CMS Finalizes Medicare IPPS/LTCH PPS Update for FY 2015

On August 22, 2014, CMS is publishing a final 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, which begins October 1, 2014.  The following are highlights of the sweeping regulations.

With regard to the IPPS, the final rule provides for a 1.4% operating payment rate update for hospitals that submit quality data and are meaningful Electronic Health Record (EHR) users. This update reflects a 2.9% market basket update, adjusted by a -0.5 percentage point multi-factor productivity (MFP) 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. Despite the positive operating rate update, total IPPS payments (capital and operating payments) are projected to decrease by about $756 million in FY 2015 as a result of reductions under the Hospital Readmissions Reduction Program, the Hospital Acquired Condition (HAC) Reduction Program, Medicare disproportionate share hospital (DSH) payment changes, and other policy changes. Moreover, CMS is revising the labor market areas used in the wage index, but adopting a 1-year transition policy for FY 2015 to mitigate potential negative payment impacts.

The rule makes numerous changes to hospital quality programs, including updating measures aligning certain reporting requirements in both the EHR Incentive Program and the Hospital Inpatient Quality Reporting Program. In addition, the rule modifies the Hospital Value-Based Purchasing Program to increase the applicable percent reduction (the portion of Medicare payments available to fund incentive payments under the program) to 1.5% of the base operating DRG payment amounts to all participating hospitals, which will generate approximately $1.4 billion for value-based incentive payments in FY 2015. In addition, the rule increases the maximum reduction in payments under the Hospital Readmissions Reduction program from 2% to 3%. The rule also implements the ACA HAC Reduction Program, which will reduce by 1% Medicare inpatient payments to hospitals with the highest rates of certain conditions that are reasonably preventable when those conditions are acquired after the beneficiary has been admitted to the hospital for a different condition.

Other IPPS policies in the rule address, among other things, the low-volume hospital payment adjustment and the Medicare Dependent Hospital program, graduate medical education funding, and critical access hospital payments. CMS also reminds hospitals of their statutory obligation to establish and make public a list of its standard charges for items and services.

With regard to the LTCH PPS, CMS estimates that estimated payments per discharge will rise by 0.8% in FY 2015, and total payments will increase by 1.1%, or approximately $62 million. This increase is attributable to several factors, including a 2.2% rate update, which is based on a market basket update of 2.9% adjusted by a -0.5 percentage point MPF adjustment and an additional adjustment of -0.2 percentage points. CMS is also applying a “one-time” prospective budget neutrality adjustment to standard federal rate of approximately -1.3% under the last year of a three-year phase-in. For 2015, the standard federal rate will be $40,240.51 (compared to the FY 2014 rate of $40,607.31), and the fixed-loss amount for high cost outlier cases will be $14,972 (compared to the FY 2014 amount of $13,314). Note that LTCHs are subject to a 2.0 percentage point reduction for failure to submit required quality data for FY 2015.

The final rule also eliminates the 5 percent readmissions policy for LTCH patients discharged on or after October 1, 2014. Under this policy readmissions from co-located providers in excess of 5 percent are paid a single LTCH payment instead of separate admission and readmission payments. CMS indicated that this policy is not needed in light of recent statutory changes establishing clinical criteria for standard LTCH-PPS payments that will be implemented for discharges beginning on or after October 1, 2015. CMS did not finalize an earlier proposal to change the fixed-day threshold under the LTCH PPS greater than 3-day interrupted stay policy.

Separately, CMS has published corrections to the August 19, 2013 FY 2014 IPPS/LTCH final rule to restore regulatory text related to the administration of pneumococcal vaccines that had been inadvertently removed.

CMS Releases Proposed Medicare Inpatient PPS/LTCH Update for FY 2015

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.

CMS Special Open Door Forum on LTCH Quality Reporting (Nov. 21)

A November 21, 2013 CMS call will provide an update on data collection and reporting requirements, time frames, and submission deadlines under the Medicare Long-Term Care Hospital (LTCH) Quality Reporting Program.

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).

