On April 26, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would update fiscal year (FY) 2014 Medicare payment policies and rates for the hospital inpatient prospective payment system (IPPS) and long-term care hospitals (LTCHs) prospective payment system (PPS). Overall, CMS estimates total Medicare spending on inpatient hospital services will increase by about $27 million in FY 2014.
The proposed rule would increase IPPS operating rates by 0.8 percent, after accounting for inflation and other adjustments for those acute care hospitals that report quality data. Hospitals that do not report quality data would receive a 2 percent reduction in Medicare payments. The proposed rate is comprised of the following updates: an estimated + 2.5% market basket update, a – 0.4% update for a productivity adjustment, a – 0.3% update for cuts under the Affordable Care Act, (ACA), a – 0.8% documentation and coding adjustment, and a – 0.2% adjustment for other policy proposals.
The rule also proposed a reduction in disproportionate share hospital (DSH) payments to 25 percent of the amount Medicare would pay under the current policy. The remaining 75 percent will be adjusted for decreases in the rate of uninsured individuals nationally and distributed to hospitals that receive DSH payments based on each hospital’s share of uncompensated care relative to all Medicare DSH hospitals.
In addition, based on provisions in the ACA, CMS proposed to implement a program aimed at improving patient safety in hospitals. Beginning in FY 2015, hospitals that rank among the lowest performing 25 percent with regard to hospital acquired conditions will be paid 99 percent of what they would otherwise be paid under the IPPS. The rule proposes also the criteria and methodology CMS would use to rank hospitals with a high rate of hospital acquired conditions.
For FY 2014, CMS is increasing the applicable percent reduction, the portion of Medicare payments available to fund the Value-Based Purchasing Program’s incentive payments, to 1.25 percent. CMS estimates that the total amount available for performance-based incentive payments for FY 2014 would be approximately $1.1 billion, and will update this estimate for the final rule.
CMS will accept comments on the proposed rule until June 25, and will respond to comments in a final rule to be issued by August 1. The proposed rule can be accessed at https://www.federalregister.gov/articles/2013/05/10.