HCFA announced PPS methodology in letter
The Health Care Financing Administration announced its decision to select a per-discharge system for rehabilitation hospitals under the prospective payment system (PPS) through a letter to U.S. Rep. Bill Thomas (R-CA), chairman of the House Subcommittee on Health of the Committee on Ways and Means, dated July 6.
Here’s what that letter said:
Dear Mr. Chairman:
Thank you for your recent letter to the Administrator regarding the implementation of a prospective payment system for rehabilitation hospitals and units. I am responding on her behalf. We have carefully considered your comments, as well as input from industry representatives and the Medicare Payment Advisory Commission, and have reached a decision about policy direction.
In developing the PPS, we plan to use a comprehensive patient assessment instrument called the Minimum Data Set for Post Acute Care (MDS-PAC), a classification system based upon the Function Related Groups (FRG), and a per episode payment unit, and to apply outlier and other adjustments. We considered several options including a per diem approach, but determined that a per discharge system based upon FRG would enable us to meet the legislated time frame given the data available to develop payment rates. This approach uses both a per discharge payment unit and a patient classification system familiar to the industry. Given the available data, we believe this system will ensure the smoothest possible transition for providers and beneficiaries.
As you note in your letter, MedPAC recommended the development of transfer and short-stay outlier policies to discourage inappropriately early discharges and increased utilization. We agree that a per discharge system coupled with adequate transfer and outlier policies would ensure that our beneficiaries receive the high-quality rehabilitation services they need in the most cost-effective manner possible.
We will continue to work on the development and refinement of this system as our research and analysis proceed.
Sincerely,
Michael M. Hash, Deputy Administrator
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