On August 2, 2013, CMS released the annual Hospital Inpatient Prospective Payment System Final Rule for FY 2014 (the “Final Rule”), effective for discharges occurring on or after October 1, 2013.  

The Final Rule increases Inpatient Prospective Payment System (IPPS) rates for FY 2014 by 0.7 percent after factoring in inflation and other adjustments mandated by law which accounts for the market basket adjustment of 1.7 percent minus a 0.8 percent documentation and coding “case mix” adjustment, and a 0.2 percent reduction in the standardized amount (and hospital-specific rates) to offset additional IPPS expenditures expected under the policy change announced in this Final Rule relating to inpatient admission criteria (the “2-midnight” rule, discussed below).

CMS also refined the MS-DRG relative weight calculation for new cost centers related to Implantable Devices, MRIs, CT scans and cardiac catheterization that were created in the FY 2009 and FY 2011 final rules.  This will increase the total number of cost-to-charge ratios used to calculate the FY 2014 relative weights from 15 to 19.

CMS projects that in FY 2014, the Final Rule would increase overall hospital payments by $1.2 billion and long-term care hospitals (LTCHs) PPS payments by nearly $72 million or 1.3 percent.