The HHS Office of Inspector General (OIG) has issued a report on variations in Medicare outlier payments made to acute hospitals under the inpatient prospective payment system (IPPS) during calendar years 2008 to 2011. According to the OIG, almost all hospitals received outlier payments, but some hospitals received a much higher proportion of Medicare IPPS reimbursements from outlier payments. Specifically, outlier payments averaged 12.8% of the Medicare IPPS reimbursement for 158 hospitals, compared to an average of 2.2% for all other hospitals. As a result, the high-outlier hospitals ended up charging Medicare substantially more for the same Medical Severity Diagnostic Related Groups (MS-DRG) provided in the subset of hospitals compared to other hospitals, even though their patients had similar lengths of stay. There were 16 specific MS-DRGs that accounted for 41% of such outlier payments. The OIG observed that high outlier charges could result from a hospital attracting a disproportionate share of exceptionally costly patients or applying costly technologies and treatments. Nevertheless, the OIG raised concerns about why charges for similar cases vary substantially across hospitals, and recommended that CMS: (1) instruct its contractors to increase monitoring of outlier payments, (2) publicly report hospital data regarding the distribution of outlier payments; and (3) examine whether MS-DRGs associated with high rates of outlier payments warrant coding changes or other adjustments. CMS concurred with the recommendations.
A November 12, 2013 CMS call will focus on the physician order, physician certification, inpatient hospital admission, and medical review criteria that were adopted in the final FY 2014 Inpatient Prospective Payment System/Long-Term Care Hospital final rule. In short, under this new policy, if the ordering practitioner expects a beneficiary’s surgical procedure, diagnostic test or other treatment to require a stay in the hospital lasting at least two midnights, and admits the beneficiary as an inpatient based on that expectation, it is generally appropriate that the hospital receive Medicare Part A payment. The order must also be documented in the medical record in accordance with the regulations, and a physician must certify the medical necessity of hospital inpatient services. CMS recently posted updated subregulatory instructions related to review guidelines and other implementation issues.
The deadline for interested parties to submit an application for FY 2015 new technology add-on payments under the Medicare inpatient prospective payment system (IPPS) is November 25, 2013.
Medicare electronic health records (EHR) incentive payments to hospitals and health care professionals topped $6.3 billion for 2012 – more than twice the $2.3 billion awarded for 2011 -- according to a GAO report entitled Electronic Health Records: Number and Characteristics of Providers Awarded Medicare Incentive Payments for 2011-2012. The proportion of eligible hospitals and professionals receiving payments also grew from 2011 to 2011, with 48% of eligible hospitals (2,291) receiving payments in 2012 compared to 777 hospitals (16%) in 2011. For 2012, 31% of eligible professionals (183,712) were awarded payments, up from 10% (58,331) in 2011. Among hospitals and professionals awarded an incentive payment for 2012, the largest proportions were in the South, the smallest proportions were in the West, and a majority were in urban areas. More than four-fifths of the hospitals were acute care hospitals and three-fifths were nonprofit hospitals, while more than half of professionals were specialty practice physicians.
