CMS' 2015 IPPS final rule: 7 things to know

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CMS has issued its hospital inpatient prospective payments systems final rule for fiscal year 2015, which increases hospital inpatient rates for hospitals that fall under the IPPS rule by 1.4 percent.

Here are seven things to know about the final rule.

1. Calculation of payments. The rule includes a 2.9 percent market basket update, offset by a negative 0.5 percent productivity adjustment and a negative 0.2 percent market basket cut as mandated by the Patient Protection and Affordable Care Act, and a negative 0.8 percent decrease in accordance with the American Taxpayer Relief Act of 2012.

2. Hospital readmission reduction program. The HRR program penalizes hospitals for heart attack, heart failure, pneumonia and hip or knee surgery 30-day readmission rates for Medicare patients that are greater than predicted, after adjusting for patients' illness severity. Under the final rule, CMS has increased the maximum penalty from 2 percent to 3 percent.

3. Hospital-acquired condition reduction program. Under the final rule, hospitals with the poorest performance in reducing HACs, specifically those in the lowest quartile, will have their Medicare pay docked by 1 percent.

4. Price transparency. Under the final rule, hospitals are required to make public a list of their standard charges or provide their policies for allowing the public to view a list of those charges in response to an inquiry.

5. Hospital value-based purchasing program. The VBP program, which was established by the PPACA, adjusts payments to hospitals under the IPPS based on the quality of care they provide to patients. CMS took back 1.25 percent of Medicare reimbursement at hospitals paid under the IPPS in fiscal year 2014. The resulting $1.1 billion was dispersed to hospitals based on how well they performed on healthcare quality measures, like treatment of heart attack and congestive heart failure, as well as patient satisfaction. In fiscal year 2014, 778 hospitals lost more than 0.2 percent of their Medicare pay, while 630 hospitals received a bonus of more than 0.2 percent.

For 2015, CMS is increasing the applicable percent reduction, the portion of Medicare payments available to fund the value-based incentive payments under the program, to 1.5 percent of Medicare reimbursements, resulting in about $1.4 billion in value-based incentives.

6. Medicare disproportionate share hospitals payments. As part of the PPACA, Medicare DSH payments will be reduced 75 percent by 2019, or $49.9 billion. The final rule cuts overall Medicare DSH payments by 1.3 percent in fiscal year 2015, compared with fiscal year 2014. Medicare DSH payments will continue to be distributed under the new policy, which is based on hospitals' uncompensated care amounts.

7. Two Midnight rule intact. Despite numerous comments from hospitals concerning the confusion surrounding the two midnight rule, the rule will continue in effect.

More articles on Medicare payments:

Long-term care hospital payments to rise 1.1% under CMS final 
Final hospice payment rule for 2014 increases payments by $230M
CMS finalizes 2% increase in skilled nursing facility payments 

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