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.