Medicare Compliance & Reimbursement

New expenditure data could spark further payment reforms.

Although revised Part D spending projections are surprisingly $34 billion lower than the projections in President Bush's budget, estimates for Part A and Part B expenditures are considerably higher. Bottom line: Providers need to prepare themselves now for more scrutiny of hospital and physician services payments.

The Centers for Medicare & Medicaid Services (CMS) attributes the decreased spending projections for Part D mostly to "strong competition." CMS projects Part D expenditures to be $110 billion lower over five years--2006 through 2010--than estimates in last year's Mid-Session Review, according to a recent fact sheet on the agency's Web site.

Bad news: But Part A and B projections are another story. Part A estimated expenditures over the same five-year period are $17 billion higher than projections in Bush's budget, and Part B projections are $30 billion higher, CMS says. Overall Part A spending increased more than 7 percent last year, and inpatient hospital services were responsible for most of the spending and jumped by 5 percent. Skilled nursing facilities account for the second highest share of Part A spending, the agency reports.

"The rate of overall hospital spending growth has slowed because of administrative payment reforms implemented by Medicare to address very rapid and nationally uneven growth in long-term care hospitals and inpatient rehabilitation facilities," CMS points out.

Part B spending jumped 11 percent last year, and spending for physicians' services increased by 10 percent and for outpatient hospital services by 11 percent, the fact sheet says. CMS attributes the increases in total expenditures to "increases in the volume and intensity of physician and outpatient hospital services over the last several years."

Result: The new spending projections seemed to have inspired CMS to tackle more payment reforms, as the agency said that it would "seek comment on such further payment reforms in the upcoming Hospital Outpatient Prospective Payment System proposed rule for 2007 payments."

To read CMS' fact sheet, go to www.cms.hhs.gov/apps/media/press/release.asp?Counter=1895.