July 30, 2010 - The Centers for Medicare & Medicaid Services (CMS) today issued a final rule establishing fiscal year (FY) 2011 policies and payment rates for inpatient services furnished to people with Medicare by acute care hospitals, long-term care hospitals (LTCHs), and certain excluded hospitals. Due to the timing of the passage of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act"), CMS issued a FY 2011 IPPS/LTCH proposed rule, as well as a supplemental proposed rule that addressed certain changes made by the Affordable Care Act. The final rule responds to comments received by CMS on both the proposed rule and the supplemental proposed rule, which appeared in the May 4 and June 2 issues of the Federal Register, respectively.
The final rule applies to approximately 3,500 acute care hospitals paid under the Inpatient Prospective Payment System (IPPS), and approximately 420 long-term care hospitals paid under the LTCH Prospective Payment System (PPS), for discharges occurring on or after October 1, 2010. It also updates the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The updated rate-of-increase limits are effective for cost reporting periods beginning on or after October 1, 2010.
"The final rule we are issuing today will ensure that Medicare pays hospitals accurately for inpatient services for Medicare beneficiaries while fostering continuing improvements in the quality and safety of care," said CMS Administrator Donald Berwick.
In today's action, CMS is updating acute care hospital rates by 2.35 percent. This update reflects a market basket increase of 2.6 percent for inflation, which is a slight increase over the FY 2010 inflation rate. The final rule reduces the 2.6 percent inflation update by 0.25 percent, as required by the Affordable Care Act. Further, CMS will apply a "documentation and coding" adjustment of -2.9 percent. Hospital coding practices following adoption of the Medicare severity DRGs increased aggregate payments to hospitals, but did not reflect actual increases in patients' severity of illness. Under legislation passed in 2007, CMS is required to recoup the entire amount of FY 2008 and 2009 excess spending due to changes in hospital coding practices no later than FY 2012. CMS has determined that a -5.8 percent adjustment is necessary to recoup these overpayments. The -2.9 percent adjustment for FY 2011 is one-half of this amount. CMS estimates that payments to general acute care hospitals for operating expenses in FY 2011 will decline by 0.4 percent, or $440 million, compared with FY 2010 under the final rule, taking into account all factors that would affect spending.
CMS is similarly updating LTCH rates by 2.5 percent for inflation, but reducing the inflation update by 0.5 percentage point as required by the Affordable Care Act. Further, CMS will apply an adjustment of -2.5 percent to the LTCH standard Federal rate for the estimated increase in spending in FYs 2008 and 2009 due to documentation and coding that did not reflect increases in patients' severity of illness. CMS estimates that aggregate payments to LTCHs would increase by approximately 0.5 percent or $22 million taking into account all provisions in the final rule that would affect spending.
Under current law, hospitals that successfully report quality measures included in the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program will receive the full update for 2011. Hospitals that do not participate in the quality reporting program will get the update less two percentage points. Based on the reporting in 2009, 96 percent of participating hospitals are receiving the full update this year.
The final rule adds 12 measures to the RHQDAPU set, and retires one current measure - Mortality for selected surgical procedures (composite). However, only 10 of the new measures - including rates of occurrence for 8 of 10 categories of conditions that are subject to the hospital-acquired conditions (HACs) policy ‑ will be considered in determining a hospital's FY 2012 update. The remaining 2 measures to be reported in 2011 would be considered in determining the hospital's FY 2013 update.
The Medicare law requires hospitals to include diagnostic services and most admission-related non-diagnostic services provided in the hospital outpatient department on the day of admission or 3 calendar days prior to admission (one day for hospital not paid under the IPPS) as part of the inpatient stay. The policy protects Medicare and the beneficiary from paying separately under Medicare Part B for services that should be included in the Part A payment for the inpatient stay.
Congress recently clarified the situations in which these non-diagnostic services should be considered part of a beneficiary's inpatient stay. The clarification, which was included in the
Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 ("Preservation of Access to Care Act"), is consistent with how CMS understands hospitals have largely billed Medicare in the past. This provision was effective for services furnished on or after June 25, 2010, and CMS is implementing this provision through an interim final rule. The comment period for this interim final rule closes on Sept. 28, 2010.
The final rule was placed on display at the Federal Register today, and can be found under Special Filings at:
http://www.ofr.gov/OFRUpload/OFRData/2010-19092_PI.pdf or
www.ofr.gov/inspection.aspx#special.
For more information, please see: www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp.
Note: More information about the proposed rule, including the documentation and coding adjustment and the RHQDAPU changes and HACs discussion, will be included in Fact Sheets to be posted on our Web page at: www.cms.hhs.gov/apps/media/fact_sheets.asp.