Aug. 5—The final inpatient prospective payment rates issued this week were slightly more than previously proposed by the Centers for Medicare & Medicaid Services (CMS).

The 1.4 percent increase in FY15 inpatient prospective payment system (IPPS) rates was a small increase over the 1.3 percent CMS proposed in April—following various cuts required by law.

Hospitals that submitted quality measure data and meaningfully use electronic health records would avoid a total 0.5 percent reduction in the 2.9 percent market-basket update. Additionally, all IPPS hospitals face a productivity cut of 0.5 percent and a 0.2 percent cut mandated by the Affordable Care Act (ACA). An additional 0.8 percent cut was required by the American Taxpayer Relief Act of 2012 to reclaim supposed overpayments stemming from FY10-FY12 documentation and coding changes.

Also included was a 1.3 percent ACA-mandated Medicare disproportionate share hospital (DSH) payment reduction. The DSH reduction was an increase over the 0.9 percent cut originally proposed.

A Bank of America-Merrill Lynch analysis, which concluded the DSH reduction was effectively 1.1 percent due to a growing pool, concluded that hospital companies would find the deeper cut “manageable.”

“However, in addition to the cut, there will be a significant change to how DSH payments will be allocated in 2014 under health care reform, which could have modestly negative implications for the publicly traded companies,” the bank analysis stated.

The deeper cut stemmed from the CMS Actuary’s decreasing estimate of payments that would otherwise be made for Medicare DSH in FY15 due to lower projected hospital inpatient spending and a reduction in the estimated population of uninsured.

Additionally, the agency indicated it will continue to work with stakeholders to address an alternative payment methodology for short inpatient stays. CMS received a range of responses to its request for comments on aspects of a new payment policy, including defining and determining appropriate costs for short stays. Although no consensus emerged among the comments, CMS officials wrote in the final rule that they would take the various views into account when crafting short-stay rule changes.

The final rule also updated the measures and financial incentives in the hospital acquired condition reduction, hospital value-based purchasing, hospital inpatient quality reporting (IQR), and hospital readmissions reduction programs. It also aligned the reporting and submission timelines for electronically reported measures in the IQR and Medicare electronic health record incentive programs.

Price Transparency Required

The final rule also underscored an ACA requirement that each hospital establish and publicize a list of standard charges for items and services. CMS guidelines for implementing the provision require hospitals to publicize either a list of their standard charges or their policies for allowing public review of those charges. Although the Medicare Payment and Advisory Committee urged online posting of such prices, CMS left it to hospitals “to determine the exact manner and method by which to make the list public in accordance with the guidelines.”

The final rule also increased payments for long-term care hospitals (LTCHs) by 1.1 percent, or somewhat more than the 0.8 percent originally proposed.

Publication Date: Tuesday, August 05, 2014