In response to the Centers for Medicare & Medicaid Services proposed rule for fiscal year 2008 inpatient Prospective Payment System, the American Hospital Association (AHA) is expressing concern over what it calls “arbitrary and unnecessary cuts” in capital payments to urban hospitals.

In a comment letter dated June 4, 2007 posted on its web site, the AHA says that the elimination of the capital payment update for urban hospitals would result in a $880 million reduction in payments to urban hospitals over a five-year period.

“These backdoor budget cuts will further deplete scarce resources, ultimately making hospitals” missions of caring for patients even more challenging, says Rick Pollack, AHA’s Executive Vice President.

The organization also recommends phasing in proposed changes to the patient classification system known as diagnosis-related groups (DRG), a structure used to determine Medicare payments to hospitals for specific medical conditions and treatments.

Changes to the DRG structure are designed to recognize the severity of a patient’s illness or condition, and adjust payment accordingly. The AHA supports these changes, but calls for a transition to the revised system to reduce the financial impact on hospitals, estimated to be between $800 million – $900 million.

The American Hospital Association is a national organization comprised of approximately 5,000 hospitals and healthcare systems and 37,000 individuals. Over one hundred years old, the AHA serves as a public policy advocate for its members in regulatory and legislative matters.