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

On May 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 Correction Notices (IPPS, LTCH-PPS, MA, PDP)

On June 11, 2012, CMS published corrections to the May 11, 2012 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 fiscal year (FY) 2013. Among other things, CMS is decreasing the national capital standard federal payment rate, which in turn decreases the standardized amount used to calculate IPPS payment rates from $5,750.04 to $5,748.09. As a result, proposed payment amounts for 2013 would be slightly lower than previously calculated. CMS also clarifies its preamble discussions of qualifications for LTCHs and calculation of outlier payments and corrects technical and typographical issues. CMS also has published corrections to technical and typographical errors in its April 12, 2012 final rule with comment period updating Medicare Advantage (MA) and Medicare Part D prescription drug program rules for contract year 2013. 

CMS Proposes LTCH Payment, Policy Changes for FY 2013

This post was written by Paul W. Pitts.

On May 11, 2012, CMS published a proposed rule updating Medicare long-term acute care hospital (LTCH) prospective payment system (PPS) policies and rates for FY 2013. Highlights include the following provisions:

  • Two different standard federal rates would apply to discharges during FY 2013. During the first three months of FY 2013, the standard federal rate would be $41,026.88, falling to $40,507.48 during the last nine months (both rates are above the FY 2012 rate of $40,222). The rate reflects an estimated market basket increase of 3.0% less a productivity adjustment of -0.8% and less an additional -0.1% adjustment mandated by ACA. For the last nine months of FY 2013, the market basket increase would be further reduced by a budget neutrality adjustment (discussed below).
  • CMS proposes to adopt an LTCH-specific market basket based entirely on Medicare cost report data from LTCHs (replacing the rehabilitation, psychiatric, and LTCH market basket). CMS estimates that the LTCH-specific market basket update for FY 2013 would be the same as under current policy.
  • CMS proposes a one-time budget neutrality adjustment that would result in a permanent 3.75% reduction to the LTCH base rate. The adjustment would be implemented over three years, FYs 2013, 2014 and 2015, except it would not apply to payments for discharges occurring on or after October 1, 2012 through December 29, 2012 because of a statutory prohibition (resulting in the two standard federal rates for FY 2013).
  • The fixed loss amount for high-cost outlier cases would be $15,728, down from $17,931 in FY 2012.
  • CMS proposes a one-year extension of the moratorium on the full application of the 25% Rule, until cost reporting periods beginning on or after October 1, 2013. LTCHs with cost reporting periods that begin between July 1, 2012 and September 30, 2012 would not qualify for the one-year extension until their subsequent cost reporting period. CMS indicates that “within the near future” it may recommend revisions to the payment policies addressing MedPAC’s recommendations for the development of patient-level and facility-level criteria.
  • Medicare payment for the so-called “very short-stay cases” will be lowered to a rate based on the IPPS per diem beginning with discharges on or after January 1, 2013.
  • CMS proposes to add five quality measures for LTCH reporting beginning in FY 2016, including: (1) percent of nursing home residents who were assessed and appropriately given the seasonal influenza vaccine, (2) percent of residents assessed and appropriately given the pneumococcal vaccine, (3) ventilator bundle, (4) restraint rate per 1,000 patient days, and (5) influenza vaccination coverage among healthcare personnel.

Comments will be accepted until June 25, 2012. 

MedPAC Issues March 2012 Medicare Recommendations

On March 15, 2012, MedPAC released its annual report to Congress on Medicare payment policy.  Major recommendations for 2013 are highlighted after the jump.

