The Centers for Medicare & Medicaid Services (CMS) today proposed the fiscal year (FY) 2011 policies and payment rates for inpatient services furnished to people with Medicare by both acute care hospitals and long-term care hospitals. The proposals are intended to ensure that Medicare pays appropriately for high quality, efficient and safe inpatient care.

The proposed rule does not address inpatient hospital related provisions of the recently enacted Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively referred to as the Affordable Care Act). CMS expects to provide further information on the implementation of health care reform provisions in these laws that affect FY 2010 and FY 2011 IPPS payments in the near future.

In today's action, CMS is proposing to update acute care hospital rates by 2.4 percent for inflation, a slight increase over the FY 2010 inflation rate, and apply an adjustment of -2.9 percentage points to recoup one-half of the estimated excess spending in FY 2008 and 2009 aggregate payments, due to changes in hospital coding practices that did not reflect 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 from changes in hospital coding practices by FY 2012. CMS estimates that payments to general acute care hospitals under the proposed rule for operating expenses in FY 2011 will decline by 0.1 percent, or $142 million, compared with FY 2010, and taking into account all factors that would affect spending.

CMS is similarly proposing to update long-term care hospital (LTCH) rates by 2.4 percent for inflation and apply an adjustment of -2.5 percentage points 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. Based on these two proposed provisions and other proposed changes, CMS estimates that payments to LTCHs would increase by 0.8 percent or $41 million.

The projected inflation updates for both types of hospitals may be revised in the final rule based on more recent data.

The proposals we are announcing today take a significant step towards improving the accuracy of Medicare payments for inpatient hospital stays, while continuing and expanding payment incentives to hospitals to improve the quality and safety of care they furnish to beneficiaries, said Jonathan Blum, Deputy Administrator and Director for the Center for Medicare.

The proposed rule would apply 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 Long-Term Care Hospital Prospective Payment System (LTCH PPS), beginning with discharges occurring on or after October 1, 2010. Proposed payment rates are based on the most recently available data and may be revised in the final rule to reflect more current data.

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 required reporting in 2009, 96 percent of participating hospitals are receiving the full update this year.

CMS is proposing to add 45 measures to the RHQDAPU set for reporting in 2011. However, only 10 of the proposed measures including rates of occurrence for eight 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 35 measures ‑ many of which CMS is proposing to be reported through registries ‑ would be considered in determining the hospital's FY 2013 update, and hospitals would not be required to report all of the proposed registry-based measures. The proposed use of registries would prevent hospitals from having to report the same data twice. In addition, CMS is proposing to retire one existing measure for reporting ‑ mortality for selected surgical procedures (composite).

The proposed rule was placed on display at the Federal Register today, and can be found under Special Filings at:

CMS will accept comments on this proposed rule until June 18, and will respond to them in a final rule to be issued by August 1, 2010.

For more information, please see:

Note: More information about the proposed rule, including the documentation and coding adjustment and the RHQDAPU changes and HACs discussion, can be found in Fact Sheets on our Web page at:

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