On April 26, 2013, CMS released the proposed 2014 payment schedule for inpatient stays at general acute care and long-term care hospitals. In addition to the annual adjustment to payment rates, the proposed rule also reduces payments to hospitals serving a disproportionate number of low-income patients (DSH payments) and implements regulations mandated by the Patient Protection and Affordable Care Act (ACA).

CMS reported that the proposed rule increases payments to general acute care hospitals for capital and operating costs by $27 million. Payments to long-term care facilities will increase by $62 million. However, DSH payments will be reduced to 25% of the amount CMS pays under the current policy. The remaining 75% of payments will be adjusted for the decrease in the number of uninsured individuals nationally once Medicaid expansion and health insurance exchanges go into effect. These remaining payments will then be distributed as an additional payment to hospitals receiving DSH payments based on each hospital’s share of uncompensated care relative to all DSH hospitals. CMS has specifically requested comment as to how the remaining 75% of DSH payments should be distributed.

Several provisions in the proposed rule, mandated by the ACA, focus on improving patient care. In fiscal year 2015, CMS will implement a Hospital-Acquired Condition Reduction Program. Hospitals in the bottom quartile for incidents relating to hospital-acquired conditions will receive a 1% reduction in their Medicare payments. The proposed rule establishes criteria and methodology for ranking hospitals based on their rate of hospital-acquired conditions. In addition, the proposed rule also updates value-based incentive payments available under the Value-Based Purchasing Program and financial incentives under the Readmissions Reduction Program.

Other items of note in the proposed rule include documentation and coding offsets of 0.8% to begin recoupment of previously issued overpayments amounting to $11 billion, as required by the American Taxpayer Relief Act. The proposed rule also clarifies admission and medical review criteria for inpatient services, updates Critical Access Hospital conditions of participation, and confirms the expiration of the Medicare Dependent Hospital Program. In addition, the proposed rule would enact the 25% Patient Threshold Rule for long-term care facilities.

The proposed rule will be published in the Federal Register on May 10, 2013. CMS has requested comments by June 25, 2013, and will respond to comments in the final rule to be released by August 1, 2013. The payment schedule will go into effect for discharges occurring on or after October 1, 2013. To view the proposed rule, please click here. CMS has also issued a press release regarding the proposal.