CMS Releases FY 2013 IPPS Proposed Rule: 12 Points to Know

CMS issued a proposed rule (pdf) for hospitals paid under the Inpatient Prospective Payment System and the Long-Term Care Hospital Prospective Payment System that would increase Medicare's operating payments to acute-care hospitals by about 0.9 percent — or roughly $904 million — in fiscal year 2013.

In addition, CMS looks to boost the emphasis on tying Medicare payments to value-based and quality-driven efforts as it proposed to expand the Value-Based Purchasing Program and Inpatient Quality Reporting Program.

"The proposed rule would implement key elements of the [Patient Protection and] Affordable Care Act's Value-Based Purchasing Program as well as the hospital readmissions reduction program," said CMS Acting Administrator Marilyn Tavenner in a news release. "It also establishes the groundwork for extending Medicare's quality reporting programs beyond general acute-care hospitals to other types of facilities. It is part of a comprehensive strategy to use Medicare's payment systems to foster better care and better value in all settings, thereby reducing overall Medicare spending."


Overall, CMS estimates total Medicare spending on inpatient hospital services will increase by about $175 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 and 440 long-term acute-care hospitals.

•    Medicare payments to acute-care hospitals would increase by about 0.9 percent. Medicare payments to LTAC hospitals would increase by 1.9 percent, or about $100 million.

•    Hospitals that successfully participate in the Hospital Inpatient Quality Reporting Program — which authorizes CMS to pay hospitals to report certain quality measures to earn a higher update to their Medicare payments — would receive a total payment boost of 2.3 percent. Hospitals that do not submit successful quality measure would see a 2 percent decrease in Medicare payments but would still see a 0.3 percent update overall.

•    CMS arrived at its proposed net payment rate of 2.3 percent by combining a 3 percent update of the hospital Medicare market basket (which adjusts for inflation, costs and other economic factors) with a -0.9 percent decrease from PPACA requirements and a 0.2 percent increase for documentation and coding updates.

•    In last year's final IPPS rule, CMS finalized the policies of the Hospital Readmissions Reduction Program. These policies included a final definition of "readmission," which refers to a patient admission to an acute-care hospital paid under the IPPS that occurred within 30 days of discharge from the same or another acute-care hospital, and the use of three 30-day readmission measures (acute myocardial infarction, heart failure and pneumonia), among others.

In this year's proposed rule, CMS proposed a way to calculate the ratio of a hospital's aggregate dollars for excess readmissions to the hospital's aggregate dollars for all discharges. This methodology, or the readmission adjustment factor, would result in a 0.3 percent Medicare payment decrease for hospitals.

•    CMS proposed several measures for the Hospital Inpatient Quality Reporting Program. In order for hospitals to receive the full annual percentage increase, hospitals must report the required data on certain quality measures. In the proposed rule, CMS would reduce the number of measures in the IQR from 72 to 59 for FY 2015 because some of the measures are duplicative from the Hospital Compare website (a full list can be found on pages 659 and 660). Seventeen total measures would be removed, as CMS also plans to add measures.

CMS based its recommendations on input from the National Quality Forum. Of the added measures, CMS wants to adopt three claims-based measures and one chart-abstracted measure on perinatal care, a structural measure and more survey-based measures for FY 2015 and beyond. A complete list of the proposed Hospital IQR Program measures for FY 2015 can be found on pages 705 through 708.

In addition, because more than 99 percent of sampled hospitals had validated data in the most recent fiscal year, CMS proposed to halve the annual random sample from 800 hospitals to 400 hospitals in FY 2014.

•    On Oct. 1, 2012, CMS will begin making value-based incentive payments under the VBP Program to hospitals. The VBP Program will be funded for FY 2013 through a 1 percent decrease in hospital Medicare payments (in FY 2014, the percentage will be 1.25 percent, and by FY 2017, the percentage will cap at 2 percent). CMS proposed to add two requirements to the VBP Program for FY 2015: the addition of three care/outcomes measures and the addition of "Medicare spending per beneficiary" in the efficiency section.

