Medicare Program Issues Proposed Rule for Acute and Long-Term Care Hospital Inpatient Prospective Payment Systems for Fiscal Year 2013

21 May 2012 Publication
Authors: Maria E. Gonzalez Knavel Donald H. Romano

Legal News Alert: Health Care

On May 11, 2012, the Centers for Medicare and Medicaid Services (CMS) published in the Federal Register a proposed rule that would, among other things, update payment policies and rates for acute care hospitals paid under the Inpatient Prospective Payment System (IPPS) for fiscal year (FY) 2013. The proposed rule also would update payment policies and rates for long-term care hospitals paid under the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for FY 2013. In its press release, CMS stated that the proposed rule is a continuation of its efforts to promote improvements in hospital care that lead to better patient outcomes while slowing growth rate of health care cost. CMS Acting Administrator Marilyn Tavenner stated that “[t]he proposed rule would implement key elements of the Affordable Care Act’s value-based purchasing program as well as the hospital readmissions reduction program. It also establishes the groundwork for extending Medicare’s quality reporting programs beyond general acute care hospitals to other types of facilities.”

Among the highlights of the proposed rule are the following:

Increased Payments for Acute Care Hospitals

According to CMS, the total Medicare operating payments to acute care hospitals for inpatient services occurring in FY 2013 would increase by about $175 million, or 0.9 percent, compared with FY 2012. This proposed overall increase is due to a 2.3 percent net increase in payment rates, together with the other policies in the proposed rule.

Hospital Readmissions Reduction Program

In the final rule for the FY 2012 IPPS, CMS finalized many of the policies for the Hospital Readmissions Reduction Program, which calls for payment reductions for certain hospitals that have excess readmissions for certain selected conditions for discharges on or after October 1, 2012. These conditions are acute myocardial infarction (or heart attack), heart failure, and pneumonia.

The proposed rule for FY 2013 addresses issues under the Hospital Readmissions Reduction Program that were not addressed in the FY 2012 final rule. The proposed rule sets forth a methodology and the payment adjustment factors that CMS would use to account for excess readmissions for these three conditions. Under the proposed rule, CMS would provide confidential reports to hospitals regarding their readmissions, and hospitals would have 30 days to review these reports and submit corrections.

Inclusion of Labor and Delivery Days in Disproportionate Share Hospital and Indirect Medical Education Adjustments

CMS proposes a change to the counting of beds for both the Disproportionate Share Hospital (DSH) and Indirect Medical Education (IME) adjustments. Over the years, CMS’ position on whether labor and delivery days and beds should be counted for the DSH and IME adjustments has shifted. Under the proposed rule, CMS would include all labor and delivery beds and patient days in the count of available beds for both the DSH and IME calculations. This change could potentially enable some hospitals to meet the threshold for DSH payments, but could have the effect of decreasing IME payments for certain hospitals, because it would reduce the resident-to-bed ratio that determines the IME adjustment.

Hospital Inpatient Quality Reporting Program

The proposed rule would reduce the number of quality measures under the hospital Inpatient Quality Reporting (IQR) Program from 72 to 59. Although 17 measures would be removed, four measures would be added for the following: perinatal care; readmissions, including overall readmissions and readmissions relating to hip and knee replacement procedures; the use of surgery checklists designed to reduce errors; and a new survey measure to assess the quality of patient care transitions.

Hospital Value-Based Purchasing Program

The Hospital Value-Based Purchasing (VBP) Program, established by the Affordable Care Act, provides for value-based incentive payments to be made to hospitals that meet certain performance standards. Under the proposed rule, CMS would add several additional measures to VBP Program. One of these measures, the Medicare spending per beneficiary by the hospital, would affect payments beginning in FY 2015. This measure would include all Part A and Part B payments from three days prior to an inpatient hospital admission through 30 days post discharge, with certain exclusion. The proposed measure would be risk-adjusted to reflect the beneficiary’s age and severity of illness.

The proposed rule also would have a new outcome measure for central-line-associated bloodstream infections. This measure is intended to reward hospitals for avoiding certain kinds of life-threatening blood infections that can develop during inpatient hospital stays.

The proposed rule also would implement an appeals process for certain VBP determinations. Under the proposed procedures, a hospital would have to submit a proposed corrections request and receive an adverse determination on that request before it could pursue an appeal. CMS explains that by requiring corrections requests it hopes to resolve many issues short of the hospital taking a formal appeal.

Hospital Services Furnished Under Arrangements

In the final rule for the FY 2012 IPPS, CMS set forth a change in policy to preclude hospitals from furnishing routine services under arrangements with another entity unless the services are provided in the hospital in which the patient has been admitted as an inpatient. Under the changed policy, only therapeutic and diagnostic items and services may be furnished under arrangements outside of the hospital. Routine services, including bed, board, and nursing, are required to be performed by the hospital. In the FY 2013 IPPS proposed rule, CMS proposes to postpone the implementation date for this policy to cost reporting periods beginning in FY 2014.

Increased Payments for Long-Term Care Hospitals

According to CMS, the total Medicare operating payments to long-term care hospitals for inpatient services occurring in FY 2013 would increase by about $100 million, or 1.9 percent, compared with FY 2012. This overall increase is due to a 2.1 percent increase in payment rates, together with the other policies in the proposed rule.

The comment period for the proposed rule ends on June 25, 2012. By statute, the final rule must be released by August 1, 2012.

The rule can be downloaded from the Federal Register here.

CMS has issued a press release to accompany the rule’s release.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our health care clients and colleagues. If you have any questions about this Alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:

Jeffrey R. Bates
Los Angeles, California

Maria E. Gonzalez Knavel
Milwaukee, Wisconsin

Donald H. Romano
Washington, D.C.

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