OIG Focuses on Hospitalization of Nursing Home Patients

A recent OIG report, "Medicare Nursing Home Resident Hospitalization Rates Merit Additional Monitoring,” examines the extent to which Medicare nursing home residents are hospitalized. The OIG found that in FY 2011, nursing homes transferred one quarter of their Medicare residents to hospitals for inpatient admissions in FY 2011, and Medicare spent $14.3 billion on these hospitalizations. Septicemia was the most common condition requiring the hospitalization of nursing home residents, and nursing homes located in Arkansas, Louisiana, Mississippi, and Oklahoma had the highest annual rates of resident hospitalizations. The OIG concludes that the higher-than-average resident hospitalization rates of some nursing homes in FY 2011 suggest that some hospitalizations could have been avoided through better nursing home care. The OIG recommends that CMS develop a quality measure that describes nursing home resident hospitalization rates and assess this measure during surveys of nursing homes. CMS concurs with OIG’s recommendations, and is already working on developing a hospitalization measure for all nursing home residents and a re-hospitalization measure for Medicare skilled nursing facility residents. CMS also concurs in adding these measurers to the quality measures surveyors review.

Medicare Home Health PPS Rates Cut 1.05% Under Final 2014 Rule

Under the final Medicare home health PPS (HH PPS) rule released on November 22, 2013, payments in 2014 will be cut by 1.05% (about $200 million) compared to 2013 levels (and compared to a -1.5% cut forecast in the proposed rule). This reduction reflects a 2.3% home health payment update, which is more than offset by a -0.62% ICD–9 grouper refinement and a -2.73% ACA-mandated rebasing adjustment to the national, standardized 60-day episode payment rate and other applicable payment amounts. The ACA rebasing adjustment is intended to reflect factors such as changes in the number of visits, the mix of services, the level of intensity, and the average cost of providing care in an episode.

CMS estimates that the difference between the 2013 average payment per episode and the average cost per episode is 13.09%; CMS is recouping this difference over four years (from CY 2014 to CY 2017). The final rule also revises the Home Health Quality Reporting Program, including adding quality measures relating to hospital readmissions and Emergency Department visits with the first 30 days of a home health stay; CMS will begin reporting feedback to HHAs on performance on these measures in CY 2014, and they will be added to Home Health Compare for public reporting in CY 2015. On the other hand, the final rule reduces the number of process measures reported on the certification and survey provider enhanced reports (CASPER) by eliminating the stratification by episode length for nine process measures. The rule also clarifies cost allocation of home health agency survey expenses; for that portion of costs attributable to Medicare and Medicaid, CMS will assign 50% to Medicare and 50% to Medicaid. The official version of the rule will be published in the Federal Register on December 2, 2013.  

CMS Finalizes FY 2014 Medicare IPPS, LTCH Rates

On August 19, 2013, the Centers for Medicare & Medicaid Services (CMS) published a final rule updating FY 2014 Medicare payment policies and rates under the acute inpatient prospective payment system (IPPS) and the long-term care hospital (LTCH) prospective payment system (PPS). The following are highlights of the lengthy rule:

