Hospitals receive 0.9% inpatient pay increase for 2016

Hospitals will receive a modest inpatient prospective payment system bump of 0.9 percent for 2016 under a final rule issued by the Centers for Medicare & Medicaid Services (CMS). However, the agency will not continue the partial delay in enforcing the two-midnight rule, which is now set to expire on Sept. 30.

The payment increase is composed of a 2.4 percent market basket increase for hospitals that were meaningful users of electronic health records last year. However, that increase was mitigated by a variety of cuts, including a 0.5 percent decrease due to increased productivity, an additional 0.2 percent cut mandated by the Affordable Care Act (ACA) and another 0.8 percent reduction under the American Taxpayer Relief Act of 2012.

In addition to the overall inpatient payment increase, the final rule also includes cuts for participants in the Disproportiate Share Hospital (DSH) program by $1.2 billion in fiscal 2016. DSH payments are reduced under the ACA and many hospitals expected the expansion of Medicaid eligibility to make up the lost revenue. But to date, only 30 states have decided to expand their Medicaid programs under the ACA. Safety-net hospitals are also more likely to receive penalties under CMS programs to reduce readmissions and encourage value-based purchasing.

The two-midnight rule, which is unpopular among acute care providers, means hospitals receive payment from Medicare for short patient stays if they span more than two midnights.

The American Hospital Association (AHA) said it would push CMS to delay the partial ban on enforcement of the two-midnight rule until Jan. 1, 2016.

"We urge CMS to issue an extension of the delay quickly," the AHA said in a statement. Last year, the lobbying group filed suit against the federal government to overturn the rule, claiming it impacts the ability of hospitals to deliver care.

To learn more:
- here's the final rule (.pdf)
- check out the AHA statement

Related Articles:
CMS proposes to ease--but not abolish--two-midnight rule 
Safety-net hospitals face greater risk for Medicare penalties 
Hospital DSH payments to plummet without Medicaid expansion 
AHA, hospital groups sue over two-midnight rule