’re getting the most complex, most costly person as our patient. And we have to wonder, will we still be able to care for them?"
The rule would include a 2% cut in the payment baseline, a reduction the Chicago-based American Hospital Association (AHA) has been lobbying aggressively to restore. The AHA also makes the point that Medicare has generated more savings from the Balanced Budget Act cuts ($70 billion) than were originally targeted by Congress ($44 billion). Furthermore, the AHA noted that the Medical Payment Advisory Commission (MedPAC) re-vealed last June a 4% to 7% reduction in Medicare operating margins for PPS-exempt hospitals and units as a result of the BBA, and recommended a 3% increase in FY 2001 to help these facilities cover inflation costs.
Understandably, rehab hospitals and units as well as case managers are anxious about just how much adjustment they’ll be dealing with under the new regulations with the new assessment tool and the payment calculations. According to HCFA, the PPS will use the patient assessment tool "to classify individuals into distinct groups based on clinical characteristics and expected resource needs. Separate payments are calculated for each group, including the application of case- and facility-level adjustments."
Those payments will be adjusted to account for geographic variations in wages. There also will be additional outlier payments for high-cost cases. HCFA concluded that rural rehabilitation facilities and those serving a large low-income population had higher costs than other facilities and were entitled to an adjustment.
Under the new rule, rehabilitation facilities would be paid based on the characteristics of each individual patient they admit, calculated on a comprehensive assessment of the patient’s condition. The PPS replaces the existing cost-based payment system. But the hitch lies in the payment structure. The rehabilitation PPS would involve each patient discharge being assigned to a functional-related group, which covers a broad range of diagnoses. "It looks like we’ll be paid on functionally related groups despite matters of age, condition, or comorbidity," says O’Leary.
The American Medical Rehabilitation Providers Association (AMRPA) worries that Medicare patients will comes out losers "because a poorly designed payment system that cannot be easily reformed will lead to limitation on access and appropriate care."
And then there is MDSPAC, the coding tool that is not being cheerfully received. "What’s giving us nightmares right now," says Joyce Speakman, CFO at Spalding Rehabilitation Center in Denver, "is the fact that we’re going to have to complete an MDSPAC. Currently, we have a tool that does what we need for selecting codes. It’s a very easy instrument to use and takes about five minutes to do. The MDSPAC could take hours. It’s also completely opposite from the way we’ve previously managed coding, and it will mean reconverting certain codes."
It’s not yet popular with case managers either. "The coding actually starts with the person who screens the admission," explains O’Leary. "They assess where the patient may fall code-wise. The case manager will verify if this is right. Screeners may find it a useful tool to work with, but case managers are still not sure about certain specific costs."
The MDSPAC was adopted at the urging of MedPAC and HCFA’s contractor, RAND Corporation, to ensure consistent assessments across all Medicare settings.
It was felt that the functional independence measures, which initially were considered, did not satisfactorily reflect speech-language pathology (SLP) services. While SLP services are more adequately recognized in the MDSPAC, the American Speech and Hearing Association will continue to seek modifications to the MDSPAC system to ensure that access to high-quality SLP treatment is not adversely affected by the new PPS.
O’Leary says Healthsouth is looking at new strategies to meet the challenge before the April 1 deadline. "Our case management department is being empowered to direct patient care around patient needs rather than length of stay and cost," she explains.
"Meantime, we’re looking individually at our amputee population, our spinal cord population, our cardiac, stroke, and other patients to assess diagnostic needs. We’re looking at our 1999-2000 history to see how many more admissions we’ll need in order to break even under the new regulations, and we’re developing ways to maximize our commercial reimbursements," O’Leary says.
The AHA says that its top legislative priority for rehabilitation will be to restore the scheduled 2% reduction in rehabilitation PPS. The Lewin Group, AHA’s consulting firm in Washington, DC, has analyzed the scheduled cut and documented significant declines in Medicare margins for rehabilitation hospitals and units. This was similar to MedPAC’s conclusions, which led to its recommendation to increase funding for PPS-exempt facilities in 2001.
Edward A. Eckenhof, AMRPA chairman, made that point and more in his statement to the House Ways and Means Committee’s Subcommittee on Health last summer. He pointed out that "overall Medicare outlays for services delivered by rehabilitation hospitals or units have been reduced by more than $600 million over three years. And although rehabilitation spending comprises just 2.3% of total Medicare spending, rehabilitation hospitals and units have been forced to absorb almost 4.3% of BBA 97 spending reductions."
He also noted that from 1997 to 1998, Medicare margins for rehabilitation facilities decreased from 6.3% to 1.8%. Eckenhof explained that for rehabilitation hospitals and units, Medicare accounts for approximately 70% of all discharges and revenues. "Therefore, even temporary changes in Medicare reimbursement can threaten the security of a great number of facilities and, consequently, the patients we serve."
It’s a scary prospect, says Speakman. "Until it actually starts to happen, we won’t really know the impact."
[For more information, contact:
Joyce Speakman, CFO, Spalding Rehabilitation Center, Denver. Telephone: (303) 363-5605.
Jan O’Leary, BSN, CCM, CRRN, MPAH, Director of Case Management, Healthsouth New England Rehabilitation Hospital. Woburn, MA. Telephone: (781) 935-5050.]