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Medicare Law Motivates Hospitals to Report Quality Data

Cheryl A. Thompson

Congress, in writing the massive Medicare Prescription Drug, Improvement, and Modernization Act of 2003, put the force of money behind the National Voluntary Hospital Reporting Initiative, run by the Department of Health and Human Services (HHS). For the next three fiscal years, ending in 2007, the inflation-based annual adjustment for inpatient hospitals' operating costs will be cut by 0.4 percentage points at facilities that do not voluntarily report their data for the initiative's 10 clinical measures.

Of the 10 measures, 8 pertain to medications given to patients with an acute myocardial infarction, heart failure, or pneumonia (see sidebar).

Although the Medicare Modernization Act did not call for the government to pay hospitals for their performance, HHS's Centers for Medicare and Medicaid Services (CMS) recently explained that "payment for performance may be an ultimate goal."

In the meantime, hospitals' performance on the medication-use and other two measures can be viewed and compared at

A consumer-oriented version, Hospital Compare, is planned for release in early 2005, CMS said.

Quality reporting as part of inpatient PPS. CMS recently changed the hospital inpatient prospective payment systems (PPS) to incorporate the alterations mandated by the new law.1

Clinical Measures in Voluntary Initiative

The 10 clinical measures added to the hospital inpatient prospective payment systems through September 2007 are as follows:

  • Did patients with acute myocardial infarction (AMI) and no contraindication to aspirin therapy receive aspirin within 24 hours before or after hospital arrival?
  • Were patients with AMI and no contraindication to aspirin therapy prescribed aspirin at hospital discharge?
  • Were patients with AMI and left ventricular systolic dysfunction (LVSD) and no contraindication to angiotensin-converting-enzyme-inhibitor (ACEI) therapy prescribed an ACEI at hospital discharge?
  • Did patients with AMI and no contraindication to beta-blocker therapy receive a beta-blocker within 24 hours after hospital arrival?
  • Were patients with AMI and no contraindication to beta-blocker therapy prescribed a beta-blocker at hospital discharge?
  • Was the left ventricular function of patients with heart failure assessed before arrival or during hospitalization or scheduled for assessment after discharge?
  • Were patients with heart failure and LVSD and no contraindication to ACEI therapy prescribed an ACEI at hospital discharge?
  • Did patients with pneumonia receive their first dose of an antimicrobial within four hours after arrival at the hospital?
  • Was the pneumococcal vaccination status evaluated in patients age 65 years or older who had pneumonia? And, if vaccination was needed, was the vaccine administered before patients' hospital discharge?
  • Was the arterial oxygenation of patients with pneumonia assessed by arterial blood gas measurement or pulse oximetry within 24 hours before or after arrival at the hospital?

To receive the full 2005 adjustment of 3.3%, acute care hospitals other than children's, cancer, and critical access hospitals must quarterly report data on all patients, not just Medicare beneficiaries.

Critical access hospitals, which are in rural areas, may report data for measures having at least 25 patient cases in three months. Those critical access hospitals that do not report data will not be penalized, however.

The 10 clinical measures originated with the National Quality Forum and its initial set of hospital care-performance measures, approved in October 2002. CMS partly funded the work of the voluntary consensus standard-setting organization.

As of September 2, according to CMS, nearly all of the hospitals paid under the inpatient PPS had started reporting data to the voluntary initiative.

A CMS demonstration project that got underway a year ago will see what happens when hospitals are told they will receive up to 2% in increased Medicare payments for being among the top performers in delivering appropriate care (see September 1, 2003, AJHP News). About 280 hospitals that subscribe to Premier Inc.'s Perspective Online clinical performance database are participating in the three-year project. The hospitals' performance on 35 clinical measures, including the 10 measures added to the inpatient PPS, will be compared.

Second-year specialty pharmacy practice residencies. CMS did not revisit the issue of pass-through payments for second-year specialty pharmacy practice residencies—a request that ASHP had made during the official comment period for the 2005 hospital inpatient PPS.

