IPPS rates: Hospitals don't get a lot love from CMS

Late last week, the Centers for Medicare and Medicaid Services released the fiscal year (FY) 2011 final rule for the inpatient prospective payment systems (IPPS) for acute-care hospitals and long-term acute-care hospitals, and the American Hospital Association (AHA) wasn't impressed. AHA CEO Rich Umbdenstock stated that U.S. hospitals "strongly disagree" with the rule, largely because CMS did not heed industry studies, as well as bipartisan congressional support, that recommended doing away with or reducing a 2.9 percent coding offset to general acute-care hospital payments. Adding further insult to injury, CMS reiterated that the 2.9 percent adjustment represents only half of the 5.8 percent adjustment required to recoup industry overpayments.

The FY 2009 coding offset and other policy changes will negate the annual market basket update, resulting in an aggregate payment reduction of 0.4 percent ($440 million) compared to FY 2010 rates for acute-care hospitals. The final rule includes a 2.6 percent market basket increase, reduced by a Patient Protection and Affordable Care Act-mandated 0.25 percent.

As required by law, hospitals participating in the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program will get the full FY 2011 update. Those few that don't participate will have two percentage points taken off of their update (giving them a whopping 0.35 percent update prior to the coding offset). In addition, the final rule expands the RHQDAPU measure set in both FY 2012 and FY 2013.

The final rule also contains news about the three-day payment rule; additional payments for hospitals with low per-enrollee Medicare spending; temporary improvements to the low-volume hospital adjustment; protections for hospitals in frontier states; adopting national budget neutrality in hospital wage index rural and imputed floor calculations; extending the Medicare Dependent Hospital program through Oct. 1, 2012; critical-access hospital reimbursement; the expansion of the Rural Community Hospital Demonstration Program; additional payments for new medical services and technology; graduate medical education payments; provider/supplier agreement effective dates; certified registered nurse anesthetist reimbursement; and which provider taxes may be allowable costs.

The FY 2011 rates take effect for IPPS hospitals with discharges on or after Oct. 1, 2010. The final rule also updates rate-of-increase limits for IPPS-excluded hospitals that are paid on a reasonable cost basis. Those new limits will be effective for cost reporting periods beginning on or after Oct. 1.

To learn more:
- access the final rule and associated tables and data files here
- read the AHA press release
- read this Healthcare Financial Management Association post
- read this CMS press release
- read this CMS fact sheet on payment and policy changes
- read this CMS fact sheet on the expansion of the quality measures
- read this CMS fact sheet on the coding offset

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