  • Congress should increase acute care hospital inpatient and hospital outpatient payment rates by 1% in 2013; gradually recover past inpatient overpayments due to documentation and coding changes; and gradually reduce outpatient hospital payment rates for evaluation and management office visits to the rate of physician office visits for the same service.
  • Congress should repeal the sustainable growth rate (SGR) system for physician services and replace it with a 10-year path of statutory fee-schedule updates. The proposal, first announced in October 2011, would freeze rates for primary care services for 10 years, while other services would be subject to annual payment reductions of 5.9% for 3 years, followed by a freeze. MedPAC also endorsed budget-neutral changes to improve data on which MPFS relative value unit (RVU) weights are based and to redistribute payments to underpriced services, and made recommendations regarding the structure of accountable care organization shared savings payments.
  • Congress should eliminate the 2013 update for skilled nursing facilities (SNFs), and direct the Secretary to revise the SNF payment system to redistribute payments away from intensive therapy care that is unrelated to patient care needs and toward medically complex care. The Secretary also should begin rebasing payments in 2014, with an initial reduction of 4% and additional reductions thereafter to align with providers’ costs. The Secretary also should reduce payments to SNFs with relatively high risk-adjusted rates of rehospitalization.
  • Congress should eliminate the 2013 market basket update for inpatient rehabilitation facilities and long-term care hospitals, and update the outpatient dialysis payment rate by 1%.
  • Congress should update payment rates for ambulatory surgical centers (ASCs) by 0.5% for 2013, require ASCs to submit cost data, and direct the Secretary to implement a value-based purchasing program for ASCs by 2016.
  • Congress should direct the Secretary to: begin a two-year rebasing of home health rates in 2013; revise the case-mix system to rely on patient characteristics rather than therapy visits; establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use; and expand certain program integrity efforts.
  • Congress should increase hospice rates by 0.5% for FY 2013 and adopt a series of previous MedPAC recommendations addressing payment and program integrity reforms.
  • Congress should modify Part D low-income subsidy copayments for beneficiaries with incomes at or below 135% of poverty to encourage the use of generic drugs when available in selected therapeutic classes (with safeguards to prevent substitutions that are not clinically appropriate).

While MedPAC recommendations are not binding, they are often considered by lawmakers in developing Medicare legislation.

IPPS/LTCH FY 2012 Final Rule Corrections

On February 1, 2012, CMS published a notice correcting technical errors in the tables accompanying the final rule entitled “Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2012 Rates,” which appeared in the August 18, 2011 Federal Register. The errors involved corrections to Table 2 (adding wage index data for certain omitted providers), Table 4C (adding a wage index value for a geographic area), and Table 9A (adding three providers to the listing of Hospital Reclassifications and Redesignations). The corrections are applicable to hospital payments and discharges on or after October 1, 2011.

GAO Report Examines CMS Oversight of Long-Term Care Hospitals

The Government Accountability Office (GAO) has issued a report entitled "Long-Term Care Hospitals: CMS Oversight Is Limited and Should Be Strengthened," which examines the extent to which CMS (1) collects data about LTCHs’ quality of care and (2) oversees LTCH survey activities. The GAO discusses the limitations of CMS data on LTCH quality, including the unavailability of detailed results of certain surveys performed prior to 2009, misidentified or missing LTCHs in CMS databases, and the lack of data on quality measures (note that the ACA requires LTCHs to report quality measures by 2014). The GAO also reviews ways in which CMS’s oversight of surveying activities related to LTCHs is limited, including shortcomings in CMS’s approach to validation surveys. The GAO recommends that CMS strengthen its oversight of LTCHs by taking a series of steps to improve available data on quality of care (such as by enhancing the accuracy of databases that track LTCH quality of care and promoting the sharing of complaint validation survey results) and improve oversight of LTCH survey activities (including conducting traditional validation surveys at a sample of LTCHs each fiscal year and holding survey organizations accountable for conducting surveys consistent with CMS requirements for evaluating the quality of care provided by LTCHs). In its response to the GAO report, CMS indicated that it concurred with all five recommendations made by the GAO. Among other things, CMS indicated that it intends to work with regional offices to clarify the policy for triaging complaint surveys at accredited LTCHs and for referring certain complaints to the appropriate accrediting organization.

CMS Call on Long-Term Care Hospital (LTCH) Quality Reporting Program (Sept. 21)

On September 21, 2011, CMS is hosting a Special Open Door Forum to focus on Section 3004 of the Affordable Care Act and the Quality Reporting Program for LTCHs.  Registration is required by midnight on September 20, 2011 to participate.

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 FY 2012 Medicare Long Term Acute Care Hospital PPS Rule

This post was written by Debbie McCurdy & Paul Pitts.

