Medicare: CMS starts to spell out PPACA impact on hospital pay

The Centers for Medicare and Medicaid Services (CMS) is beginning to put the financial impact of the Patient Protection and Affordable Care Act and its related Reconciliation Act (collectively the PPACA) into quantifiable terms for Medicare-participating hospitals. The agency has issued two documents that implement many (but not all) of the PPACA mandates: (1) a supplemental proposed payment rule for the inpatient prospective payment system (IPPS) and the long-term acute-care (LTAC) PPS for fiscal year (FY) 2011 beginning Oct. 1, 2010; and (2) a notice containing the final wage indices, hospital reclassifications, market basket updates, payment rates and other key data for FY 2010, which are being used to pay hospitals for discharges on or after April 1, 2010, in accordance with the PPACA.

In the bad news category, everyone knew that the PPACA would reduce the FY 2011 annual update, but it somehow seems more real in black-and-white print. The original FY 2011 proposed rule set the estimated market basket update at 2.4 percent for both IPPS and LTAC PPS hospitals. While they could change again in the final rule, the supplemental proposed rule revises the IPPS annual update to 2.15 percent and the LTAC PPS market basket update to 1.9 percent. Remember: Documentation and coding adjustments will still be applied. In the original proposed rule, CMS had projected an aggregate payment decrease of $142 million for IPPS hospitals and an aggregate payment increase of $41 million for LTAC PPS hospitals. With the supplemental rule, the IPPS decrease balloons to $820 million, and the LTAC PPS increase drops to $13 million.

Here is a taste of some positive PPACA highlights that CMS tackles:

  • Frontier state wage index protections. Effective with FY 2011, hospitals in frontier states must be provided with a wage index of 1.0 or higher. Based on current U.S. Census annual population estimates, 51 IPPS hospitals in Montana, Nevada, North Dakota, South Dakota and Wyoming would qualify for the protection, which also would apply to the wage index for hospital outpatient services. 
  • Additional payments for hospitals with low per-enrollee Medicare spending. The PPACA provides $400 million in these additional payments for FYs 2011 and 2012 for qualifying hospitals located in counties that are in the lowest quartile of per-enrollee Medicare spending. In the supplemental rule, CMS proposes a methodology for determining which hospitals qualify and how much additional money each hospital should expect to receive.
  • Temporary expanded eligibility for the low-volume hospital adjustment. The PPACA reduces eligibility requirements for FYs 2011 and 2012 to hospitals within 15 miles of other hospitals and fewer than 1,600 discharges of Part A beneficiaries. CMS proposes adopting a linear sliding payment scale to determine the payment add-on these hospitals receive, ranging from 25 percent for hospitals with 200 or fewer Medicare discharges to 1.6667 percent for hospitals with 1,501 to 1,599 Medicare discharges.

Both the supplemental proposed rule and the notice are on display at the Federal Register and will be published on June 2. CMS will accept comments on the supplemental rule until June 21. 

To learn more:
- read the CMS fact sheet
- download the supplemental proposed rule here,  or here when it is published on June 2
- read the notice here, or here when it is published on June 2

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