A recent OIG report links the growing presence of physician-owned distributorships, or PODs, to increased spinal surgery volumes and potentially increased Medicare costs. The OIG notes a “substantial presence” of PODs in the spinal device market, with PODs supplying spinal devices for 19% of the spinal fusion surgeries billed to Medicare in FY 2011. According to the OIG, hospitals that purchased devices from PODs performed more spinal surgeries in 2012 than hospitals that did not purchase from PODs, and hospitals increased the rate of growth in the number of spinal surgeries after they began purchasing from PODs. Hospitals identified surgeon preference as the strongest influence on their decisions to purchase spinal devices from PODs. The OIG also disagrees with PODs’ claims that their devices cost less than those from other suppliers; rather, in the categories examined by the OIG, the devices cost the same as or more than devices from companies not owned by physicians. This fact, coupled with increased volumes, according to the OIG, could increase overall Medicare costs over time. In addition, the OIG raises concerns about inconsistencies in hospital policies regarding physician disclosure of ownership to either hospitals or their patients of interests in PODs (although the OIG suggests that the new “Sunshine Act” disclosure rules may improve the ability of hospitals and patients to identify physicians’ investment in device companies). For a case urging an alternative perspective on PODs, see the report on our sister blog, http://www.lifescienceslegalupdate.com/, about a recent complaint filed in the U.S. District Court for the Central District of California that seeks a declaration that the OIG’s Special Fraud Alert on PODs unfairly and unconstitutionally burdens First Amendment rights of free speech and due process. The complaint defends the lawfulness of the physician-owned model, and characterizes the Fraud Alert as the result of a multi-year lobbying campaign by “Big Corporations” forced to compete with small physician-owned entities. For more details, see our full report.
On October 3, 2013, CMS published an interim final rule with comment period revising disproportionate share hospital (DSH) payment calculations. By way of background, in the FY 2014 inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment (PPS) final rule, CMS established a methodology for determining the amount of uncompensated care payments made to hospitals eligible for the DSH payment adjustment in FY 2014 and a process for making interim and final payments. The new rule revises certain operational requirements for hospitals with Medicare cost reporting periods that span more than one federal fiscal year. It also makes changes to way Indian Health Service hospital data will be used in the uncompensated care payment calculation. The regulations are effective on October 1, 2013, and comments will be accepted on the rule until November 29, 2013.
As discussed in previous reports, the final FY 2014 IPPS rule established new criteria for determining the appropriateness of inpatient admissions. In brief, under this policy, CMS generally will presume that surgical procedures, diagnostic tests, and other treatments are 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. On September 26, 2013, CMS issued FAQs on the new policy, in which it announces it is directing MACs and Recovery Audit Contractors (RACs) to limit review of hospital compliance with this policy. Specifically, MACs and RACs will be instructed not to review claims spanning more than two midnights after admission for a determination of whether the inpatient hospital admission and patient status was appropriate, and CMS will not permit RACs to review inpatient admissions of one midnight or less that begin on or after October 1, 2013 through the end of the year. On the other hand, CMS will instruct the MACs to conduct limited “probe” prepayment reviews of inpatient hospital claims spanning less than two midnights after admission to determine for medical necessity of the patient status in accordance with the two midnight benchmark to assess compliance and provide feedback to CMS for purposes of developing further education and guidance. Since the probe reviews will be conducted on a prepayment basis, hospitals can rebill denied inpatient hospital admissions in accordance with the IPPS rule. CMS notes that while medical review will not be focused this issue, “physicians should make inpatient admission decisions in accordance with the 2 midnight provisions in the final rule.” Moreover, CMS warns that “evidence of systematic gaming, abuse or delays in the provision of care in an attempt to surpass the 2-midnight presumption could warrant medical review.”
On October 3, 2013, CMS published notices correcting technical and typographical errors in two final Medicare FY 2014 payment rules. The first notice corrects the August 19, 2013 final FY 2014 IPPS/LTCH PPS rule. The second notice corrects technical errors in the August 6, 2013 final skilled nursing facility PPS rule for FY 2014.
CMS is hosting a call on September 26, 2013 to discuss the physician order, and physician certification, inpatient hospital admission, and medical review criteria that were adopted in the final FY 2014 Inpatient Prospective Payment System (IPPS)/Long-Term Care Hospital (LTCH) rule. In short, under this new policy, if the ordering practitioner expects a beneficiary’s surgical procedure, diagnostic test or other treatment to require a stay in the hospital lasting at least two midnights, and admits the beneficiary as an inpatient based on that expectation, it is generally appropriate that the hospital receive Medicare Part A payment. The order must also be documented in the medical record in accordance with the regulations, and a physician must certify the medical necessity of hospital inpatient services.