On August 18, 2011, CMS is publishing its final rule updating Medicare long-term care hospital (LTCH) PPS policies and payment rates for FY 2012 (affecting discharges and cost reporting periods beginning on or after October 1, 2011 through September 30, 2012). Medicare payments to LTCHs are projected to increase by $126 million (2.5%) in FY 2012 relative to FY 2011, due to a 1.8% rate update together with other policies adopted in the final rule. Specifically, the final standard federal rate for FY 2012 is $40,222, an increase from $39,600 applicable during FY 2011. The increase is based on a market basket increase of 2.9% minus a productivity adjustment of 1.0% and minus an additional 0.1% as mandated by the ACA. Under the final rule, the fixed loss amount for high cost outlier cases is set at $17,931, down from $18,785 in FY 2011, and the labor-related share of the LTCH-PPS standard federal rate is decreased from 75.271% to 70.199%. In addition, the final rule requires that any updates to the area wage level adjustment be made in a budget-neutral manner. CMS also has updated how to determine if an LTCH meets the requirement that it have an average inpatient length of stay for Medicare patients (including both Medicare covered and non-covered days) of greater than 25 days. In the final rule, CMS has clarified that all data on all Medicare inpatient days, including Medicare Advantage days, must be included in the average length of stay calculation. Effective for cost reporting periods beginning on or after January 1, 2012, CMS will disqualify an LTCH for payment under LTCH-PPS if it fails to meet the average length of stay requirement when Medicare Advantage days are included. The final rule also implements a new quality reporting program for LTCHs mandated by the ACA that will impact payment determinations beginning in FY 2014Under this program, LTCHs will be required to submit data from three quality measures in order to receive the full payment update in fiscal year 2014, including measures related to (1) catheter-associated urinary tract infections, (2) central line catheter-associated blood stream infection, and (3) pressure ulcers that are new or have worsened. If an LTCH fails to report on the selected quality measures, its annual market basket update will be reduced by 2 percentage points.

CMS Issues Correction to FY 2012 Medicare IPPS/LTCH Proposed Rule

CMS has put on display a notice correcting technical and typographical errors in the May 5, 2011 Medicare inpatient prospective payment system (IPPS) and long term care hospital (LTCH) PPS proposed rule for fiscal year (FY) 2012. The official version is scheduled to be published June 14. 

CMS Issues Proposed Changes to LTCH Payment Rates and Other Payment Policies for Fiscal Year 2012

 

This post was written by Karl A. Thallner, Paul W. Pitts and Catherine A. Hurley.

Reed Smith attorneys have prepared a Client Alert which provides a summary of the most significant proposed changes to the Medicare program’s long-term acute care hospital prospective payment system (“LTCH-PPS”) for fiscal year (“FY”) 2012. On Tuesday, April 19, 2011, the Centers for Medicare & Medicaid Services (“CMS”) released on its website an advance copy of the “Proposed Rule” revising the LTCH-PPS for fiscal year FY 2012, which applies to discharges occurring on or after October 1, 2011 through September 30, 2012. The official copy of the Proposed Rule will be published in the Federal Register in the coming days. Comments on the Proposed Rule must be submitted no later than 5 p.m. on June 20, 2011.

The Proposed Rule would implement several significant changes to CMS policy and adopt a quality reporting program as mandated by the Patient Protection and Affordable Care Act (“ACA”). In this Client Alert we summarize the following aspects of the Proposed Rule:

  • Changes to the payment rates and other payment rate policies for FY 2012;
  • Rebasing and revising the market basket for LTCHs;
  • Requiring budget neutrality in the area wage level adjustment;
  • New policies regarding the calculation of the average length of stay requirement for LTCHs;
  • Including Medicare Advantage days in the average length of stay calculation;
  • Extending 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.

Click here to read the full Alert (PDF).

 

 

MedPAC Report to Congress on 2012 Payment Recommendations

On March 15, 2011, MedPAC released its annual report to Congress on Medicare Payment Policy. The report includes MedPAC’s recommendations on payment rate updates and other policies, such as distribution of payments and program integrity, for Medicare fee-for-service payment systems. It also includes an overview of the status of the Medicare Advantage and Medicare Part D prescription drug programs. Major recommendations include the following: 

