Late on April 30, 2014, CMS released the advance text of its proposed rule to update the Medicare acute hospital inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) for fiscal year (FY) 2015.
With regard to IPPS hospitals, the rule would provide for a 1.3% operating payment rate update, which reflects a 2.7% market basket update, adjusted by a -0.4 percentage point multi-factor productivity cut and an additional -0.2 percentage point cut (both mandated by the Affordable Care Act), with an additional -0.8 percentage point documentation and coding recoupment adjustment. Updates to IPPS hospitals are also subject to several other quality-related adjustments under the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, the Hospital-Acquired Condition (HAC) Reduction Program, the Hospital Inpatient Quality Reporting Program, and the Electronic Health Records Incentive Program. Despite the positive operating rate update, total IPPS payments (capital and operating payments) are projected to decrease by about $241 million in FY 2015 as a result of reductions under the Hospital Readmissions Reduction Program, the HAC Reduction Program, Medicare disproportionate share hospital payment changes, the expiration of certain statutory provisions that temporarily increased payments to hospitals, and other policy changes included in the sweeping 1688-page rule.
With regard to LTCHs, CMS estimates that the rule would increase LTCH PPS payments by 0.8%, or approximately $44 million. This increase would result from a 2.1% update to the standard federal rate (reflecting a 2.7% market basket update offset by a 0.4 percentage point multi-factor productivity adjustment and a -0.2 percentage point reduction under the ACA), a -1.3% budget neutrality adjustment, and a projected decrease in estimated high cost outlier payments. LTCHs are subject to a 2.0 percentage point reduction for failure to submit required quality data for FY 2015. Moreover, other policies in the proposed rule, including implementation of statutory provisions in the Pathway for SGR Reform Act of 2013 and the Protecting Access to Medicare Act of 2014 (including reinstating moratoria on full implementation of the “25 percent threshold” payment adjustment and on the development of new LTCHs and LTCH satellite facilities and additional LTCH beds) and a proposed expansion of the interrupted stay policy, among others, would reduce LTCH PPS payments by approximately $14 million, for a total net increase of approximately $30 million.
The official version of the proposed rule will be published on May 15, 2014. CMS will accept comments on the proposed rule until June 30, 2014. The final rule will be published by August 1, 2014, and will apply generally to discharges occurring on or after October 1, 2014.