On April 24, the Centers for Medicare and Medicaid Services (CMS) issued its proposed Inpatient Prospective Payment Systems (IPPS) rule setting forth hospital payment rate changes for the 2013 fiscal year, which begins October 1, 2012. The rule proposes rate increases of 2.3% for inpatient stays at acute care hospitals that participate in the Hospital Inpatient Quality Reporting Program (IQR) and 0.3% at hospitals that don’t participate. Over 99% of eligible hospitals participate in the IQR, which will collect information on 59 quality indicators for FY 2013.

In a news release, CMS stated that “the rate increase, together with other policies in the proposed rule and projected utilization of inpatient services, would increase Medicare’s operating payments to acute care hospitals by approximately 0.9 percent in FY 2013,” or $904 million. However, because certain temporary payment increases are expiring and due to other proposed changes, total Medicare spending for inpatient hospital services will actually increase by only about $175 million. The proposed rule will also increase payments to long-term care hospitals by 1.9%.

The proposed rule also sets forth operational details for the Hospital Value-Based Purchasing (VBP) Program. Established under the Patient Protection and Affordable Care Act (PPACA), the VBP will vary payments to hospitals based on their performance on certain quality measures, such as readmissions for heart attack, heart failure and pneumonia patients within 30 days after they are discharged. Although the VBP provides incentive payments beginning in 2013 to those hospitals that improve their performance, CMS expects an overall $300 million decrease in hospital payments.

The proposed rule, which affects about 3,400 acute care hospitals and 430 long-term care hospitals, will be officially published in the Federal Register on May 11. Comments will be accepted through June 25, and the final rule will be issued by August 1.