  • Congress should increase acute care hospital inpatient and HOPPS payment rates by 1% in 2012, and require the HHS Secretary to adjust inpatient payment rates in future years to fully recover all overpayments due to documentation and coding improvements.
  • Congress should provide a 1% update to Medicare physician payments and outpatient dialysis services for 2012.
  • Ambulatory surgical center (ASC) payments should increase by 0.5% for 2012, and ASCs should submit cost and quality data.
  • Congress should: eliminate the update to payment rates for skilled nursing facility (SNF) services for FY 2012; revise payment for nontherapy ancillary services; establish a quality incentive payment program for SNFs; and strengthen SNF reporting requirements.
  • Congress should: eliminate the home health update for 2012 and direct the Secretary to: begin a two-year rebasing of home health rates in 2013 (and protect beneficiaries from lower quality of care in response to rebasing); revise the case-mix system; establish a per episode copay for home health episodes not preceded by hospitalization or post-acute care use; and expand certain program integrity efforts.
  • Congress should eliminate the update for inpatient rehabilitation facilities and long-term care hospitals for 2012.
  • Congress should increase hospice rates by 1% for FY 2012 and adopt a series of recommendations from March 2009 addressing payment and program integrity reforms.

Proposed Medicare Inpatient Psychiatric Facilities PPS Update

On January 27, 2011, CMS published a proposed rule that would update prospective payment rates for Medicare inpatient hospital services provided by inpatient psychiatric facilities (IPFs) for discharges occurring July 1, 2011 through September 30, 2012 and make other changes to the IPF PPS. The proposed rule also would rebase and revise the Rehabilitation, Psychiatric, and Long-Term Care (RPL) market basket, and make certain clarifications and corrections to terminology and regulations text. Comments will be accepted until March 22, 2011.

Final FY 2011 Medicare Inpatient Hospital, LTCH Rates

On August 16, 2010, CMS is publishing its final rule updating Medicare hospital inpatient prospective payment systems (IPPS) and long term care hospital (LTCH) prospective payment system (PPS) rates for 2011. The rule, which responds to comments that CMS received on its May 4, 2010 proposed rule and a June 2, 2010 supplemental proposed rule, also makes numerous changes to Medicare policies affecting hospitals and other providers. The rule generally is effective October 1, 2010, with certain exceptions. Highlights of the lengthy rule are available after the jump.

  • CMS estimates that Medicare IPPS payments for operating expenses will decrease by 0.4%, or $440 million, in FY 2011 compared with FY 2010 under the final rule taking into account all provisions affecting spending. The final rule provides for a market basket increase of 2.6%, reduced by 0.25% as required by the Affordable Care Act (ACA). This update is more than fully offset by a “documentation and coding” adjustment of -2.9% designed to recoup Medicare spending in FY 2008 and 2009 resulting from hospital coding practices that CMS asserts did not reflect increases in patients’ severity of illness. CMS notes that the -2.9% adjustment is only half of the total recoupment adjustment of 5.8% that would be necessary to fully recover excess payments for FYs 2008 and 2009.
     
  • CMS is adding 10 new measures for which hospitals must submit data under the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program for 2011 to receive the full market basket update. CMS also is retiring one current measure (Mortality for selected surgical procedures (composite)), bringing the total number of measures in the RHQDAPU measure set to 55 for the FY 2012 market basket update. Hospitals that do not participate in the RHQDAPU quality reporting program will have their market basket update reduced by two percentage points.
     
  • The rule implements ACA provisions that, among other things, provide additional payments for hospitals in counties with low per-enrollee Medicare spending; revise the hospital wage index for hospitals in frontier states; expand eligibility for certain low-volume payment adjustments; establish a national budget neutrality adjustment to the calculation of the rural floor for hospital wage index; extend the Medicare Dependent Hospitals program; and adjust payments to critical access hospitals (CAH) for certain outpatient facility and ambulance services.
     
  • The rule lowers the IPPS outlier threshold in FY 2011 to $23,075 to maintain projected outlier payments at 5.1%. The rule also addresses changes to the amounts and factors used to determine the rates for Medicare acute care hospital inpatient services for operating costs and capital-related costs, clarifies treatment of certain physician services for graduate medical education purposes, and updates certain policies affecting CAHs.
     
  • The rule 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.
     
