On August 2, 2013, the Centers for Medicare & Medicaid Services (CMS) issued a final rule updating fiscal year (FY) 2014 Medicare payment policies and rates for inpatient stays at general acute care and long-term care hospitals (LTCHs). The final FY 2014 Hospital Inpatient Prospective Payment System (IPPS) rule increases overall hospital payments (capital and operating) by $1.2 billion. The final rule will increase IPPS operating rates by 0.7 %. This increase reflects a temporary reduction of 0.8 percent to implement the American Taxpayer Relief Act’s requirement to recoup overpayments from prior years as a result of a new patient classification system that better recognizes patient severity of illness. CMS is also making an additional 0.2 percent reduction to offset projected spending increases associated with changes to admission and medical review criteria for inpatient services. CMS projects that LTCH PPS payments would increase by 1.3 percent, or approximately $72 million, in FY 2014.
The following are the key changes:
Refinements of Medicare Severity Relative Weight Calculation. There will be increased payment rates for high-cost implantable devices beginning on October 1st. In the FY 2009 and in FY 2011 IPPS final rules, CMS created new cost centers for Implantable Devices Charged to Patients, MRIs, CT scans, and cardiac catheterization. As part of those rules, CMS stated that they would consider creating separate cost to charge ratios (CCRs) for the new cost centers in order to calculate the relative weights. CMS will implement the new cost centers for FY 2014, which will increase the total number of CCRs used to calculate the relative weights from 15 to 19
New Hospital-Acquired Condition (HAC) Reduction Program. As part of a new HAC Reduction program, beginning in FY 2015, hospitals that are in the lowest quartile for medical errors or serious infections that patients contract while in the hospital will be paid 99 percent of what they otherwise would have been paid under the IPPS.
Readmissions Reduction Program. In October 2012, Medicare began encouraging hospitals with excess 30-day readmissions to lower readmission rates for heart attack, heart failure, and pneumonia patients by reducing a portion of the hospital’s payments by up to 1%. For 2014, the rule increases the maximum reduction of payments to up to 2%. It also adds hip and knee surgery and chronic obstructive pulmonary disease to the list of conditions used to determine the reduction, effective in FY 2015.
Admission and Medical Review Criteria for Inpatient Services. The final rule provides greater clarity regarding when inpatient hospital admissions are generally appropriate for Medicare Part A payment. Under the rule, if a physician expects a beneficiary’s surgical procedure, diagnostic test or other treatment to require a stay in the hospital lasting at least two midnights, and admits the beneficiary to the hospital based on that expectation, it is presumed to be appropriate that the hospital receive Medicare Part A payment. The final rule emphasizes the need for a formal order of inpatient admission to begin inpatient status, but permits the physician to consider all time a patient has already spent in the hospital as an outpatient receiving observation services, or in the emergency department, operating room, or other treatment area in guiding their two-midnight expectation.
Medicare Disproportionate Share Hospitals (DSH). The Affordable Care Act (ACA) directs CMS to revise the methodology used to recalculate the additional amount Medicare pays hospitals that serve a disproportionate share of low-income patients. Under the new rules, part of the DSH payments will be distributed to hospitals based on an estimate of how much uncompensated care they provide relative to other hospitals.
Other changes. The rule also finalizes a number of payment policies as proposed, among them rebasing the hospital market basket and the method to recover documentation and coding. The final rule also will allow the LTCH 25-percent patient threshold payment adjustment policy moratorium to expire.
The final rule and data files are available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2014-IPPS-Final-Rule-Home-Page.html.