On August 1, the Centers for Medicare and Medicaid Services (CMS) posted a display copy of the final rule governing inpatient prospective payment system (IPPS) for acute care hospitals and the long term care hospital prospective payment system (LTCH PPS). The rule contained two pleasant surprises: a net increase of 1.1% in overall payments to acute care hospitals for FY 2012 over FY 2011 (rather than the proposed decrease of 0.55%) and an increase in payments to LTCHs of 2.5% for FY 2012 over FY 2011 (as opposed to the proposed 1.9% increase). The net 1.1% increase for acute care hospitals is the result of a market basket increase of 3%, an Affordable Care Act (ACA)-mandated reduction of 0.1%, a documentation and coding reduction of 2.0% (as opposed to the 3.15% reduction that was proposed), a 1% productivity reduction, a 1.1% increase designed to correct a rural floor budget neutrality adjustment error brought to light by Cape Cod v. Sebelius, No. 09-5447 and another increase of 0.1%.

The following are other highlights from the final rule:

  • Hospital Acquired Conditions (HACs): clarifies instructions on Present on Admission (POA) indicator use, adds five new diagnosis codes as CC/MCCs, and announces CMS’s decision not to add contrast induced acute kidney injury as a HAC at this time (CMS deferred the decision to a time in the future when improved coding for the condition is available).
  • Wage Index: publishes the national average hourly wage (unadjusted for occupational mix) of $36.2784 and explains in detail changes to the pension expense calculation for defined benefit pension plans.
  • Hospital Value-Based Purchasing Program and Hospital Inpatient Quality Reporting Program: finalizes establishment of hospital value-based purchasing program and measures for value-based incentive payments for FY 2013 discharges; describes the new spending-per-beneficiary measure, which measures spending from 3 days prior to admission to 30 days after discharge (rather than the proposed 90 days after discharge).
  • Hospital Readmissions Reduction Program: discusses general framework of the program, which will reduce payments in FY 2013 for discharges occurring on or after October 1, 2012 to hospitals with excess readmissions for the following three conditions: myocardial infarction, heart failure, and pneumonia. More specifically, the final rule discusses the selection of applicable conditions, the definition of readmission, measures for the conditions chosen for readmission, the methodology for calculating the Excess Readmission Ratio, Public Reporting of readmission data, and the definition of “applicable period.” The rest of the rules governing the operation of the program will be discussed in rulemakings in future years.
  • DSH & IME: finalizes proposal (without modification) that days relating to patients receiving inpatient hospice services in the inpatient hospital setting be excluded from both the Medicare and Medicaid Fraction components of the disproportionate share hospital (DSH) patient percentage calculation and for purposes of the indirect medical education (IME) adjustment.
  • LTCHs: In addition to the 2.5% increase in operating payments, the final rule adopts the following three proposed quality measures to be used in the LTCH Quality Reporting Program for 2014 payment determinations: new/worsening pressure ulcer, urinary catheter-associated urinary tract infection, and central line catheter-associated bloodstream infections.
  • Graduate Medical Education (GME): finalizes the interim final rule (without modification) regarding the treatment of teaching hospitals that are members of Medicare GME affiliated groups for purposes of determining full time equivalent (FTE) cap reductions.

The final rule is available by clicking here and is scheduled for publication in the Federal Register on August 18, 2011.