CMS Proposes Medicare Inpatient Hospital/LTCH Payment Policies for FY 2012
On May 5, 2011, the Centers for Medicare & Medicaid Services (CMS) is publishing its proposed rule to update Medicare inpatient prospective payment system (IPPS) hospital and long-term care hospital prospective payment system (LTCH-PPS) payment and other policies for FY 2012. Overall, CMS estimates that FY 2012 payments to general acute care hospitals for operating expenses would decrease by $498 million (0.5%) under the proposed rule, while Medicare payments to LTCHs are projected to increase by $95 million (1.9%). CMS addresses a wide variety of policies in the more than 1000-page advance version of the rule.
Highlights of the proposal are available after the jump.
- CMS proposes applying a number of adjustments to arrive at an overall operating payment reduction of approximately 0.5%. Specifically, CMS proposes updating IPPS payments by 1.5% (based on a projected market basket update of 2.8%, which is reduced by a multi-factor productivity adjustment of 1.2% and an additional 0.1% reduction mandated by the Affordable Care Act or ACA), with an additional 1.1% increase in response to litigation involving the calculation of budget neutrality for the rural floor, and a 3.15 percentage point reduction to account for changes in hospital documentation and coding practices that did not reflect actual increases in patients’ severity of illness.
- The proposed rule includes a number of hospital quality initiatives. The proposed rule would expand the measures to be reported for purposes of the Inpatient Quality Reporting (IQR) program (formerly called the Reporting Hospital Quality Data for Annual Payment Update or RHQDAPU) for the FY 2013 and FY 2014 updates. Hospitals that do not participate in the IQR quality reporting program will have their market basket update reduced by two percentage points. The rule also would streamline reporting requirements in an effort to reduce the burden on participating hospitals. CMS is also proposing to add one category of conditions (Acute Renal Failure after Contrast Administration) to the list of hospital-acquired conditions (HACs) in FY 2012 (hospitals are prevented from receiving higher payment for care solely resulting from HACs). CMS also proposes implementing the ACA’s Hospital Readmissions Reduction Program, which will reduce payments beginning in FY 2013 to certain hospitals that have excess readmissions for certain selected conditions. CMS is proposing measures regarding rates of readmissions for acute myocardial infarction, heart failure, and pneumonia, along with a methodology for calculating excess readmission rates. The proposed rule also builds on CMS’s January 13, 2011 separate proposed rule to implement the ACA’s Hospital Value-Based Purchasing (VBP) program, which will tie Medicare payments to the quality of hospital services beginning in FY 2013, by proposing an additional measure on Medicare Spending Per Beneficiary.
- The proposed rule would, among many other things: modify Medicare severity diagnosis related group (MS-DRG) classifications for certain procedures; implement ACA policies providing additional payments to certain low-volume hospitals and to qualifying hospitals in certain geographic areas with low per-beneficiary Medicare spending; clarify the payment policy for replacement of recalled devices to address partial credits; exclude hospice discharges from the disproportionate share hospital and indirect medical education adjustments; further clarify Medicare payment for services provided in hospital outpatient departments on either the day of or during the three days prior to an inpatient admission (known as the 3-day payment window); revise how pension contributions are reported for wage index and cost finding purposes; address three applications for new technology add-on payments; and institute policy changes affecting wage indices and add-on payments for hospitals treating patients with end-stage renal disease. CMS also proposes to modify Medicare “under arrangements” requirements to clarify that hospitals could provide only therapeutic and diagnostic services “under arrangements” with an outside entity. Routine services, such as contracted nursing services, furnished outside the hospital could no longer be furnished “under arrangement” and covered by Medicare. The rule also would update the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits.
- The proposed rule also includes numerous changes impacting LTCHs. Reed Smith attorneys have prepared a Client Alert summarizing the LTCH proposals, including provisions addressing: changes to payment rates and other payment policies for FY 2012; revisions to and rebasing of the LTCH market basket; a requirement for budget neutrality in the area wage level adjustment; LTCH average length of stay policies; an extension of the LTCH moratorium on new LTCH beds to LTCHs “under development” on December 29, 2007; and implementation of a quality data reporting program for LTCHs as mandated by the ACA.
Supplementary information regarding the rule is posted on the CMS web site. The official version of the proposed rule will be published May 5, 2011. Comments will be accepted until on June 20, 2011.
