On November 19, 2014, House Ways & Means Health Subcommittee Chairman Kevin Brady introduced a 146-page discussion draft of the Hospital Improvements for Payment Act of 2014 (HIP). HIP seeks to, among other things, make significant reforms to Medicare payment policies for short stay inpatient admissions, reform CMS Medicare contractor programs, and alleviate the appeals backlog. Chairman Brady has asked “all stakeholders to review this discussion draft carefully and provide timely, real-world feedback.”

HIP would:

  • Establish a new payment system, known as the Hospital Prospective Payment System (HPPS), which would establish a per-diem payment for certain hospital short-stay admissions.   
  • Require the Secretary to treat outpatient short stay hospital stays as inpatient hospital services under Part A, and require the Secretary to ensure that overnight outpatient observation stays are reimbursed out of the Hospital Insurance trust fund once the HPPS is implemented. In addition, HIP clarifies that HPPS overnight outpatient observation stays will be subject to the Part A deductible and cost-sharing rules. HIP further clarifies that outpatient overnight observation stays under the HPPS would count towards the 3-day stay requirement for qualifying for coverage in a skilled nursing facility (SNF).  
  • Extend the RAC audit moratorium on short stay admissions subject to the Two Midnight Rule to September 30, 2015. The audit moratorium is currently scheduled to end on March 31, 2015.  
  • Repeal the Two Midnight payment reduction of 0.2 percent ($220 million per year) that CMS implemented in its FY 2014 IPPS Final Rule and extended in the FY 2015 IPPS Final Rule.  
  • Establish a Recovery Audit Contractor (RAC) Compare website and require the Secretary to publicly report metrics on the total number of claims paid, the number of claims denied and the number of denied claims that are overturned at the third or fourth level of appeal.   
  • Establish a voluntary settlement process for medical MS-DRGs. This voluntary settlement process would only be applicable to those discharges in which providers have filed a request for an Administrative Law Judge (ALJ) hearing on or prior to the enactment of this section.  
  • Establish a rebilling option for surgical MS-DRGs for claims that are in the ALJ appeals backlog. The voluntary settlement process would allow hospitals to rebill going back to dates of service of July 1, 2007.

To view the HIP discussion draft, click here. To view the House Ways & Means fact sheet, click here. To view the House Ways & Means section-by-section summary of the HIP, click here.