As previously reported, the final FY 2014 Medicare inpatient prospective payment system (IPPS) rule established new criteria for determining the appropriateness of inpatient admissions. In brief, under this policy, CMS generally will presume that surgical procedures, diagnostic tests, and other treatments are 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. On September 5, 2013, CMS released guidance on admission order and certification requirements in connection with the new “two‐midnight” benchmark. The guidance addresses standards for physician certification of hospital services, such as content, timing, authorization, and the medical record elements that meet the initial inpatient certification requirements. CMS also provides guidance on practitioner orders, including content, qualifications of ordering/admitting practitioner, verbal orders, "knowledge of the patient," timing, and specificity of the order.
Almost two-thirds of critical access hospitals (CAHs) would not meet Medicare CAH location requirements if they were required to re-enroll today, according to the OIG. Many of these rural hospitals were permanently exempted from CAH distance requirements under previous authority of states to designate “necessary provider” (NP) CAHs. Medicare reimburses CAHs at 101% of their reasonable costs; if CMS had the authority to decertify CAHs that were 15 or fewer miles from their nearest hospitals in 2011, the OIG estimates that Medicare would have saved $449 million. The OIG recommends that CMS take several steps to “ensure that the only CAHs to remain certified would be those that serve beneficiaries who would otherwise be unable to reasonably access hospital services.” For instance, the OIG recommends that CMS seek legislative authority to remove NP CAHs’ permanent exemption from the distance requirement; CMS notes that the President’s proposed FY 2014 budget would decertify any CAHs located fewer than 10 miles from another hospital or CAH (and reduce payment to all remaining CAHs to 100% of reasonable cost). CMS also discusses steps it has already taken to implement OIG recommendations to periodically reassess CAHs for compliance with all location-related requirements and to ensure that CMS applies a uniform definition of “mountainous terrain” to all CAHs. CMS disagreed with an OIG recommendation to seek legislative authority to revise the CAH Conditions of Participation to include alternative location-related requirements.
On August 19, 2013, the Centers for Medicare & Medicaid Services (CMS) published the 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) (Final Rule) which, among other changes, updates policies related to the Hospital Readmissions Reduction Program (HRRP or Program). As discussed in greater detail in the May 2012 Reed Smith LLP Client Alert, since October 1, 2012, CMS has utilized the HRRP in an effort to reduce hospital readmissions after discharge of patients with certain conditions. Under the Program, an inpatient admission by a short-term acute care hospital (STACH) of a patient discharged from the same or different STACH within 30 days preceding the readmission may result in a reduction of Medicare payments to the STACH that initially treated the patient. CMS employs a complicated formula to determine the amount of the payment reduction to the original STACH for certain readmissions. Initially, the HRRP only applied to readmissions of patients with a diagnosis upon discharge from a STACH of myocardial infarction, heart failure or pneumonia, though federal statutes permit CMS to expand the list of applicable conditions beginning FY 2015.
CMS made several changes to the Program in the Final Rule. First, CMS adopted its proposal to refine the readmission measures and to adopt a revised “planned readmission algorithm” for the Program, which broadly identifies planned readmissions for procedures and treatments for exclusion from the readmission measures. Along these same lines, CMS finalized its proposal to change the measurement of planned readmissions. Under the Final Rule, if the first readmission is planned, it will not count as a readmission for purposes of the Program, nor will any subsequent unplanned readmission within 30 days of the index readmission. CMS anticipates that this revision will decrease the number of readmissions that “count” toward a hospital’s readmission numbers.
Third, CMS expanded the list of applicable conditions for FY 2015 to include patients admitted for: (1) an acute exacerbation of chronic obstructive pulmonary disease; (2) elective total hip arthroplasty; and (3) elective total knee arthroplasty. CMS declined to include other vascular conditions, as recommended by MedPAC, because many of those procedures are now performed on an outpatient basis.