  • The final rule increases IPPS operating payment rates by 0.7% for hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program (for hospitals that do not successfully, the update is reduced by 2.0 percentage points). This reflects the hospital market basket of 2.5%, which is reduced by 0.5 percentage points for multi-factor productivity and an additional reduction of 0.3 percentage points under the Affordable Care Act (ACA). The rate is further decreased by 0.8% for a documentation and coding recoupment adjustment required by the American Taxpayer Relief Act of 2012 and by a 0.2% adjustment to offset the effect of the policy on inpatient admission and medical review criteria for hospital inpatient services (discussed below).
  • The final rule addresses a number of hospital quality initiatives. For instance, CMS is implementing the ACA’s Hospital-Acquired Condition (HAC) Reduction Program, under which hospitals that rank among the lowest-performing 25% with regard to HACs will be paid 99% of the IPPS payment that otherwise would be made, effective beginning in FY 2015. The rule finalizes the quality measures and scoring methodology for the HAC Reduction Program, along with the process for hospitals to review and correct data. In addition, the rule updates the Hospital Readmissions Reduction Program to, among other things, increase the maximum payment reduction to up to 2% and add hip and knee surgery and chronic obstructive pulmonary disease to the list of conditions used to determine the reduction, effective in FY 2015. CMS also has revised the methodology to better account for planned readmissions. Further, CMS has updated the Hospital Value-Based Purchasing (VBP) Program, which adjusts IPPS payments based on how well a hospital performs or improves performance on a set of quality measures. For FY 2014, CMS is adding new measures to the program, and increasing the applicable reduction to base operating DRG payment amounts to 1.25%, which increases the total estimated amount available for value-based incentive payments to approximately $1.1 billion. The rule also revises Inpatient Quality Reporting program measures.
  • CMS is finalizing (with modifications) its proposed changes in criteria for determining the appropriateness of inpatient admissions. In brief, under this policy, CMS will provide that, in addition to services designated by CMS as “inpatient only,” surgical procedures, diagnostic tests, and other treatments will be presumed to be appropriate for Medicare Part A inpatient hospital payment when the physician admits a patient based on the expectation that the patient will require a stay of at least two midnights. As noted, CMS adopted its proposed 0.2% rate cut to offset the expected effect of the policy on inpatient admissions.
  • CMS finalized its proposal to use cost-to-charge ratios (CCRs) for Implantable Devices, MRIs, CT scans, and cardiac catheterization for rate-setting purposes, which increases the total number of CCRs used to calculate FY 2014 relative weights from 15 to 19. The additional CCRs generally increase relative weight values for surgical Medicare severity diagnosis related group (MS–DRGs) and decrease values for medical MS–DRGs.
  • The rule implements an ACA provision that provides that distribution of Medicare disproportionate share hospital (DSH) payments will be based in part on an estimate of how much uncompensated care hospitals provide relative to other hospitals.
  • The rule addresses a number of other policy issues, including: MS-DRG classifications for certain procedures; applications for new technology add-on payments; the timeframe for hospital billing of Medicare Part B services inappropriately billed under Part A; the calculation of graduate medical education payments; a revised/rebased market basket; critical access hospital (CAH) conditions of participation; the expiration of the Medicare-Dependent Hospital program, the expiration of changes to low volume hospital policy; and revised measures under the Inpatient Psychiatric Facility (IPF) Quality Reporting, LTCH QRP, and PPS-Exempt Cancer Hospital Quality Reporting programs.
  • The rule also updates LTCH PPS rates and policies for FY 2014. Under the final rule, the standard federal rate will equal $40,607.31, compared to a standard rate of $40,397.96 applicable from December 29, 2012 through September 30, 2013. The FY 2014 standard federal rate reflects a 1.7% update for LTCHs that submit the requisite quality data under the LTCH Quality Reporting Program (LTCH QRP), based on a market basket update of 2.5% reduced by a multi-factor productivity adjustment of 0.5 percentage point and an additional 0.3 percentage point reduction as mandated by the ACA. The LTCH PPS standard federal rate will be of -0.3% for LTCHs that fail to submit data under the LTCH QRP. The rule also provides a budget neutrality adjustment (under the second year of a 3-year phase-in of a onetime prospective adjustment) and an area wage level budget neutrality factor. In addition, the final rule sets the fixed-loss amount for high cost outlier cases at $13,314, down from the FY 2013 fixed-loss amount of $15,408. Moreover, the final rule allows the current moratorium on the full implementation of the so-called “25% rule” to expire at the end of FY 2013 (at which time, if an LTCH admits more than a specified percentage of its patients from a single acute care hospital during a fiscal year, it will be paid at a rate comparable to the IPPS rate for patients above the specified percentage threshold).

Ways and Means Committee Releases Draft Medicare Post-Acute Care Reform Legislation

The House Ways and Means Committee is inviting comments on draft legislation to reform Medicare post-acute care (PAC) policy, based on reforms included in President Obama’s fiscal year 2014 budget. The legislation would:

1. Reduce market basket updates for home health agencies, skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs) and long-term care hospitals;
2. Create site neutral payments between IRFs and SNFs for certain procedures (unilateral knee replacement, unilateral hip replacement, unilateral hip fracture, and other appropriate conditions)
3. Modify the criteria required for IRF status (the so-called “75 percent rule”);
4. Establish a SNF readmissions program; and
5. Establish a prospective payment system for Part A and Part B payment for bundles of PAC services (determined by the Secretary, with consideration to the Bundled Payments for Care Improvement Initiative) provided after a hospitalization, beginning in 2018.

Comments will be accepted until August 30, 2013.

