Proposed Changes to the Hospital IPPS for Acute Care Hospitals and the Long-Term Care Hospital PPS and FY 2012 Rates - Make Your Revenue Smarter

From the CMS Fact Sheet:

On Apr. 19, 2011, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would revise policies and payment rates for general acute care hospitals that are paid for inpatient services under the Inpatient Prospective Payment System (IPPS), effective for discharges in fiscal (FY) 2012 – that is, on or after Oct. 1, 2011. The proposed rule would also update payment policies and rates for Long-term Care Hospitals (LTCHs) under the LTCH Prospective Payment System (LTCH PPS).

Proposal continues to tie annual update amount for many hospitals to participation in Inpatient Quality Reporting Program, supports efforts to lower health care costs

The proposed rule, which would apply to approximately 3,400 acute care hospitals and approximately 420 LTCHs, would generally be effective for discharges occurring on or after Oct. 1, 2011.  Under the proposed rule, CMS projects that Medicare operating payments to acute care hospitals for inpatient services occurring in FY 2012 would decrease by a projected $498 million or 0.5 percent between FY 2011 and FY 2012.  This reflects a proposed hospital update of 1.5 percent (based on a projected increase of 2.8 percent for inflation in hospital costs, reduced by a multi-factor productivity adjustment of 1.2 percent and an additional 0.1 percent in accordance with the Affordable Care Act), increased by 1.1 percent in response to litigation, as well as a -3.15 percent documentation and coding adjustment.  This documentation and coding adjustment is consistent with a statutory provision that requires CMS to adjust payments to remove the effect of increased aggregate payments due to changes in documentation and coding that did not reflect increases in patients’ severity of illness after adoption of the MS-DRGs.   Medicare payments to LTCHs in FY 2012 are projected to increase by $95 million or 1.9 percent.

 

In addition to promoting accurate payment for inpatient services to Medicare beneficiaries, the proposed rule would strengthen the relationship between payment and quality of service in a number of ways.  First, the proposed rule includes proposals that are part of a new Readmissions Reduction Program required by the Affordable Care Act.  Second, it would expand the quality measures that hospitals must report under the Hospital Inpatient Quality Reporting (IQR) Program – formerly called the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program ? in order to receive the full update to the standardized amount in FYs 2014 and 2015.  Under the Medicare law, the update for hospitals that choose not to participate in the voluntary reporting program or that do not meet program requirements includes (until FY 2015) a two percentage point reduction.  As detailed above, the proposed rule proposed an update of -1.5 percent.  Therefore, CMS is proposing that hospitals that do not successfully report the quality measures will receive updates currently projected to be -0.5 percent (that is, the projected increase of 2.8 percent for inflation in hospital costs, reduced by two percentage points for non-compliance with the IQR program, and further reduced by a multi-factor productivity adjustment of 1.2 percent and the additional required 0.1 percent).

 

Finally, the proposed rule would add one category of conditions to the list of hospital-acquired conditions (HACs) in FY 2012 for purposes of the HACs payment policy.  This policy prevents hospitals from being paid at an enhanced rate for treating a beneficiary if the sole reason for the higher payment is the occurrence, during the beneficiary’s hospital stay, of one of conditions on the HACs list.  The proposed HAC is Acute Renal Failure after Contrast Administration (also known as contrast-induced acute kidney injury, or CI-AKI0), which is an abrupt deterioration in renal function that can be associated with the use of iodinated contrast medium.

 

The proposed rule also contains a proposal to create a new quality reporting program, as authorized by the Affordable Care Act, that would apply to hospitals that are paid under the LTCH PPS.

 

This year, CMS expects to build on these quality efforts by implementing a new Hospital Value-Based Purchasing (HVBP) program, authorized by the Affordable Care Act, that will provide additional incentives to hospitals to improve the way care is delivered.  CMS issued a proposed rule for the HVBP program in January and plans to issue a final rule in the near future.  The IPPS proposed rule being issued today[?] contains additional proposals related to the HVBP program.

 

This fact sheet discusses the provisions in the proposed rule that are intended to promote continued improvement in the quality and safety of care that beneficiaries receive during inpatient hospital stays.

CMS will accept public comments on the proposed rule until June 20, 2011, and will respond to them in a final rule to be issued by Aug. 1, 2011.

 

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