On April 19, 2011, CMS issued a proposed rule to revise the Medicare hospital inpatient prospective payment systems (IPPS) for acute care hospitals and the prospective payment system for inpatient services provided by long-term care hospitals for fiscal year (FY) 2012. The proposed rule implements certain statutory provisions set forth in the Affordable Care Act as well as updates Medicare payment policies and rates. The changes under the proposed rule would be applicable to discharges occurring on or after October 1, 2011.

The rule proposes to change and/or implement the following, among others:

  • MS-DRG classifications and recalibrations of relative weights;
  • hospital-acquired conditions (HACs) and a listing and discussion of HACs, including infections, that would be subject to the statutorily required quality adjustment in MS-DRG payments for FY 2012;
  • hospital wage index for acute care hospitals using wage data from cost reporting periods beginning in FY 2008;
  • IPPS for operating costs and GME costs including proposed payment adjustment for low-volume hospitals;
  • FY 2012 policy governing the IPPS for capital-related costs;
  • payment rates for certain excluded hospitals;
  • quality data reporting program for long-term care hospitals; and
  • threshold amounts for outlier cases.

When grouped with certain policy changes, the average decrease in payments under the proposed rule would be 0.55 percent. The FY 2012 estimate of the market basket rate-of-increase is 2.8 percent for hospitals that submit data on quality measures. The rule makes a productivity reduction of 1.2 percent and an additional market basket reduction of 0.1 percent as required under the Affordable Care Act. There is also a negative “documentation and coding” adjustment in the amount of -3.15 percent along with other positive and negative adjustments. While CMS estimates that the average decrease in payment is 0.55 percent, individual hospitals may experience greater or lesser adjustments, due in part to volatility in the wage index figures.

CMS will accept comments on the proposed rule until June 20, 2011, and the final rule will be issued by August 1, 2011. The proposed rule is available here.