Medicare Home Health PPS Rates to Drop under Proposed CY 2014 Rule

CMS’s proposed Medicare home health PPS (HH PPS) rule for CY 2014 would cut payment by 1.5% ($290 million) compared to 2013 levels. This proposed reduction reflects a 2.4% home health payment update, which is more than offset by an ICD–9 grouper refinement and an ACA-mandated rebasing adjustment to the national, standardized 60-day episode payment rate and other applicable payment amounts. The ACA rebasing adjustment is intended to reflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, and the average cost of providing care per episode. CMS estimates that the difference between the 2013 average payment per episode and the average cost per episode is 13.63%; since the ACA caps the adjustment at 3.5% per year for four years, CMS proposes to reduce payments in each year from CY 2014 to CY 2017 by 3.5% (for a total of 14% over four years). In addition to other home health policy updates, the proposed rule would revise the Home Health Quality Reporting Program, including adding quality measures relating to hospital readmissions and Emergency Department visits with the first 30 days of a home health stay. The proposed rule would also clarify cost allocation of home health agency survey expenses; for that portion of costs attributable to Medicare and Medicaid, CMS would assign 50% to Medicare and 50% to Medicaid. CMS will accept comments on the proposed rule until August 26, 2013.

Congressional Committees Seek Input on Post-Acute Care Reforms

On June 19, 2013, the leaders of the House Ways and Means Committee and Senate Finance Committee issued an open call for Medicare post-acute care payment (PAC) reform recommendations. The lawmakers cited their concerns about “the substantial variation in Medicare spending, utilization, quality, and Medicare profit margins within the post-acute sector,” and request information on PAC reforms that can result in Medicare program savings, improve PAC payment accuracy, combat fraud, and address variation in utilization. In addition, the letter requests feedback on a long list of policy considerations, including specific questions on hospital readmissions, bundled payments, site-neutral payments, and various questions raised by alternatives to fee-for-service payment. Comments will be accepted until August 19, 2013.

MedPAC Report to Congress on Delivery Reform

The Medicare Payment Advisory Commission (MedPAC) has released its June 2013 Report to the Congress on Medicare and the Health Care Delivery System. The report examines a number of potential ways to reform Medicare, including the following: 

  • Redesigning the Medicare benefit. MedPAC continues to discuss the concept of competitively determined plan contributions (CPC), under which Medicare beneficiaries could receive care through either a private plan or traditional fee-for-service, but the premium paid by the beneficiary could vary depending on the coverage option chosen. The federal government’s payment for a beneficiary’s care would be determined through a competitive process comparing the costs of available options for coverage. The report identifies key issues to be addressed if the Congress wishes to pursue a policy option like CPC, such as how benefits could be standardized for comparability, how to calculate the Medicare contribution, and the structure of subsidies for low-income beneficiaries.
  • Reducing Medicare payment differences across sites of care. MedPAC notes that Medicare payment rates often vary for similar services provided to similar patients, simply because they are provided in different sites of care (e.g., physician’s office vs. hospital outpatient department). The report identifies services that may be eligible for equalizing or narrowing payment differences across settings.
  • Bundling post-acute care services. MedPAC explores the implications for quality and program spending for different design features of post-acute care payment bundles, such as the services included, the length of time covered by the bundle, and the method of payment.
  • Reducing hospital readmissions. MedPAC suggests further refinements to improve incentives for hospitals and generate program savings through reduced readmissions, including proposals to address the effect of random variation on hospitals with small numbers of cases, the inability of the industry to reduce average penalties with improved performance, the correlation of patient income and readmission rates, and the inverse relationship between readmissions and mortality for cardiac patients.
  • Payments for hospice services. MedPAC presents information on the prevalence of long-stay patients and the use of hospice services among nursing home patients to inform future hospice payment reforms. MedPAC also provides additional information supporting its March 2009 recommendations to revise the hospice payment system.
  • Improving care for dual-eligible beneficiaries. MedPAC discusses the potential role that federally qualified health centers and community health centers can play in coordinating care for Medicare-Medicaid dual-eligible beneficiaries.

In addition to discussing these delivery reforms, the MedPAC report addresses Congressionally-mandated reviews of the following topics: Medicare ambulance add-on payments; geographic adjustment of fee schedule payments for the work effort of physicians and other health professionals; and Medicare payment for outpatient therapy services.

