Aug. 5—The Centers for Medicare & Medicaid Services (CMS) provided an average 0.5 percent boost in hospitals' Medicare inpatient operating payment rates as part of a recent final rule. However, some changes sought by hospitals were not included.

The final FY14 Hospital Inpatient Prospective Payment System (IPPS) rule will increase hospital payments by $1.2 billion. The initial 2.5 percent market basket update was reduced 0.5 percentage points by a productivity adjustment, 0.3 percentage points by a mandated cut from the Affordable Care Act (ACA), 0.8 percentage points required by the American Taxpayer Relief Act to reclaim documentation and coding changes from FY10 through FY12, and a 0.2 percentage point cut to offset projected increases from changes to admission and medical review criteria for inpatient services.

The rule finalized a proposal to generally consider reasonable and necessary payment under Medicare Part A hospital inpatient admissions spanning two midnights.

Hospitals had sought more clarification of inpatient admission criteria under Part A to reduce claim denials. Additionally, hospitals wanted an extension of the re-billing period for denied claims from one year after the service was provided to at least 180 days after the claim was denied by a retrospective audit. Hospital advocates objected to the shorter timeframe because RACs and other retrospective auditors may review claims from three years prior.

"We’re disappointed that CMS is moving forward with the reduction related to the two-midnight rule, and it is also disappointing that hospitals were not given a longer time to re-bill disputed services," said Chad Mulvany, director, Healthcare Finance Policy, Strategy, and Development for HFMA.

The rule also implemented an increase in penalties for hospitals that exceed Medicare's 30-day readmission rates for certain conditions. The rule increased the maximum penalty from 1 percent to 2 percent of all Medicare payments for hospitals with excess 30-day readmission rates for heart attack, heart failure, pneumonia. The rule added excess readmission penalties in FY15 for hip and knee surgery and chronic obstructive pulmonary disease.

However, as HFMA has requested in prior comment letters, the rule increased the number and type of planned readmissions that will no longer count against a hospital's readmission rate.

The rule also reduced a planned cut in Medicare disproportionate share hospital (DSH) payments by about half. The final rule implemented an ACA-required cut in DSH payments by reducing such payments by $550 million, instead of the $1 billion in the proposed rule.

A separate component of the rule increased long-term care hospital (LTCH) payments by 1.3 percent, or approximately $72 million, in FY2014. That increase was slightly more than the 1.1 percent boost CMS proposed.

The rule also finalized the proposed rule’s re-implementation of the 25-percent rule for LTCHs, which will reduce their payments by 0.3 percent, or $18 million.

Publication Date: Monday, August 05, 2013