Policy and Payment Rate Changes for Inpatient Stays in Acute Care and Long Term Care Hospitals (Inpatient Prospective Payment System)

04 August 2009 Publication
Author(s): Chris E. Rossman

American Health Lawyers Association

By Chris E. Rossman

On July 31, 2009, the Centers for Medicare & Medicaid Services (CMS) issued the final rules implementing changes to the Hospital Inpatient Prospective Payment System (IPPS) for acute care hospitals and Fiscal Year (FY) 2010 Rates. The rules are scheduled to be published in the August 27, 2009, edition of the Federal Register, but they were placed on display at the Office of Federal Register and can be viewed online. Following are some of the many provisions of the rules applicable, for the most part, for federal FY 2010:

  • The rules will increase Medicare IPPS payments to acute care hospitals by more than $1 billion, as a result of an inflation increase of 2.1%.
  • CMS had previously proposed, earlier this year, to reduce IPPS payments by almost $1 billion to account for changes in hospital coding practices that do not reflect increases in severity of illness.
  • In the proposed IPPS rules for FY 2010, CMS proposed to reduce future IPPS rates based on the increase observed by CMS in spending because of documentation and coding that CMS states occurred in FY 2008, after CMS adopted Medicare severity diagnosis related groups (MS-DRGs) that were intended by CMS to better account for the severity of patient illnesses and the cost of treating Medicare patients. However, CMS does not yet have information on the extent of documentation and coding effects on FY 2009 spending. Therefore, CMS is not implementing an adjustment for FY 2010 until it has a full year of FY 2009 data. CMS will then consider phasing in future adjustments over an extended period beginning in FY 2011.
  • Payments to long term care hospitals (LTCHs) are estimated to increase by $153 million for the 2010 rate year (RY). CMS is applying a 2.5% inflation update to payment rates for inpatient services for LTCHs.
  • Similar to the approach taken for hospitals paid under IPPS, CMS is not making any adjustments to LTCH rates for RY 2010 for the effect of changes in documentation and coding that occurred in FY 2008. CMS announced that it is finalizing its proposal to adjust the RY 2010 LTCH rates by -0.5% to account for the effect of changes in documentation and coding that occurred in FY 2007 under the previous patient classification system.
  • CMS announced that it was continuing to apply the capital indirect medical education (IME) adjustment to teaching hospital rates. CMS had previously stated in the 2008 final IPPS rule that it was phasing out the capital IPPS teaching adjustment--50% in FY 2009 and completely in FY 2010. In 2009, this adjustment was maintained at the 100% level by the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5). The rules continue the adjustment at 100% for FY 2010.
  • CMS is clarifying the definition of a new medical residency training program in the rules for purposes of graduate medical education (GME). The regulations currently specify that a new medical residency program is one that receives initial accreditation by the appropriate accrediting body or begins training residents on or after January 1, 1995. The final rules clarify that the accreditation must be truly "initial," as opposed to a re-accreditation of a program that existed previously at the same or at another hospital. In determining whether a program is truly new, CMS will use certain "supporting factors" (such as whether the program director, teaching staff, and residents are different). CMS will also consider whether there previously was a program in the same specialty at a hospital that closed and, more generally, whether that program is part of the FTE caps of any existing hospital.
  • CMS is specifying that a new hospital that begins training residents for the first time after July 1, 2009, will be permitted to submit a Medicare GME affiliation agreement prior to the earlier of the end of its cost-reporting period or the end of the academic year in order to participate in a Medicare GME affiliated group for the remainder of the academic year.

Access the CMS press release and fact sheet that accompanied the rule's release. 

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