CMS issued a proposed rule April 24 that would update Medicare payment policies and rates for inpatient stays to general acute care hospitals paid under the inpatient prospective payment system (IPPS) and long-term care hospitals (LTCH) paid under the LTCH prospective payment system (PPS). The proposed rule, effective for patient discharges occurring on or after October 1, 2012, is expected to increase Medicare's operating payments to general acute care hospitals by 0.9 percent and LTAC hospitals by 1.9 percent. The proposed rule provides additional information regarding the implementation of the Hospital Readmission Reduction (HRR) program, including the payment methodology and adjustment factors, as well as future plans for the Inpatient Quality Reporting (IQR), Hospital-Acquired Conditions (HAC) and Value-Based Purchasing (VBP) programs. Any effects of sequestration, including 2 percent across-the-board cuts, which are scheduled to take effect in January 2013, are not reflected in the proposed rule. The proposed rule is scheduled to be published in the Federal Register on May 11 with comments due June 25.

Major provisions in the proposed rule are a mixed bag and include the following:

  • CMS is projecting that net payment rates to general acute care hospitals will increase by 2.3 percent in FY 2013. The increased rate takes into account a 3 percent update of the hospital Medicare market basket (including adjustments for inflation), certain statutory adjustment factors and documentation and coding updates.
  • In the final rule for the FY 2012 IPPS, CMS finalized the policies of the HRR program, including the definition of "readmission." The HRR program requires a reduction to a hospital's base operating DRG payments to account for excess readmissions of selected applicable conditions, which include acute myocardial infarction, heart failure and pneumonia. In the proposed rule, CMS would calculate the adjustment factor as the ratio of a hospital's aggregate dollars for excess readmissions to the hospital's aggregate dollars for all discharges with the result of this being a 0.3 percent Medicare payment decrease for hospitals.
  • The proposed rule makes a number of adjustments to the IQR program quality measures for FY 2015, including reducing the number of quality measures from 72 to 59. Adjustments to the measures include removing one chart-abstracted measure and 16 claims-based measures from the program, while adding three claims-based measures, one chart-abstracted measure on perinatal care, a structural measure and more survey-based measures.
  • CMS, working in conjunction with the Centers for Disease Control and Prevention, proposes adding two new conditions to the HAC payment provision list: (1) surgical site infection following cardiac implantable electronic device procedures and (2) pneumothorax with venous catheterization.
  • The requirements and related measures to implement the hospital inpatient VBP program for FY 2014 already are in place. As such, CMS proposes to add requirements for the FY 2015 hospital inpatient VBP program. To that end, CMS would retain 12 of the 13 clinical process of care measures from the FY 2014 program and adopt one new clinical process of care measure, AMI-10: Statin Prescribed at Discharge, and two additional outcomes measures -- an AHRQ Patient Safety Indicators composite measure and CLABSI: Central Line-Associated Blood Stream Infection. Additionally, CMS plans to adopt the Medicare spending per beneficiary measure in the efficiency domain in FY 2015. CMS also offers clarifications regarding exclusion from the VBP on the basis of an "immediate jeopardy" citation.
  • In response to the need for additional time for hospitals to comply with the "services furnished under arrangements" requirement, CMS proposes to postpone the implementation date to cost-reporting periods beginning in FY 2014. At that time, "routine services" (e.g., bed, board, nursing and other related services) must be provided in the hospital in which the patient is a registered inpatient in order for the services to be considered as provided by the hospital. Only therapeutic and diagnostic services may be furnished under arrangements outside the hospital.
  • The PPACA provision revising the Low-Volume Hospital Payment Adjustment (hospitals will have to be more than 15 miles from another hospital and have less than 1600 Medicare discharges) will expire, and the former qualifications (hospitals will have to be more than 25 miles from another hospital and have less than 200 Medicare discharges) will once again rule. These hospitals would receive a 25 percent payment adjustment if proper application to the Medicare administrative contractor is made.
  • CMS proposes to adjust indirect medical education (IME) and Medicare disproportionate share hospital payments by including labor and delivery beds in their total bed count.
  • CMS also would increase the timeframe from three to five years for a new teaching hospital to establish its full-time equivalent (FTE) resident cap for the purpose of graduate medical education (GME) and IME payments.