CMS Proposes Medicare IPPS and LTCH PPS Rates/Policies for FY 2014

On Mayl 10, 2013, the Centers for Medicare & Medicaid Services (CMS) published its proposed rule updating Medicare inpatient prospective payment system (IPPS) and long-term acute care hospital prospective payment system (LTCH PPS) rates and policies for fiscal year (FY) 2014, which begins October 1, 2013. Comments on the proposed rule will be accepted until June 25, 2013. Highlights of the sweeping rule include the following: 

  • The proposed rule would increase IPPS operating rates by 0.8% after accounting for all adjustments (if a hospital does not successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program, this update is reduced by 2.0 percentage points). The 0.8% update reflects the hospital market basket of 2.5% reduced by a -0.4 percentage point multi-factor productivity adjustment and an additional -0.3 percentage point reduction in accordance with the Affordable Care Act (ACA). The rate is further decreased by 0.8% for a proposed documentation and coding recoupment adjustment required by the American Tax Relief Act of 2012 and by a 0.2% proposed adjustment to offset the cost of a proposal addressing its inpatient medical review criteria. Specifically, CMS proposes to clarify its medical review criteria to presume that Part A hospital inpatient status is appropriate if the beneficiary is admitted to the hospital pursuant to a physician order and receives care for at least two midnights. On the other hand, hospital inpatient admissions spanning less than two midnights will presumptively be inappropriate under Part A. Appropriate documentation could rebut the presumption.
  • The proposed rule includes a number of hospital quality initiatives. For instance, CMS is proposing to implement the ACA’s Hospital-Acquired Condition (HAC) Reduction Program. Under this provision, effective beginning in FY 2015, hospitals that rank among the lowest-performing 25% with regard to HACs will be paid 99% of the IPPS payment that otherwise would be made. The proposed rule addresses, among other things, the payment adjustment, measure selection, risk-adjustment and scoring methodology; performance scoring; public availability of hospital-specific performance information; and limitation of administrative and judicial review. CMS also proposes to update the Hospital Value-Based Purchasing (VBP) Program, which adjusts IPPS payments based on how well a hospital performs or improves performance on a set of quality measures. For FY 2014, CMS proposes increasing the applicable percent reduction to base operating DRG payment amounts to 1.25%, increasing the total estimated amount available for value-based incentive payments (approximately $1.1 billion), and adding new measures to the program. In addition, the proposed rule would expand the Hospital Readmissions Reduction Program, under which CMS currently assesses hospitals’ penalties using three readmissions measures (heart attack, heart failure, and pneumonia). The maximum payment reduction will increase from 1% to 2% in FY 2014, as mandated by the ACA. For FY 2014, CMS also proposes to add two new measures to calculate readmission penalties effective for FY 2015: readmissions for hip/knee arthroplasty and chronic obstructive pulmonary disease. CMS also proposes a revised methodology to take into account planned readmissions for the existing readmissions measures. The proposed rule also would revise IQR program measures.
  • CMS proposes to implement new cost centers for Implantable Devices, MRIs, CT scans, and cardiac catheterization for FY 2014, which would increase the total number of cost-to-charge ratios (CCRs) used to calculate the FY 2014 proposed relative weights from 15 to 19. The additional CCRs generally increase the relative weight values for surgical Medicare severity diagnosis related group (MS-DRGs) and decrease the relative weight values for medical MS-DRGs.
  • CMS proposes to implement an ACA provision revising how Medicare disproportionate share hospital (DSH) payments are paid. Under the proposed rule, hospitals will receive 25% of the payment they otherwise would receive, and the remaining 75% percent will be adjusted for decreases in the national rate of uninsured individuals and distributed to hospitals payments based on the hospital’s share of uncompensated care relative to all Medicare DSH hospitals.
  • The proposed rule also addresses, among many other things: MS-DRG classifications for certain procedures; applications for new technology add-on payments; direct graduate medical education and indirect medical education payments; and the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. In addition, CMS proposes to revise the conditions of participation (CoPs) for hospitals relating to the administration of vaccines by nursing staff, and the CoPs for critical access hospitals relating to the provision of acute care inpatient services.
  • With regard to the LTCH PPS, CMS proposes a 1.8% annual update for LTCHs, which would increase the standard federal rate to $40,622.06. The rule also includes a number of other LTCH PPS payment and policy provisions, including a proposal to allow the regulatory moratorium on the full application of the “25% Rule” to lapse, new quality measures, and solicitation of comments on patient criteria-based payment adjustments. Reed Smith has prepared a Client Alert with additional details on the LTCH PPS provisions.

CMS Proposed Changes to Medicare LTCH Payment Rates and Policies for FY 2014

This post was written by Paul W. Pitts.

