Medicare Publishes IR Rule, Providers Fear Cuts

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A debate that began nearly two decades ago entered its final stages last month, when the Centers for Medicare and Medicaid Services granted itself the authority to alter what the government pays for Part B items and services, based on a standard of “inherent reasonableness.”

The interim final rule, which appeared in the Dec. 13 Federal Register, addresses many of the concerns that providers and lawmakers raised in 1998, after CMS first attempted to use the IR authority. However, the rule does not go far enough to limit the power of the durable medical equipment regional carriers, according to Asela Cuervo, vice president of government relations for the Alexandria, Va.-based American Association for Homecare.

“The biggest issue was, and continues to be, that CMS has given the DMERCs the authority to reduce payments by greater than 15 percent, as long as they do it over a series of years,” she said.

While the rule limits IR adjustments to no more than 15 percent per year, it does not stop the DMERCs from adjusting payments for the same products during several consecutive years, Cuervo explained. Additionally, while the rule requires the DMERCs to go through the rulemaking process before altering reimbursements, it does not require the DMERCs to publish additional rules for consecutive changes, she added.

Nonetheless, the new rule goes further than did its predecessor to clarify an authority that many in the home care industry have called arbitrary.

Responding to recommendations that appeared in a July 2000 General Accounting Office report, CMS changed the IR rule in two significant ways. First, it defined “grossly excessive” and “grossly deficient” as any reimbursement that would require an adjustment of more than 15 percent to reflect “reasonable” market prices. Second, it put in place guidelines for determining whether a payment is inherently reasonable. When collecting data on market prices, CMS and the DMERCs must ensure that:

• the survey is consistent;
• price samples represent a range of national prices;
• the survey considers the distribution of Medicare beneficiaries;
• adjustments consider the range of prices in different geographical regions;
• the survey defines what it means by a “populous” or “less populous” state;
• prices consider the products that beneficiaries generally use; and
• the survey uses a consistent approach to selecting retail outlets against whose prices Medicare will compare its reimbursements.

Stakeholders may submit comments until Feb. 11, when the interim rule becomes final, and AAHomecare intends to make its grievances known, Cuervo said.

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