Finally, CMS finalized certain aspects of the FY 2014 adjustment factor and applicable period for consideration of readmission data. In particular, for FY 2014, CMS increased the maximum payment reduction to 2% as required by the Affordable Care Act and finalized the applicable period for purposes of collecting data to ascertain readmission numbers as the period from July 1, 2009 through June 30, 2012.
Notably, CMS again refused to adjust the Program to account for readmissions unrelated to the patient’s initial hospital stay, despite commenters’ concern that STACHs may be held responsible for readmissions entirely outside of their control (i.e., a patient suffering injuries in a car accident within 30 days of discharge with a diagnosis of PN).
CMS also addressed commenters’ concerns regarding the impact on readmission rates of claims denied by Recovery Audit Contractors (RACs) – an issue of increasing importance to hospitals. CMS declined to omit from the HRRP readmissions associated with these denied claims, emphasizing the importance of utilizing transparent data to calculate readmissions (updates of the MedPAR and SAF files – which are not immediately adjusted for RAC denials) and the fact that inpatient stays denied payment by RACs under Medicare Part A remain classified as inpatient stays and can be billed as Medicare Part B inpatient stays. Because inpatient stays denied payment under Medicare Part A typically continue to count as qualifying inpatient stays for other payment purposes (i.e. qualifying for SNF benefits), CMS believes it is appropriate to include them in the HRRP.
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).
CMS has finalized prospective payment rates for Medicare inpatient hospital services provided by inpatient psychiatric facilities (IPFs) for FY 2014. CMS estimates that the FY 2014 rates will increase by a total of $115 million compared to FY 2013 levels. CMS is providing a 2.6% market basket update, which is adjusted by a 0.1 percentage point reduction and a 0.5 percentage point multi-factor productivity adjustment/reduction mandated by the ACA. CMS also is decreasing the outlier threshold amount from $11,600 in FY 2013 to $10,245 in FY 2014, which is expected to increase outlier payments by $15 million.
The HHS Office of the Inspector General (OIG) has issued a report entitled “Medicare Could Save Millions by Strengthening Billing Requirements for Canceled Elective Surgeries.” Based on a review of 100 claims, the OIG estimates that Medicare made $38.2 million in Part A inpatient hospital payments in calendar years 2009 and 2010 for short-stay, canceled elective surgery admissions that were not reasonable and necessary. Specifically, the OIG found that for 80 of the 100 sampled claims, Medicare made payments totaling $345,717 for hospital inpatient claims involving canceled elective surgeries when the condition of the patient was not severe enough to warrant an inpatient admission (i.e., a clinical condition did not exist on admission or a new condition did not emerge after admission that required inpatient care). The OIG recommends that CMS: (1) adjust sampled claims representing overpayments to the extent allowed under the law; (2) strengthen guidance to hospitals; (3) resolve remaining non-sampled claims and recover overpayments to the extent feasible and allowed under the law; and (4) instruct Medicare administrative contractors to emphasize to hospitals the need for stronger utilization review controls for claims that include admissions for elective surgeries that did not occur. CMS generally agreed with the OIG’s recommendations.