On April 26, 2013, the Centers for Medicare & Medicaid Services (“CMS”) released the proposed update to the Medicare long-term acute care hospital prospective payment system (“LTCH PPS”) policies and payment rates for fiscal year (“FY”) 2014. The proposed changes would apply to discharges occurring on or after October 1, 2013 through September 30, 2014. CMS will accept comments on the proposed rule until June 25, 2013, and will respond to comments in a final rule to be issued by August 1, 2013. Reed Smith has prepared a Client Alert that provides a summary of the most significant proposed changes to the LTCH PPS in the proposed rule.

CMS Notice Corrects Hospital Readmissions Data

CMS published a notice on March 13, 2013 correcting previous technical errors to the Medicare inpatient prospective payment systems (IPPS) final rulemaking for FY 2013. Among other things, CMS is correcting statistics on the Hospital Readmissions Reduction Program with regard to (1) the amount by which payments to hospitals would be reduced; and (2) the number of hospitals that will have their base operating DRG payments reduced by the readmissions adjustment. 
 

MedPAC Meeting on Medicare Policy Issues (Sept. 6-7)

On September 6 and 7, 2012, MedPAC is meeting to discuss a variety of Medicare issues, including reforming the traditional benefit package, bundling, readmissions, and physical therapy policy. More information, including issue briefs for each of the topics, is available on the MedPAC web site.

CMS Issues Final Medicare Inpatient Hospital Rates/Policies for FY 2013

On August 31, 2012, the Centers for Medicare & Medicaid Services (CMS) is publishing its final 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 2013. Overall, CMS estimates that FY 2013 payments to general acute care hospitals for operating expenses will increase by $2 billion under the rule considering all policy changes, the expiration of certain temporary payment increases, and projected utilization. CMS addresses a wide variety of policies in the extensive rule, including the following:

  • CMS is updating IPPS rates by 2.8% for FY 2013. This increase reflects a 2.6% market basket update that is reduced under the Affordable Care Act (ACA) by a multi-factor productivity adjustment of 0.7% and an additional 0.1% reduction, which is then increased by a 1.0% documentation and coding adjustment (CMS did not adopt its proposal to make a prospective documentation and coding adjustment to account for estimated overpayments in FY 2010, and as a result the overall update is higher than under the proposed rule). Payments also will be impacted by other policies, including an estimated 0.3% cut under a new readmissions reduction program (discussed below), and expiration of certain temporary increases to the Medicare-Dependent Hospital program and the low-volume hospital payment adjustment under the ACA.
  • The rule includes a number of hospital quality initiatives. CMS seeks to strengthen the Hospital Value-Based Purchasing Program (VBP Program) by adjusting hospital payments beginning in FY 2013 and annually thereafter based on how well a hospital performs or improves performance on a set of quality measures. Among other things, CMS finalized a risk-adjusted Medicare spending per beneficiary measure under the VBP Program, which will impact payments beginning in FY 2015. The rule also revises Inpatient Quality Reporting (IQR) program measures, resulting in a net reduction in measures from 72 to 59 for the FY 2015 payment determination, and 60 for the FY 2016 payment determination. Hospitals that do not successfully participate in the IQR program will have their market basket update reduced by two percentage points (to a 0.8% update). The rule also establishes the methodology to calculate the readmissions adjustment factor for the ACA Hospital Readmissions Reduction Program, which will reduce payments beginning in FY 2013 to certain hospitals that have excess readmissions for heart attack, heart failure, and pneumonia. CMS estimates that readmission policy will reduce base operating DRG payments to 2,206 hospitals, resulting in 0.3% overall decrease in hospital payments. CMS also is adding Surgical Site Infection Following Cardiac Implantable Electronic Device and Iatrogenic Pneumothorax with Venous Catheterization to the list of hospital acquired conditions for FY 2013. In addition, the rule establishes new quality reporting requirements for cancer hospitals and inpatient psychiatric facilities, and finalizes several requirements pertaining to ambulatory surgical center (ASC) quality reporting, with various effective dates.
  • CMS adopted its proposal to postpone the effective date of a policy adopted in the FY 2012 IPPS rule that clarified that hospitals may provide only therapeutic and diagnostic services “under arrangements” with an outside entity. On the other hand, routine services, such as contracted nursing services, furnished outside the hospital may not be furnished “under arrangement” and covered by Medicare. In response to requests from hospitals for additional time to restructure arrangements and establish operational protocols, the final rule provides that this policy will be effective for hospital cost reports beginning on or after October 1, 2013.
  • The final rule also, among many other things: modifies Medicare severity diagnosis related group (MS-DRG) classifications for certain procedures; makes a variety of changes to graduate medical education policy (including changes relating to determining a hospital’s fulltime equivalent resident cap); announces the approval of three new technology add-on payment applications (glucarpidase (Voraxaze®), fidaxomicin (DIFICIDTM), and the Zenith® Fenestrated Abdominal Aortic Aneurysm (AAA) Endovascular Graft); updates the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits; and updates LTCH-PPS policies and rates, as discussed below.

