October 2010 Clinical Laboratory News: Regulatory Profiles

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October 2010: Volume 36, Number 10

Slow Progress on Electronic Health Records

The federal government’s push for wide-spread implementation of electronic health records (EHR) has so far not led to swift adoption by U.S. hospitals, although a new government effort to help hospitals choose EHR systems that meet government standards is on track. A new study released by Health Affairs found that while the number of U.S. hospitals that have adopted either basic or comprehensive EHRs rose modestly between 2008 and 2009, from 8.7% to 11.9%, only 2% of the country’s hospitals reported having records that would meet the federal government’s meaningful use criteria and be eligible for extra Medicare and Medicaid incentive payments. The authors of the study went on to note that “policy makers need to consider ways to make it easier for hospitals to adopt EHRs and meet the criteria for their meaningful use—especially in the case of smaller, rural, and public hospitals… to ensure that all Americans, regardless of where they receive care, derive the benefits that health IT has to offer.”

On the other hand, the federal government recently announced two EHR certification bodies that will be authorized to test and certify EHR systems for compliance with the standards and certification criteria that were issued by the U.S. Department of Health and Human Services earlier this year. The Certification Commission for Health Information Technology (CCHIT), Chicago, Ill. and the Drummond Group Inc. (DGI), Austin, Texas, were named by the Office of the National Coordinator for Health Information Technology (ONC) as the first such technology review bodies.

Announcement of these ONC-authorized testing and certification bodies (ONC-ATCBs) means that EHR vendors can now begin to have their products certified as meeting criteria to support meaningful use, which ONC described as a key step in the national initiative to encourage adoption and effective use of EHRs.

More about the ONC-ATCBs is available at the CCHIT website and the Drummond Group website. More information about the ONC certification programs is available at the HHS website.


FDA, CMS to Work More Closely on Post-Market Research

The Food and Drug Administration (FDA) and Centers for Medicare and Medicaid Services (CMS) announced a plan to improve their collaboration on post-market research, a move that lab industry observers hope can cut the time between FDA approval of a device and a CMS decision to pay for it. 

The Memorandum of Understanding (MOU), published in the Federal Register, aims to enhance knowledge and efficiency, and sharing of information and expertise between the two agencies. The goals of the collaboration are to explore ways to: further enhance information sharing efforts through more efficient and robust inter-agency activities; promote efficient utilization of tools and expertise for product analysis, validation, and risk identification; and build infrastructure and processes that meet the common needs for evaluating the safety, efficacy, utilization, coverage, payment, and clinical benefit of drugs, biologics, and medical devices. Unless terminated before by FDA or CMS, the MOU will remain in effect for 5 years. 

The MOU is available from the Federal Register online.


CMS Cuts Hospital Inpatient Payments

CMS announced it will cut Medicare inpatient payments to hospitals in 2011 by $440 million compared to 2010, nearly $300 million more than the agency estimated in April in a proposed rule. The cuts mean an overall 0.4% reduction in reimbursement rates to acute care hospitals for inpatient stays. This reduction reflects the balance of a range of adjustments, mainly a positive 2.4% update for inflation coupled with a 2.9% cut aimed at recouping payments in 2008 and 2009 that CMS says did not accurately reflect the severity of patients’ illness.

CMS has replaced its Diagnosis-Related Group (DRG) system with the new Medicare Severity DRGs (MS-DRGs), which indicate the severity of a patient’s illness in addition to the diagnosis. However, CMS believes it got a bad deal on payments it made while this change was being rolled out, and has determined that a 5.9% adjustment is needed to recover overpayments. Part of this adjustment is coming out of the 2011 payment system rule, with more cuts expected for 2012.

CMS published the final Inpatient Prospective Payment System rule in the Federal Register online.


Productivity Cuts Imperil Future of Medicare

In a recent report, the Medicare Board of Trustees admitted that CMS productivity cuts, expanded by healthcare reform to include cuts to the lab fee schedule, could eventually make it difficult for providers to offer care to Medicare beneficiaries as costs to providers rise faster than payment increases. The board raised concerns that, in the long run, these cuts could result in lower provider participation, less access to care, and reduced quality of services. Statutory changes to correct this problem would require congressional action. 

Because the productivity adjustments are tied to the over-all economy, the ensuing cuts to providers do not take into account the unique factors in each area of medicine, the report explained. “Since the provision of health services tends to be labor-intensive and is often customized to match individuals’ specific needs, most categories of health providers have not been able to improve their productivity to the same extent as the economy at large,” the board wrote. “Overtime, the productivity adjustments mean that the prices paid for health services by Medicare will grow about 1.1 percent per year more slowly than the increase in prices that providers must pay to purchase the goods and services they use to provide health care services. Unless providers could reduce their cost per service correspondingly, through productivity improvements or other steps, they would eventually become unwilling or unable to treat Medicare beneficiaries.”

It is possible that providers could reduce waste and take other steps to keep their cost growth within the boundaries imposed by the Medicare payment limitations, the board suggested. “Similarly, the implementation of payment and delivery system reforms…could help constrain cost growth to a level consistent with the lower Medicare payments. These outcomes are far from certain, however.”

The Board of Trustees report is available on the CMS website.


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