CMS' Fiscal Year 2014 IPPS Proposed Rule: 10 Points to Know

Last week, CMS issued its proposed rule for acute-care hospitals paid under the inpatient prospective payment system, and the rule included major changes and suggestions in regards to hospitals' Medicare payments for fiscal year 2014, which begins Oct. 1.

NewCMSlogoOverall, CMS estimates total Medicare spending on inpatient hospital services will increase by about $27 million next fiscal year. Here are some of the biggest elements of this year's Medicare IPPS proposed rule, which will affect roughly 3,400 acute-care hospitals.

1.    CMS recommended acute-care hospitals that report quality data receive a 0.8 percent increase in Medicare operating rates, after accounting for inflation and other adjustments. Hospitals that do not report quality data would receive a 2 percent reduction in Medicare payments. CMS has proposed similarly low Medicare increases in the past, though the final rule typically has included higher rate increases.

2.    CMS arrived to its proposed rate of 0.8 percent through the following updates: an estimated positive 2.5 percent market basket update, a negative 0.4 percent update for a productivity adjustment, a negative 0.3 percent update for cuts under the Patient Protection and Affordable Care Act, a negative 0.8 percent documentation and coding adjustment and a negative 0.2 percent adjustment for other policy proposals.

3.    CMS included the 0.8 percent documentation and coding adjustment as part of the American Taxpayer Relief Act of 2012, better known as the fiscal cliff deal. Legislators included $11 billion in MS-DRG documentation and coding adjustments. This meant hospitals and other providers would lose $11 billion in Medicare payments between FY 2014 and FY 2017 due to past overpayments the government made to hospitals as the country transitioned to MS-DRGs. For FY 2014 alone, hospitals would lose roughly $1 billion in Medicare payments under this policy.

4.    Under the PPACA, Medicare disproportionate share hospital payments will be modified beginning in FY 2014. Starting in October, CMS said any IPPS hospitals would receive only 25 percent of Medicare DSH payments than they previously would have received. The remaining 75 percent would be distributed to hospitals based on each their share of uncompensated care for Medicare patients.

5.    In 2007, CMS began issuing DRG values based on cost report data instead of charge information. Beginning in October, CMS proposed calculating MS-DRG relative weights using 19 specific cost-to-charge ratios for implantable devices, MRIs, CT scans and cardiac catheterization.

6.    As part of the PPACA's Hospital Readmissions Reduction program, hospitals would concede a maximum of 2 percent of Medicare payments for excessive readmissions in FY 2014, up from this year's figure of 1 percent. CMS estimates there would be $175 million in Medicare readmission dollars to redistribute.

7.    Under the PPACA's Hospital Value-Based Purchasing program, hospitals would have 1.25 percent of their Medicare payments withheld, and the resulting $1.1 billion in incentive payments will be doled out to hospitals that deliver the best quality of care based on clinical process of care measures and patient satisfaction scores. CMS has adopted some new measures for FY 2014's VBP program, such as 30-day heart failure.

8.    For hospitals that receive direct graduate medical education funding, CMS proposed to include labor and delivery days for maternity patients as inpatient days in its Medicare payment calculations.

9.    CMS proposed clarifying the Medicare conditions of participation for critical access hospitals. These rural providers must furnish emergency care and acute-care inpatient services on-site and cannot only function as a nursing home/skilled nursing facility.

10.    This October, there will only be limited code updates to both ICD-9 and ICD-10 code sets to capture new technology and diseases. Starting Oct. 1, 2014, when ICD-10 goes live, there will only be limited code updates to ICD-10, and on Oct. 1, 2015, regular updates to ICD-10 will begin.

CMS will accept comments on the proposed rule until June 25 and will issue a final rule in August.

More Articles on Medicare and Hospitals:

CMS Proposes 0.8% Boost in Medicare Inpatient Rates for 2014
Did the Fiscal Cliff-SGR Bill Rob Hospitals?
CMS' FY 2013 IPPS Final Rule: 9 Observations

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