The VBP Program for FY 2014 has been finalized (a complete list of clinical process of care, patient experience of care and outcome measures for the FY 2014 VBP Program can be found on page 795 of the proposed rule), and CMS began planning for the FY 2015 requirements. CMS proposed to retain 12 of the 13 clinical process of care measures from the FY 2014 program and adopt one new clinical process of care measure — "AMI-10: Statin Prescribed at Discharge." For outcome measures, CMS proposed keeping the three 30-day mortality measures from the FY 2014 program while also adding two additional outcomes measures — "PSI-90" and the "CLABSI" (central line-associate blood stream infection measure). Patient experience of care measures will remain the same.

CMS also wants to adopt the Medicare spending per beneficiary measure to the efficiency category in FY 2015. CMS just added that measure to its Hospital Compare website. Blair Childs, senior vice president of public affairs for the Premier healthcare alliance, said many within the healthcare setting appreciate CMS' efforts to fine tune the VBP Program, but the new efficiency measure could cause risks to Medicare reimbursements. "While the [Medicare spending per beneficiary] measure in principle has merit, it still has not been tested and can't be replicated," Mr. Childs said. "The end result is a lack of national data that hospitals can use to verify CMS' calculations, determine the appropriateness of the methodology or analyze true differences in performance."

•    In conjunction with the Centers for Disease Control and Prevention, CMS proposed adding two new conditions to the hospital-acquired condition payment provision list. The HAC payment provisions impact hospital payments for HACs that are high-cost, high-volume or both and could have been prevented through evidence-based measures. The two proposed conditions were surgical site infection following cardiac implantable electronic device procedures and pneumothorax with venous catheterization

•    Regarding graduate medical education and indirect medical education, CMS proposed increasing the timeframe for new teaching hospitals to establish their caps for new GME and IME programs from three to five years.  

•    There are several expiring provisions of the PPACA that will go into effect in FY 2013. The Medicare-Dependent Hospital Program, which awarded extra payments to small, rural hospitals that rely heavily on Medicare patients, was extended by the PPACA through the end of FY 2012. Starting Oct. 1, 2012, those rural hospitals will no longer receive the enhanced payments.

The PPACA also amended the Low-Volume Hospital Payment Adjustment, but starting in FY 2013, hospitals that qualify for this Medicare payment adjustment will be paid on the former qualifications. For FY 2011 and FY 2012, a hospital could be considered a "low-volume hospital" if it was more than 15 miles away from another hospital and had less than 1,600 Medicare discharges. Now, hospitals would have to be more than 25 miles away from another hospital and have less than 200 Medicare discharges. These hospitals would receive a 25 percent payment adjustment instead of a payment update on a sliding scale.

•    CMS proposed to postpone the implementation date of the "services furnished under arrangements" requirements for cost reporting periods beginning on or after Oct. 1, 2013. Currently, therapeutic and diagnostic services are the only services that can be delivered under arrangement outside of the hospital to Medicare beneficiaries. "Routine services," which include bed, board, nursing and other related services, must be delivered by the hospital. CMS has discovered many affected hospitals need additional time to abide by the requirements that only therapeutic and diagnostic services can be furnished outside their facilities.

•    In order to help low-bed hospitals qualify for the soon-to-expire Medicare Disproportionate Share Hospital payments, CMS proposed to include labor and delivery beds in their total bed count. Consequently, this would impact indirect medical education payments because it would reduce the resident-to-bed ratio that determines IME adjustments. CMS projects included labor and delivery beds in the available bed day count would decrease IME payments by $170 million in FY 2013.

•    CMS will continue to update hospitals, payors and other healthcare providers on the conversion of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The final version of the ICD-10 MS-DRGs will be implemented at the same time as ICD-10 goes live, which was recently delayed to Oct. 1, 2014.

CMS will accept comments on the proposal rule until June 25 and will issue a final rule by August 1.

More Articles on Hospital Medicare Payments:

Top 10 Hospitals With Most Medicare Inpatient Volume for Chest Pain

12 Challenges and Opportunities for Hospitals in 2012

6 Ways Hospitals Can Survive the Onslaught of Medicare Cuts

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