A recent OIG report examined “Hospitals’ Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries.” The report was conducted in response to concerns about hospitals’ use of observation stays, which may be resulting in Medicare beneficiaries paying more as outpatients than if they were admitted as inpatients, and which may prevent beneficiaries from qualifying under Medicare for SNF services following discharge from the hospital. In addition, CMS is concerned about improper payments for short inpatient stays when the beneficiaries should have been treated as outpatients. Based on a review of claims from 2012, the OIG found that Medicare beneficiaries had 1.5 million observation stays, commonly spending one night or more in the hospital. Beneficiaries had an additional 1.4 million long outpatient stays; some of these may have been observation stays. Beneficiaries also had 1.1 million short inpatient stays, which the OIG notes typically cost Medicare and beneficiaries more than observation stays. In addition, beneficiaries had more than 600,000 hospital stays that lasted 3 nights or more but did not qualify them for SNF services, while Medicare inappropriately paid $255 million for SNF services for which beneficiaries did not qualify (CMS will refer these SNFs to CMS so the agency can look into recoupment). The OIG points out that that the CMS proposed IPPS rule for FY 2014 (which subsequently was finalized, as discussed above) would substantially affect how hospitals bill for these stays. While the number of short inpatient stays would be significantly reduced under the proposed rule, the number of observation and long outpatient stays may not be reduced if outpatient nights are not counted towards the proposed two night presumption. The OIG suggests that CMS consider how to ensure that beneficiaries with similar post-hospital care needs have the same access to and cost sharing for SNF services. In a related matter, a nationwide class action lawsuit filed November 3, 2011 on behalf of 14 named seniors by the Center for Medicare Advocacy and the National Senior Citizens Law Center challenging CMS’s observation day policy and practice is still pending in federal district court. Bagnall v. Sebelius, No. 11-1703 (D. Conn. filed Nov. 3, 2011). The lawsuit alleges that the use of observation status violates the Medicare Act, the Freedom of Information Act, the Administrative Procedure Act, and the Due Process Clause of the Fifth Amendment to the Constitution.
On July 26, 2013, CMS published a notice announcing the final federal share disproportionate share hospital (DSH) allotments for federal fiscal year (FY) 2012 and the preliminary federal share DSH allotments for FY 2013. CMS also announces the final FY 2012 and the preliminary FY 2013 limits on aggregate DSH payments that states may make to institutions for mental diseases (IMDs) and other mental health facilities.
Two recent OIG reports examine Medicare policies involving hospice services. The first report concentrates on hospice general inpatient care (GIP), under which short-term pain control or symptom management that cannot be managed in other settings is provided in an inpatient facility (a Medicare-certified hospice inpatient unit, a hospital, or a SNF). Medicare paid $1.1 billion for GIP in 2011, mainly for care in hospice inpatient units. Almost one-quarter of hospice beneficiaries received GIP that year, with one-third of the stays exceeding 5 days. On the other hand, 27% of Medicare hospices did not provide any GIP, and many of these hospices did not provide any level of hospice care other than routine home care. The OIG believes additional review is needed to ensure that hospices are using GIP as intended and providing the appropriate level of care. The OIG also suggests that CMS ensure that hospices that do not provide GIP are offering the necessary levels of care, such as through adoption of a quality measure regarding hospices’ ability to provide all hospice services.
The second report examined the growth in Medicare beneficiaries’ discharges from acute-care hospitals to hospice care, and its impact on hospital payment. While Medicare has “transfer payment policies” that adjust payments to hospitals for early discharges (i.e., sooner than a Medicare-established average length of stay) to other hospitals or postacute-care facilities, Medicare does not currently have a transfer payment policy for early discharges to hospice care. The OIG estimates that Medicare could have saved more than $602 million in 2009 and 2010 by applying a hospital transfer payment policy for early discharges to hospice care. The OIG recommends that CMS adopt regulations or pursue a legislative change, if necessary, to establish a hospital transfer payment policy for early discharges to hospice care. CMS will study the recommendations.
CMS has opened an “informal” comment period on potential quality of care measures for cancer hospitals exempt from the Medicare prospective payment system (PPS). A CMS contractor has developed the following candidate measures intended to address gap areas not covered by the current PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program: (1) Initiation of Osteoclast Inhibitors for Patients with Multiple Myeloma or Bone Metastases Associated with Breast Cancer, Prostate Cancer, or Lung Cancer; (2) Overuse of Imaging for Staging Breast Cancer at Low Risk of Metastasis; and (3) Potentially Avoidable Admissions and Emergency Department Visits Among Patients Receiving Outpatient Chemotherapy. Comments are due July 3, 2013.
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.