The agency had determined in 2003 that these residencies were not a prerequisite in most hospitals to practice cardiology, geriatrics, or oncology pharmacy and thus not eligible for the special payments (see October 1, 2003, AJHP News).

But ASHP surveyed hospitals in 2004 and found "conclusively that second-year pharmacy residencies are indeed the industry norm" for geriatric, oncology, infectious disease, and critical care practice.

ASHP Executive Vice President Henri R. Manasse Jr., in a letter sent August 31, informed CMS Administrator Mark B. McClellan that his agency's inaction was "totally unacceptable" and requested a meeting with McClellan as soon as possible.

A CMS staff member had earlier explained that the agency would consider the Society's comments "in developing future Medicare payment policy," a response deemed unacceptable by the ASHP staff. In his letter, Manasse told McClellan that a number of hospitals had already postponed their plan to increase their number of second-year pharmacy residency programs and positions, and some institutions had eliminated the positions. Manasse stated that the eventual result of these postponements and eliminations will be a lower quality of care for the nation's seniors and greater expense for the Medicare program.

Better payments for rural hospitals. The Medicare Modernization Act also told CMS to pay rural disproportionate share hospitals having less than 500 beds on par with large rural hospitals and urban hospitals with 100 or more beds.

And critical care hospitals receive 101%, instead of 100%, of the reasonable costs for providing inpatient and outpatient services to Medicare beneficiaries as of January 1, 2004.

Creation of new codes for inpatient PPS. CMS created diagnosis-related group (DRG) 543 to encompass the care of patients whose hospitalization includes implantation of the carmustine implant (Gliadel wafer, Guilford). The new DRG is titled "Craniotomy with Implantation of Chemotherapeutic Agent or Acute Complex Central Nervous System Principal Diagnosis."

Procedure code 00.16 ("Pressurized treatment of venous bypass graft [conduit] with pharmaceutical substance") in the International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) was created to recognize the use of a drug not yet approved by FDA for marketing. Edifoligide, according to developer Corgentech Inc., prevents vein-graft failures after bypass grafting. The double-stranded short polymer of nucleotides binds to and inactivates the transcription factor E2F. This "E2F decoy," as Corgentech and CMS call the drug, is being evaluated for use in patients undergoing venous bypass grafting.

Add-on payments for new drugs and technologies. Eligibility for the extra, or add-on, payment to compensate for the use of drotrecogin alfa activated (Xigris, Eli Lilly) in patients with severe sepsis expired on September 30, and CMS declined to create a DRG specifically for that medical condition. Instead, CMS created procedure code 00.17 ("Infusion of vasopressor agent") for use with code 00.11, indicating infusion of drotrecogin alfa activated, and one of the DRGs for systemic inflammatory response syndrome. CMS said it hopes the change will help the agency better identify patients with severe sepsis and evaluate their treatment costs. According to CMS, the costs for the use of drotrecogin alfa activated are now included in the relevant DRGs.

Coding for the insertion of drug-eluting coronary-artery stents remains the same as last year, despite requests for CMS to create codes indicating the insertion of more than one stent in a patient during a single procedure. However, HHS's ICD-9-CM coordination and maintenance committee is scheduled to meet later this month to discuss adding a code for the insertion of drug-eluting stents in multiple vessels.

CMS told hospitals that, to be properly paid for the insertion of any coronary-artery stent, they must also report a code for vessel angioplasty. Apparently, some hospitals feared action from a regulatory agency if they included a code for vessel angioplasty when insertion of the stent did not involve a "true" angioplasty. Without a code for vessel angioplasty at the time of stent insertion, CMS stated, patients' cases are assigned a lower-paying medical DRG instead of the proper surgical DRG.

The agency denied a request from Scios Inc. to make its nesiritide product (Natrecor) eligible for an add-on payment because the drug was approved for marketing in August 2001, more than three years ago.

  1. Centers for Medicare and Medicaid Services. Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2005 rates; final rule. Fed Regist. 2004; 69:48915-9781.