  • With regard to the LTCH PPS, CMS estimates that the final rule will increase total LTCH payments by 0.5% in 2011. The final standard federal rate for FY 2011 is $39,599.95, a 0.49% decrease in compared to the rate year 2010 amount. The new standard federal rate reflects a 2.5% market basket increase, less a -2.5% adjustment to account for what CMS characterizes as an increase in case-mix resulting from changes in documentation and coding practices, further reduced by 0.5% reduction mandated by the Affordable Care Act (ACA). The final fixed-loss amount for FY 2011 is $18,785, an increase compared to 2010. The final rule also reflects that LTCH policies are now revised on a fiscal year rather than rate year basis. In addition to the rate changes, the rule codifies ACA provisions extending for an additional two years provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) affecting certain LTCHs and LTCH satellite facilities, including (1) relief from payment adjustments for LTCHs whose admissions from co-located or non co-located hospitals exceed a certain threshold (commonly referred to as the "25% Rule"), (2) the moratorium on establishing new LTCHs and LTCH satellite facilities or expanding bed capacity in existing facilities, (3) the application of an adjustment for short stay outlier discharges, and (4) a one-time adjustment of the standard federal rate.
     
  • The rule revises the Medicare conditions of participation for hospitals relating to the types of practitioners who may provide rehabilitation services and respiratory care services. It also requires all orders for these services to meet existing standards for documentation.
     
  • The final rule clarifies that the effective date of a Medicare provider or supplier agreement with health care facilities that are subject to survey and certification is the date that the provider or supplier meets all federal Medicare requirements (which may or may not be the date the survey was completed).
     
  • As part of the rulemaking, CMS also issued an interim final rule with comment period to implement a provision of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 that clarifies Medicare payment of 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). This provision was effective for services furnished on or after June 25, 2010, and CMS is implementing the policy through the interim final rule. Comments on this provision will be accepted until September 28, 2010.

Revisions to Medicare Inpatient Hospital, LTCH Rates

CMS has issued two regulations implementing Affordable Care Act provisions impacting hospital inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) payments.

  • First, CMS has issued a “supplement” to its May 4, 2010 fiscal year (FY) 2011 IPPS and LTCH PPS proposed rule to implement provisions of the Affordable Care Act relating to FY 2011 Medicare payments for these facilities. CMS estimates that the supplemental rule would decrease cumulative operating and capital payments for IPPS providers by $820 million, while increasing LTCH payments by $13 million for FY 2011 (which is less than the prior estimate of a $41 million increase LTCH payments in FY 2011). Among other things, the supplemental proposed rule implements Affordable Care Act provisions that: reduce the FY 2011 IPPS market basket update by 0.25 percentage points and reduce the FY 2011 LTCH PPS annual update by 0.5 percentage points; provide additional payments for hospitals in counties with low per-enrollee Medicare spending; revise the hospital wage index for hospitals in frontier states; expand eligibility for certain low-volume payment adjustments; revise geographic reclassification eligibility standards; establish a national (rather than statewide) budget neutrality adjustment to the calculation of the rural floor for hospital wage index; extend the Medicare Dependent Hospitals program; and adjust payments to critical access hospitals for certain outpatient facility and ambulance services. With regard to LTCHs, the supplemental proposed rule extends for an additional two years provisions of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) affecting certain LTCHs and LTCH satellite facilities, including (1) relief from payment adjustments for LTCHs whose admissions from co-located or non co-located hospitals exceed a certain threshold (commonly referred to as the "25% Rule"), (2) the moratorium on establishing new LTCHs and LTCH satellite facilities or expanding bed capacity in existing facilities, (3) the application of an adjustment for short stay outlier discharges, and (4) a one-time adjustment of the standard federal rate. The supplemental rule will be published in the Federal Register on June 2, 2010.  Note that CMS had provided conflicting information about the comment deadline for the supplemental rule; a separate correction notice clarifies that the comment deadline is June 18, 2010. 
  • Second, on June 2, 2010, CMS is publishing final wage indices, hospital reclassifications, payment rates, impacts, and other related tables effective for the FY 2010 IPPS and rate year 2010 LTCH PPS, reflecting changes mandated by the Affordable Care Act applicable to rates during the remainder of FY/RY 2010 (April 1, 2010–September 31, 2010). These provisions require the extension of the expiration date for certain geographic reclassifications and special exception wage indices through September 30, 2010; and certain market basket updates for the IPPS and LTCH PPS. The standard federal rate for discharges under LTCH PPS occurring on or after April 1, 2010 is revised to $39,794.95. This change reflects a decrease from $39,896.65 established in the original LTCH PPS rule for RY 2010. The revised standard federal rates described in the notice are effective for payment years beginning October 1, 2009, although hospitals are paid based on these rates for discharges on or after April 1, 2010.