April 29—Medicare inpatient prospective payment system (IPPS) rates at general acute care hospitals would increase by 0.8 percent in FY14, according to the proposed IPPS rule issued April 26 by the Centers for Medicare & Medicaid Services (CMS).

Under the proposed rule, disproportionate share hospital (DSH) payment would be reduced to 25 percent of current levels, beginning in FY14, as required by the Affordable Care Act. The remaining 75 percent of payments “will be adjusted for decreases in the rate of uninsured individuals nationally and distributed as additional payments to hospitals that receive DSH payments” based on each hospital’s share of uncompensated care, according to a CMS fact sheet. The proposed rule addresses methods for estimating the three factors required to determine the additional DSH payment.

In addition to establishing payment for Medicare-covered inpatient services, the proposed rule lays out a framework for implementation of the CMS Hospital-Acquired Conditions (HAC) Reduction program and updates the measures and financial incentives in the Hospital Value-Based Purchasing (VBP) and Readmissions Reduction programs, as described in another CMS fact sheet.

  • Under the Hospital Readmissions Reduction Program, penalties would be expanded to include readmissions for hip and knee arthroplasty and chronic obstructive pulmonary disease. Under the current program, readmissions penalties are assessed only for heart attack, heart failure, and pneumonia. Also, the maximum reduction in payments under the readmissions program will increase from 1 percent to 2 percent, as required by the Affordable Care Act.
  • For the Value-Based Purchasing Program, CMS is increasing the applicable percentage reduction—the portion of Medicare payments available to fund the program’s incentive payments—to 1.25 percent.
  • For the HAC Reduction Program, the proposed rule includes criteria and methodology CMS would use to rank hospitals with a high rate of HACs.

In addition, the proposed rule provides guidance on admission and medical review criteria for inpatient services. According to CMS, the proposed change would “address longstanding concerns from hospitals that they need more guidance on when a patient is appropriately treated and paid by Medicare as an inpatient.”

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.

HFMA Analysis: HFMA is concerned about the continuation of insufficient payment updates to hospitals and, in particular for this proposed rule, rural providers. Additionally, while HFMA continues to strongly support the transition to value-based reimbursement, we have reservations about some of the technical details—both existing and newly proposed—of value-based programs outlined in the 2014 IPPS rule. As always, HFMA will work with members to identify ways to improve the proposed rule and will provide comments and technical assistance related to the proposed rule to CMS.

Publication Date: Monday, April 29, 2013