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CMS proposes to pay for transformative IT

The change would ramp up add-on payments to hospitals that implement new tech and increase the wage index for rural and other qualifying hospitals.

Susan Morse, Senior Editor

To address disparities between urban and rural hospitals, the Centers for Medicare and Medicaid Services is proposing to increase the wage index of low wage index hospitals, such as those in rural areas.

WHY IT MATTERS

The proposed rule would update Medicare payment policies for hospitals under the Inpatient Prospective Payment System and the Long-Term Care Hospital Prospective Payment System for 2020.

Proposed payment policy changes include increasing the new technology add-on payment, which provides hospitals with additional payments for cases with high costs involving new technologies, including potentially new antimicrobial therapies.

The increase would apply to all technologies receiving add-on payments starting on October 1, 2019, so that when a physician determines that a patient needs a qualifying new therapy, the hospital at which the therapy is administered would be able to more completely cover its costs. This change would promote patient access and reduce the uncertainty that innovators face regarding payment for new medical technologies for Medicare beneficiaries, CMS said.

CMS is also proposing to modernize payment policies for medical devices that meet the FDA's Breakthrough Devices designation. For devices granted this expedited FDA approval, real-world data regarding outcomes for the devices in different patient populations is often limited. At the time of approval, it can be challenging for innovators to meet the requirement for evidence demonstrating "substantial clinical improvement" to qualify for new technology add-on payments.

CMS is proposing to waive for two years the requirement for evidence that these devices represent a "substantial clinical improvement." Waiving this requirement would provide additional Medicare payment for the technologies for a period of time while real-world evidence is emerging, so Medicare beneficiaries do not have to wait for access to the latest innovations.

There are unique challenges associated with paying for CAR-T technology in particular.  CAR-T is the first-ever gene therapy and is used to treat certain forms of cancer for which no other treatment options exist. 

The agency is considering several changes to payment policies for CAR-T for 2020, including additional changes to new technology add-on payments for CAR-T and changes to the formula that is used to calculate payments to hospitals for CAR-T.  These changes may help ensure adequate payments to hospitals administering the groundbreaking therapy.

CMS seeks comment on the proposed approaches that advance "Rethinking Rural Health" and "Unleashing Innovation," by proposing historic changes to the way Medicare pays hospitals.

THE EXPECTED IMPACT

The inpatient hospital wage index specifies how inpatient payment rates are adjusted to account for local differences in wages that hospitals face in their respective labor markets. It is intended to measure differences in hospital wage rates across geographic regions and is updated annually based on wage data reported by hospitals.

Since the wage index adjustments are budget neutral, hospitals on the higher end would be expected to be paid less than their current amount.

Hospitals located in areas with wages less than the national average receive a lower Medicare payment rate than hospitals located in areas with wages higher than the national average.

For example, a hospital in a rural community could receive a Medicare payment of about $4,000 for treating a beneficiary admitted for pneumonia while a hospital in a high wage area in an urban community could receive a Medicare payment of nearly $6,000 for the same case, due to differences in their wage index.

THE CONTINUING TREND

In last year's proposed rule, CMS invited comments on changes to the Medicare inpatient hospital wage index. Many responses reflected a common concern that the current wage index system makes the disparities between high and low wage index hospitals worse, CMS said.

High wage index hospitals, by virtue of higher Medicare payments, can afford to pay their staff more, allowing the hospitals to continue operating as high wage index hospitals.

Conversely, low wage index hospitals often cannot afford to pay wages that would allow them to climb to a higher wage index. Over time, this creates a downward spiral that increases the disparity in payments between high wage index hospitals and low wage index hospitals, and payment for rural hospitals and other low wage index hospitals declines, CMS says.

Numerous rural hospitals have closed or are facing closure.

ON THE RECORD

"Transformative technologies are coming to the private market, but Medicare's antiquated payment systems have not contemplated these technologies," said CMS Administrator Seema Verma. "I am particularly concerned about cases that have been reported to the agency in which Medicare's inadequate payment has led hospitals to curtail access to needed therapies. We must continually update our policies in response to the rapid pace of advancement in medical science."

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com

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