The policies in the final rule generally are applicable to discharges occurring on or after October 1, 2012, with certain exceptions.

Hospital Readmissions Reduction Program May Impact Post-Acute Providers

This post was written by Paul Pitts and Rachel M. Golick.

A new Medicare payment policy on readmissions may place more pressure on post-acute providers to coordinate care with the general acute-care hospitals in their community. The Centers for Medicare & Medicaid Services is in the process of adopting a new policy for reducing payments under the inpatient prospective payment system to those hospitals with high readmission rates for patients with certain conditions. As a result, hospitals paid under the IPPS may incur a payment penalty if a skilled nursing facility, long-term acute care hospital, inpatient rehabilitation facility or other post-acute care provider transfers a patient or resident back to the hospital for additional inpatient services. This policy change provides a powerful incentive to coordinate care and standardize procedures across providers. To read the full Alert, click here.

CMS Seeks Applicants for ACA Bundled Payment Initiative

The Centers for Medicare & Medicaid Services (CMS) has launched the Bundled Payments for Care Improvement Initiative under Section 3021 of the Affordable Care Act (ACA), which authorizes the Secretary to test innovative delivery arrangements to reduce federal spending while preserving or enhancing the quality of care. Under the Bundled Payments Initiative, CMS seeks applicants who will strive to improve care coordination for Medicare beneficiaries who are hospitalized and when they leave the hospital. Very broadly, applicants will offer a discount to Medicare compared to usual Medicare spending; the applicant will be paid the Medicare savings beyond the discount level, but will assume risk for Medicare expenditures above an established risk threshold. CMS invites proposals with one of following four approaches to bundled payments:

  • Model 1: Retrospective payment models for the acute inpatient hospital stay only

For this model, the episode of care consist of all Part A services furnished to “included beneficiaries” during a hospital stay, including hospital diagnostic testing and all related therapeutic services furnished by an entity wholly owned/operated by the admitting hospital in the three days prior to admission and the hospital facility services furnished during the hospital stay. Awardees will offer a discount from the usual Part A hospital inpatient MS-DRG payments; the minimum discount varies by year, ranging from 0% for the first six months, gradually increasing to 2% by year three. 

  • Model 2: Retrospective bundled payment models for hospitals, physicians, and post-acute providers for an episode of care consisting of an inpatient hospital stay followed by post-acute care

All beneficiaries admitted to an awardee acute care hospital for agreed-upon MS-DRGs will be included in the episode. The episode begins with the inpatient hospital admission to a participating provider and continues for a minimum of 30 days following discharge. The episode includes all hospital services (as defined in Model 1), plus Part A and Part B services furnished during the hospital stay, and Part A and Part B services furnished in the post-discharge period related to the episode “anchor.” In addition to the inpatient services, bundled services include inpatient hospital readmission services; long term care hospital services (LTCH); inpatient rehabilitation facility services (IRF); skilled nursing facility services (SNF); home health agency services (HHA); hospital outpatient services; independent outpatient therapy services; clinical laboratory services; durable medical equipment (DME); and Part B drugs. Applicants should propose a target price for the episode that includes a single rate of discount on the expected Medicare payments for all included Part A and Part B services. CMS requires minimum discount of 3% for applicants who propose a 30-89 day post-discharge episode, and a 2% minimum discount for 90 day or longer episode. Awardees may not restrict beneficiary choice of provider, including post-acute care provider, and awardees will be financially liable for care for included beneficiaries that is furnished by providers who are not participating in the model. 

