On March 14, 2014, CMS released an interim final rule implementing a six-month extension of the low-volume payment adjustment and Medicare-Dependent Hospital (MDH) program under the inpatient prospective payment system (IPPS) rule for fiscal year 2014.  These changes were made in accordance with sections 1105 and 1106 of the Pathway for SGR Reform Act of 2013, a December 2013 law (Pub. L. No. 113-67) that made continuing appropriations for FY 2014.

Guidance for Low-Volume Hospitals

For the applicable low-volume percentage increase to be applied to payments for discharges on or after October 1, 2013 (the beginning of FY 2014) and on or before March 31, 2014, a hospital must:

  • have fewer than 1,600 Medicare discharges annually;  
  • be located 15 road miles or more from the nearest subsection (d) hospital (i.e., IPPS); and  
  • make its request for low-volume hospital status in writing to its Medicare Administrative Contractor (MAC) by March 31, 2014, and provide documentation that it meets the 15-mile mileage criterion; CMS will accept the use of a web-based mapping tool, such as MapQuest, as part of acceptable documentation related to the mileage requirement.

A hospital that qualified for the low-volume payment adjustment in FY 2013 may continue to receive a low-volume payment adjustment for FY 2014 discharges (occurring prior to April 1, 2014) without reapplying if it continues to meet the Medicare discharge and distance criteria.  However, the hospital must send written verification to its MAC by the March 31, 2014 deadline that it continues to be more than 15 miles from any other IPPS hospital. 

Starting on April 1, 2014, the 6-month extension of the temporary changes to the low-volume hospital payment adjustment policy will expire and the low-volume hospital definition and payment methodology will revert back to the statutory requirements that were in effect prior to the amendments made by the Affordable Care Act.

Guidance Related to MDH Classification

With respect to the six-month extension of the MDH classification (October 1, 2013 to March 31, 2014), CMS generally will permit hospitals that qualified as an MDH in FY 2013 to continue with MDH classification in FY 2014 (effective October 1, 2013) without reapplying, so long as they have not been reclassified as a sole community hospital (SCH), or have not requested a cancellation of their rural classification.  If, however, a former MDH requested cancellation of its rural classification, or if it was classified as a SCH on or after October 1, 2013, it would need to reapply for MDH status consistent with 42 C.F.R. § 412.108(b), and the provider’s MDH status would be effective prospectively only (i.e., effective 30 days after the date of the MAC’s written notice to the hospital that it again meets the requirements for MDH status).  Hospitals in this situation stand to lose several months of MDH status, and the more favorable reimbursement associated with it, simply because they acted to limit the negative reimbursement impact from what appeared to be the end of the MDH program. 

If a hospital reclassified to SCH status or cancelled its rural status effective on a date after October 1, 2013, CMS instructs that “MDH status will be reinstated effective from October 1, 2013 but will end on the date on which the provider changed its status to an SCH or cancelled its rural status.”  Hospitals falling within this category may reapply for MDH status, which status will be effective 30 days from the date the hospital is notified of the determination, consistent with 42 C.F.R. § 412.108(b)(4).  CMS reiterates throughout the interim final rule that, given the partial year extension of the MDH program, there may not be sufficient time for hospitals that have reclassified as SCHs or cancelled classification of their rural status to reapply and be approved for MDH status.  

CMS projects a $227 million increase to small rural hospitals and providers, as well as other classes of hospitals and providers.  The interim final rule is available here and  was published in the March 18, 2014 Federal Register.  Comments are due by 5:00 p.m. on May 13, 2014.