CMS Proposes 0.5% Cut in Medicare Payments to Hospitals for FY12

CMS has issued a proposed rule to reduce average inpatient payments for hospitals by 0.55 percent for fiscal year 2012, prompting criticism from the AHA, according to a report by AHA News Now.

The overall reduction is due to a 3.15 percent cut in reimbursements, amounting to more than $3 billion, to eliminate the perceived effect of coding or classification changes that do not reflect real changes in case-mix, CMS asserted.

In a statement, the AHA disputed CMS' assertion that per-patient spending has increased due to coding and classification changes. Rather, the AHA argued hospitals are treating more complex and severely ill patients.

"America's hospitals are deeply disappointed that today's proposal puts further stress on vital care on which seniors depend on," AHA President and CEO Rich Umbdenstock said. "Hospital care is being threatened due to reductions to state Medicaid programs and proposed federal budget cuts to Medicare and Medicaid, which are woefully underfunded programs." He noted that hospitals already faced $155 billion in reductions.

In the new proposed rule, the overall 0.55 percent cut was arrived at by combining the 3.15 percent coding or classification offset with payment increases. These included a 1.1 percent increase to correct a technical error linked to the rural floor budget neutrality adjustment and increases for reporting quality measures. Hospitals submitting the quality data would get an initial market-basket update of 2.8 percent while those not submitting data would get a 0.8 percent update. In addition, the rule makes a productivity cut of 1.2 percent and a market basket cut of 0.1 percent, as required by the healthcare reform law.

CMS Administrator Donald Berwick, MD, defended the proposed payment cut. "The proposals CMS is making today reflect an underlying premise that we can improve the quality of and access to care while at the same time slowing the growth in healthcare spending," Dr. Berwick said in a statement. "In fact, there is a growing body of evidence that improving care — focusing on the patient's needs, reducing unnecessary duplicate services, and avoiding costly mistakes and preventable healthcare acquired conditions — is key to reducing healthcare cost growth."

The new regulation also proposed a methodology to calculate excess Medicare readmission rates, with more conditions possibly added later. The payment adjustments would apply to hospitals for discharges on or after Oct. 1, 2012.

Read the AHA News Now report on hospital payments.

Read the proposed rule (pdf).

Read the AHA statement on the proposed rule.

Read more coverage of Medicare payments to hospitals:   

- Obama's Plan to Reduce Deficit Will Preserve Medicare, Medicaid But Includes "Tough Cuts"

- While President Calls to Enhance Payment Board, Opposition Grows

- Obama's Plan to Reduce Deficit Will Preserve Medicare, Medicaid But Includes "Tough Cuts"


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