CMS recently released the final fiscal year (FY) 2010 changes to the inpatient hospital prospective payment system (IPPS) rules (Final Rule). The Final Rule, in brief, includes the following changes and updates:

Payment Update. CMS revised and updated the operating and capital "market basket" factors for FY 2010. Using the revised market basket, acute care hospitals can expect an operating market basket update of 2.1 percent for FY 2010. However, hospitals that do not participate in the hospital quality data reporting program will receive only a 0.1 percent market basket update. The actual FY 2010 payment update will be less, however, because of budget-neutrality and other adjustments.

CMS also announced that it is not going to reduce the IPPS payments in FY 2010 to account for the anticipated provider behavioral shifts resulting from the FY 2008 implementation of the new Medicare Severity Diagnosis-Related Groups (MS-DRGs). CMS had proposed to adjust FY 2010 rates by 1.9 percent; however, because it lacked adequate data, the adjustment has been deferred.

Outliers. The Final Rule raises the outlier threshold to $23,140 in order to limit outlier payments to 5.1 percent of total IPPS payments in FY 2010.

Labor Related Share. CMS is lowering the labor-related share of the base IPPS payment rate to 68.8 percent for FY 2010 from 69.7 percent in FY 2009. This is the portion of the IPPS rate that is adjusted by the wage index applicable to the area where the hospital is located.

MS-DRG Relative Weights. In the Final Rule, CMS did not make any changes to the MS-DRG Relative Weights. CMS, however, finalized the reassignment of cases involving patients who have received hip or knee joint replacements, but have contracted an infection that requires the removal of the prosthesis and inpatient hospitalization while the infection is treated, and a new prosthesis implanted to higher-paying MS-DRGs to reflect the complexity of these admissions.

DSH Payment Calculation Adjustments.

Labor and Delivery Days. Patient days associated with beds for labor and delivery services, even when the patient did not occupy a routine bed prior to occupying an ancillary bed, will be included in the Medicare disproportionate share hospital (DSH) calculation.

Observation Beds. CMS will exclude patient days and beds associated with observation services from the DSH calculation and the determination of a hospital's indirect medical education payment. CMS views observation services as an excludable outpatient service.

Medicaid Numerator Inpatient Day Aggregation Methodology. CMS will allow hospitals to count the number of days in the numerator of the Medicaid fraction of the Medicare disproportionate patient percentage using either (1) date of discharge, (2) date of admission or (3) dates of service. However, hospitals cannot reap the benefit of "double-counting" patient days if they change their methodology.

New Graduate Medical Education (GME) Program Definition. Currently, a new medical residency program is one that receives "initial" accreditation or begins training residents on or after January 1, 1995. The Final Rule clarifies that to be considered a new program, the accreditation must be deemed an "initial," accreditation as opposed to a reaccreditation. To make the determination, CMS will look at "supporting factors" (such as whether the program director, teaching staff and residents are different). CMS also will consider whether there was a program in the same specialty at a hospital that closed and, more generally, whether that program is part of the FTE caps of any existing hospital. The Final Rule also allows new hospitals that begin training residents for the first time after July 1 to submit a Medicare GME affiliation agreement prior to the earlier of the end of its cost-reporting period or the end of the academic year, in order to participate in a Medicare GME-affiliated group for the remainder of the academic year.

Teaching Payment Adjustments. Teaching hospitals will continue to receive the full capital indirect medical education adjustment in FY 2010.

Quality Reporting Program. The Final Rule adds two new chart-abstracted measures (SCIP-Infection-9 Postoperative Urinary Catheter Removal on Postoperative Day 1 or 2 and SCIP-Infection-10: Perioperative Temperature Management), and two new structural measures (Participation in a Systematic Clinical Database Registry for Stroke Care and Participation in a Systematic Clinical Database Registry for Nursing Sensitive Care).

Hospital-Acquired Conditions. The Final Rule makes no changes to the list of hospital-acquired conditions for FY 2010. However, CMS added two E-codes for surgery on an incorrect patient or incorrect site on the correct person.

Nursing Homes: Recalibrated -- No Cash for Clunkers

In its FY 2010 final rule for skilled nursing facilities (SNFs), also placed on display July 31, CMS finalized a 3.3 percent reduction to the FY 2010 SNF payments. The reduction occurred because of provider behavioral coding and documentation shifts following implementation of the expanded Resource Utilization Groups, FY 2006. The net impact of the market basket increase and the "recalibration" yields a 1.1 percent reduction in SNF PPS payments for FY 2010.

Inpatient Rehabilitation Facilities

CMS provided a full market basket update of 2.5 percent for FY 2010 for inpatient rehabilitation facility payments. After applying the budget-neutrality adjustments, the final FY 2010 standard payment conversion factor increases from $12,958 in FY 2009 to $13,661 in FY 2010. The final Inpatient Rehabilitation Facility Prospective Payment System rule is available online.  

Home Care: Payment Reduction Proposed

CMS proposed reducing home health PPS payments for calendar year (CY) 2010 by 0.86 percent as a result of applying the full 2.2 percent market basket update and reducing the 60-day episode rate by 2.75 percent to account for provider documentation and coding behavioral changes and other factors.