Inpatient Prospective Payment System NPRM

On April 26, 2013 the CMS issued a notice of proposed rulemaking (NPRM) for inpatient prospective payment systems (IPPS) and long-term care hospitals (LTCHs). The rule affects approx. 3,400 acute care hospitals and 440 LTCHs. Comments will be accepted until June 25.

• FY 2014 Payment Update: The proposed rule would increase IPPS operating rates by 0.8% after accounting for adjustments, such as the required recoupment (American Taxpayer Relief Act) of $11 billion in overpayments resulting from documentation and coding changes that occurred after CMS implemented new patient severity classifications in FY 2008. LTCH PPS payments would increase by 1.1%. 
• CAH Conditions of Participation (COP): The proposed rule clarifies the COPs to require that CAHs have the capacity to provide inpatient care on-site. Approximately 1% of CAHs do not currently provide inpatient services. 
• Graduate Medical Education (GME): The Centers for Medicare and Medicaid Services (CMS) proposes to revise the GME policy addressing inpatient labor and delivery days in the inpatient Medicare utilization calculation. This may also impact "like hospital" determinations when considering designation as a sole community hospital or conversion to a CAH. CMS also proposes that a hospital may not claim FTE residents training at a CAH for indirect medical education (IME) and/or direct GME purposes. However, if a CAH incurs the costs of training the FTE residents while on rotation at the CAH, the CAH may receive 101% of those Medicare reasonable costs. 
• Medicare Disproportionate Share Hospitals (DSH): The ACA changes the methodology for calculating payments to DSHs, which serve a large proportion of low-income people, to account for the decreased in the number of the uninsured beginning in 2014. DSH payments will be reduced to 25% of the amount under current policy. The remaining 75% will be adjusted for decreases in the rate of uninsured individuals nationally, and then distributed to currently-eligible hospitals based on their share of uncompensated care relative to all Medicare DSH hospitals. 
• Value-Based Purchasing Program: The ACA adjusts payments to hospitals according to the quality of care they deliver. For FY 2014, CMS is increasing the percent reduction - the portion of Medicare payments available to fund the VBP Program's incentive payments - to 1.25%, which would provide approximately $1.1 billion. The NPRM also proposes new VBP measures. 
• New Hospital-Acquired Condition (HAC) Reduction Program: The ACA mandates a HAC program. Beginning in FY 2015, hospitals that rank among the worst quartile with regard to HACs will receive a 1% payment reduction. The NPRM proposes HAC ranking criteria and methodology. 
• Hospital Readmissions Reduction Program: The maximum payment reduction increases from 1% to 2% (statutory). CMS proposes to add two readmission measures for use in calculating FY 2015 penalties. 
• Medicare-Dependent Hospital (MDH) Program: The American Taxpayer Relief Act extended the MDH program through FY 2013. The NPRM includes the expiration of the designation for discharges occurring on or after October 1, 2013. 
• Low-Volume Hospitals: The temporary changes to low-volume hospital definition and payment adjustment methodology provided for by the ACA for FY 2011 through FY 2013 are expiring. CMS is proposing in FY 2014 to return the hospital definition and payment adjustment methodology that was in place prior to FY 2011.