This article was originally published in the May 2011 issue of Atlanta Hospital News.
On April 19, 2011, the Department of Health and Human Services Centers for Medicare & Medicaid Services (CMS) issued a proposed rule, which proposes changes to the Hospital Inpatient Prospective Payment Systems (IPPS) for Fiscal Year 2012.
CMS proposes to revise the Medicare hospital IPPS for operating and capital-related costs of acute care hospitals to implement changes arising from its continuing experience with such systems and to implement certain statutory provisions contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the Affordable Care Act) and other legislation. These changes would be applicable to Fiscal Year 2012, beginning with discharges occurring on or after October 1, 2011.
Under the prospective payment system (PPS) established by the Social Security Act, Medicare payment for hospital inpatient operating and capital-related costs is made at predetermined, specific rates for each hospital discharge. Discharges are classified according to a list of diagnosis-related groups (DRGs). In the Proposed Rule, CMS proposes a -3.15 percent prospective adjustment to the standardized amount to partially eliminate the full effect of the documentation and coding changes on future payments. The proposed IPPS adjustment exceeds the remaining -2.5 percent documentation and coding adjustment for hospitals receiving a hospital-specific rate, (that is, the entire -5.4 percent adjustment, minus the -2.9 percent adjustment finalized for FY 2011). CMS states that it believes "that proposing the entire remaining prospective adjustment of -2.5 percent allows CMS to maintain, to the extent possible, similarity and consistency in payment rates for different IPPS hospitals paid using the MS-DRG."
On the date of the issuance of the Proposed Rule, the American Hospital Association (AHA) issued a statement expressing its displeasure with the Proposed Rule. Rich Umbdenstock, President and CEO of the AHA stated that the Proposed Rule "puts further stress on vital care on which seniors depend. Medicare already fails to cover the cost of hospital services, and these reductions ultimately make hospitals' ability to care for patients and communities even more challenging. This proposal further exacerbates the 'cost-shift,' increasing health care costs to employers and other purchasers of private coverage." Mr. Umbdenstock noted AHA's concern "that CMS continues to move forward with the proposed 'coding offset,' which is excessive and wrongly assumes spending on inpatient hospital care has increased solely due to changes in coding. Independent research confirms that CMS' methodology does not recognize that hospitals are caring for patients who are older and sicker." (AHA Press Releases & Statements, Statement on Proposed FY2012 Rule, Tuesday, April 19, 2011).
The Proposed Rule also includes several quality provisions. One of these is the Hospital Readmissions Reduction Program. CMS states readmission to a hospital may be an adverse event for patients and many times imposes a financial burden on the health care system. CMS believes that successful efforts to reduce preventable readmission rates will improve quality of care while simultaneously decreasing costs. The Proposed Rule sets forth the general framework of the Hospital Readmissions Reduction Program, but the actual payment adjustment pursuant to the Program will not apply until FY 2013 (beginning October 1, 2012). Under the Proposed Rule, CMS will reduce payments for three conditions that have excess readmissions: acute myocardial infarction; heart failure; and pneumonia. CMS notes that the three readmission measures were endorsed by the National Quality Forum. These measures include the currently endorsed 30-day time window, risk-adjustment methodology and exclusions for readmissions that are unrelated to the prior discharge. According to CMS, transfers to other acute-care facilities are excluded from each of the three readmission measures, as the NQF-endorsed proposed measures consider these multiple contiguous hospitalizations to be a single acute episode of care.
The Proposed Rule will be published in the May 5, 2011 Federal Register. CMS will accept comments on the Proposed Rule until June 20, 2011. The final rule is expected to be issued by August 1, 2011.
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