  • Model 3: Retrospective bundled payment models for post-acute care where the bundle does not include the acute inpatient hospital stay

The episode anchor is the initiation of post-acute care services at a SNF, IRF, LTCH, or with an HHA within 30 days of beneficiary discharge from an acute care hospital for an agreed-upon MS-DRG. The episode will begin on the date post-acute services are initiated with an awardee and continue through a minimum of 30 days following initiation of the episode. The episode must include all related Part A and Part B services furnished during the episode period, including related readmissions (all services in Model 2 except acute inpatient services). Applicants should propose a target price for the episode that includes a single rate of discount off of the expected Medicare payments for all included services. Awardees may not restrict beneficiary choice of provider; awardees are financially responsible for care for included beneficiaries furnished by providers who are not directly participating in the model.  

  • Model 4: Prospectively-administered bundled payment models for hospitals and physicians for the acute inpatient hospital stay only

Proposals under Model 4 will build on the ongoing Medicare Acute Care Episode (ACE) demonstration for cardiac and orthopedic inpatient procedure hospitalizations, but will expand to additional geographic areas and clinical conditions. CMS notes that, unlike the ACE demonstration, the Bundled Payment Initiative will not include sharing savings with patients because such policies previously “have proven operationally challenging to administer and confusing for beneficiaries.” The episode of care is the acute inpatient admission to an awardee for agreed-upon MS-DRGs through patient discharge. The episode will include Part A hospital services (as defined in Model 1) and Part B professional services, along with specified services furnished during certain readmissions. The CMS will consider applicant proposals around risk adjustment, which must include a description of the methodology and may include plans for updating risk adjustment on a yearly basis. Applicants should propose a target price for the episode that includes a single rate of discount off of the expected Medicare Part A and Part B payments for all hospital facility and professional services furnished during the hospitalization and related readmissions for all beneficiaries with the agreed-upon MS-DRGs (a minimum 3% discount). CMS and the awardee will agree to the price for the bundle of services in advance, and the awardee bears full risk for the price of the episode.

Additional requirements for each model are set forth in the request for application (RFA). In general, CMS seeks to ensure that total Medicare expenditures under any model will decrease relative to what they would have been absent this initiative, and that quality measures are met.   Gainsharing arrangements are permitted under each model, but they must meet criteria “designed to ensure that care is not inappropriately reduced, that the quality of care remains constant or is improved, that there are not inappropriate changes in utilization or referral patterns, and to guard against fraud, waste, and abuse.” CMS states in the RFA that it will consider using its waiver authority with respect to fraud and abuse laws and other Medicare provisions for such gainsharing arrangements as appropriate. Bundled payment agreements will include a performance period of 3 years, with the possibility of a 2-year extension, beginning with program start date (which may be as early as the first quarter of CY 2012 for Model 1 awardees). Potential applicants must submit a letter of intent by September 22, 2011 for Model 1 (subsequently extended until October 6) and by November 4, 2011 for Models 2, 3, and 4; additional deadlines are set forth in the RFA materials. CMS also published a Federal Register notice announcing the initiative. 

CMS Issues Final Medicare Inpatient Hospital PPS Rule for FY 2012

CMS has released its final 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.   The official version of the rule will be published on August 18, 2011. Overall, CMS estimates that FY 2012 payments to general acute care hospitals for operating expenses would increase by $1.13 billion, or 1.1%, compared to 2012 (and compared to a projected decrease of $498 million under the proposed rule). The following are the highlights of the sweeping rule (the advance version is almost 1500 pages):

