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Computing the Hospital Wage Index using Census Data: Alternatives and Impacts

In its June 2007 report to Congress, the Medicare Payment Advisory Commission (MedPAC) proposed an alternative to the current hospital wage index that is based on wage data from the Bureau of Labor Statistics and the Census Bureau. This study developed and tested alternative approaches to computing the wage index that incorporate some of the elements of the MedPAC proposal. Specifically, the study considered alternatives that used the Census Bureau wage data to create a county-level wage index and that smoothed values to limit significant variations in the wage index across neighboring counties. The study was conducted using data from hospital cost reports and the 2000 Census.

An Analysis of Medicare Outpatient Margins of Teaching Hospitals

In 2000, the Centers for Medicare and Medicaid Services adopted a prospective payment system (PPS) for hospital outpatient services. Under the system, major services are grouped into ambulatory payment categories. Although Medicare hospital outpatient margins have been consistently negative since the inception of the outpatient PPS, major teaching hospitals have performed particularly poorly under the system. The potential underlying reasons for the poor financial performance of major teaching hospitals include higher use of ancillary and other services by residents, higher costs associated with standby capacity (e.g., Level 1 Trauma Centers), and treatment of high-severity, high-cost patients. In this project, we explored the reasons for low Medicare outpatient margins among major teaching hospitals with a focus on differences in service mix and costs as potential explanations.

Adopting the Resource-based Relative Value Scale (RBRVS) Methodology for the California Workers’ Compensation Physician Fee Schedule
(Subcontractor to The Lewin Group)

The State of California Division of Workers’ Compensation (DWC) is revising its fee schedule to incorporate the methodology of RBRVS maintained by Centers for Medicare and Medicaid Services in its Medicare Fee Schedule. KNG Health, as a subcontractor to The Lewin Group, provided the DWC with data analyses to understand the impact of this change in payment on physicians. In addition, our study presented a set of policy options for implementation, geographic adjustment, and transition strategy.

Bundling of Imaging Services under Medicare’s Hospital Outpatient Prospective Payment System

Imaging services are sometimes used in conjunction with other medical procedures, such as a breast biopsy, to maximize the effectiveness of the procedures. In the past, the Centers for Medicare and Medicaid Services (CMS) has reimbursed providers for these two types of services separately under the Hospital Outpatient Prospective Payment System (HOPPS). In its 2008 HOPPS proposed rule, CMS proposed packaging the payment for imaging guidance services with their “independent” service. Under the rule, providers would no longer receive separate payments, but, instead, would receive a single, bundled payment for both services.

For select imaging guidance services, the study compared HOPPS payments under the 2007 rule (in which the imaging service received a separate payment) and the proposed rule (i.e., packaging). The study was conducted using the HOPPS limited data set. This file was derived from 2006 hospital outpatient claims, updated through December 2006.

Admission Criteria for Long-Term Care Hospitals: A Review of the Centers for Medicare and Medicaid Services’ Work to Date

In its 2009 Long-term Care Hospital (LTCH) proposed rule, the Centers for Medicare of Medicaid Services (CMS) presented its findings to date on developing admission criteria for LTCHs. This review focused on the basis of CMS’ conclusion, in its proposed Rate Year 2009 LTCH-PPS Update Rule, that there exists an overlap in services provided by LTCHs and by short-term acute care hospitals, as well as on questions about the appropriate role of LTCHs in the continuum of care. The study also examined the feasibility of developing admission criteria for LTCHs.

The Use of Ultrasound to Diagnose Soft-Tissue Injuries in the Medicare Population

For certain types of conditions, different imaging technologies may serve as substitutes for one another. Rotator cuff tears, for example, can be diagnosed with ultrasound or magnetic resonance imaging (MRI). Because both imaging technologies have been shown to be effective in diagnosing this type of injury, relative cost becomes an important consideration.

The purpose of this study was to identify potential cost savings to the Medicare program from the substitution of ultrasound for MRI and computed tomography (CT) in the diagnosis of certain soft-tissue or musculoskeletal conditions. Cost-saving estimates were developed using Medicare claims data and assumptions relating to the use of diagnostic ultrasound, MRI, and CT in the Medicare population.

Payment Reform Model for Initial Blueprint for Health Pilots

The Vermont Blueprint for Health is a statewide initiative designed to assist residents with chronic conditions in successfully managing their health through improving the quality of primary care. In June 2007, the Vermont legislature passed Act 71 – Ensuring Success in Health Care Reform. As required by the Act, the Director of the Blueprint established pilot projects to test key elements of the Blueprint, including the use of the medical home concept in primary care practices and the use of community-based care coordination teams. This study developed a payment reform model to be used in the pilot projects to support the key elements of the Blueprint.