  • The higher final 1.1% update to payments reflects a 3% market basket update (compared to 2.8% in the proposed rule), which is reduced by a multi-factor productivity adjustment of 1.0% (compared to the proposed 1.2%) and an additional 0.1% reduction mandated by the ACA). This amount is further adjusted by a 2% reduction to account for changes in hospital documentation and coding practices that did not reflect actual increases in patients’ severity of illness (CMS initially proposed a 3.15% documentation and coding adjustment), along with an additional 1.1% increase in response to litigation involving the calculation of budget neutrality for the rural floor. Hospitals that do not successfully participate in the Inpatient Quality Reporting (IQR) program (formerly called the Reporting Hospital Quality Data for Annual Payment Update or RHQDAPU) will have their market basket update reduced by two percentage points. 
  • The final rule includes a number of hospital quality initiatives. The rule expands the measures to be reported under the IQR program for the FY 2014 and FY 2015 payment determinations (there are a total of 76 measures for the FY 2015 payment determination), but streamlines reporting requirements in an effort to reduce the burden on participating hospitals. CMS also is 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 finalizing measures regarding rates of readmissions for acute myocardial infarction, heart failure, and pneumonia, along with a methodology for calculating excess readmission rates. In addition, the rule builds on CMS’s January 13, 2011 separate proposed rule to implement the ACA’s Hospital Value-Based Purchasing program, which will tie Medicare payments to the quality of hospital services beginning in FY 2013, by adding a measure on Medicare Spending Per Beneficiary (this measure will also be used in the Hospital IQR Program). CMS did not adopt its proposal to add Acute Renal Failure after Contrast Administration to the list of hospital-acquired conditions in FY 2012.
  • The final rule also, among many other things: modifies Medicare severity diagnosis related group (MS-DRG) classifications for certain procedures; implements ACA policies providing additional payments to certain low-volume hospitals and to qualifying hospitals in certain geographic areas with low per-beneficiary Medicare spending; clarifies the payment policy for replacement of recalled devices to address partial credits; excludes hospice discharges from the disproportionate share hospital and indirect medical education adjustments; further clarifies that the “3-day payment window” policy applies to preadmission diagnostic and non-diagnostic services furnished at physicians’ practices that are wholly owned or wholly operated by the admitting hospital, revises how pension contributions are reported for wage index and cost finding purposes; discusses its decision to deny three applications for new technology add-on payments; modifies add-on payments for hospitals treating patients with end-stage renal disease; finalizes redistribution of graduate medical education caps; and updates 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 final rule also modifies Medicare “under arrangements” requirements to clarify that hospitals may provide only therapeutic and diagnostic services “under arrangements” with an outside entity; routine services, such as contracted nursing services, furnished outside the hospital can no longer be furnished “under arrangement” and covered by Medicare. Hospitals that cannot provide routine services directly (rather than under arrangement) to Medicare inpatients would be required to discharge the inpatient and transfer the patient to another hospital.  The final rule also includes numerous changes impacting LTCHs

The official version of the rule will be published on August 18, 2011. 

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.

CMS Open Door Forum on "Partnership for Patients: The Community-Based Care Transitions Program" (May 5)

On May 5, 2011, CMS is hosting a national forum on the ACA-mandated Community-Based Care Transitions Program (CCTP). The CCTP is designed to encourage the development of partnerships between hospitals with high readmission rates and community based organizations in order to: improve transitions of beneficiaries from the inpatient hospital setting to other care settings; improve quality of care for Medicare beneficiaries; reduce avoidable hospital readmissions for high risk beneficiaries; and document measureable savings to Medicare.

HHS Launches $1 Billion Partnership for Patients to Improve Hospital Care

On April 12, 2011, HHS Secretary Kathleen Sebelius and CMS Administrator Donald Berwick launched a public-private Partnership for Patients” to improve hospital care and transitions between care settings and reduce health system costs. By the end of 2013, the Partnership is committed to: (1) reducing preventable hospital-acquired conditions by 40% compared to 2010 levels; and (2) decreasing preventable complications during transitions between care settings, thereby reducing hospital readmissions by 20% compared to 2010. According to CMS, over the next three years this initiative could save 60,000 lives and save the health care system $35 billion, including up to $10 billion in Medicare savings. To date, the initiative has been endorsed by more than 500 hospitals, along with physicians and nurses groups, consumer groups, and employers.  As part of this initiative, the CMS Innovation Center intends to dedicate more than $500 million to test and implement models that promote delivery of safer patient care.  Key patient safety areas of focus include: adverse drug events; catheter-associated urinary tract infections; central line associated blood stream infections; injuries from falls and immobility; obstetrical adverse events; pressure ulcers; surgical site infections; venous thromboembolism; ventilator-associated pneumonia; and other hospital-acquired conditions.  CMS also will provide $500 million for a Community-based Care Transition Program (CCTP), as authorized by the ACA. The CCTP will support hospitals and community based organizations in helping Medicare beneficiaries at high risk for readmission to the hospital safely transition from the hospital to other care settings. CMS is now soliciting applications for CCTP funding from eligible community-based organizations and acute care hospitals that partner with community based organizations.

CMS Conference on ACA Community-Based Care Transitions Program (Reducing Hospital Readmissions)

On December 3, 2010, CMS is hosting a public forum on the upcoming Community-Based Care Transitions Program, which was authorized by the Affordable Care Act to reduce hospital readmissions, test sustainable funding streams for care transition services, maintain or improve quality of care, and document measureable savings to the Medicare program. The registration deadline for in-person meeting attendance is November 19, and the deadline for webinar registration is December 2, 2010 (or when space is full). 

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