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Rate change: CMS payment schedule proposal already drawing fire

By Jessica Zigmond and Rich Daly
Posted: April 26, 2013 - 7:45 pm ET

While the CMS' proposed payment schedule for 2014 includes small increases in Medicare payments for the nation's acute- and long-term care hospitals, it would change reimbursement for facilities serving high numbers of the uninsured in a way that is already drawing fire from public hospitals.

The proposed rule, released late Friday, also launches a new penalty program for hospitals that fail to curb hospital-acquired conditions, a provision mandated by the Patient Protection and Affordable Care Act. The proposed changes to the 30-day readmissions penalty program includes for the first time knee and hip implants and chronic obstructive pulmonary disorder.

“When you start to add up the quality-oriented programs, it's just a lot,” said Erik Johnson, senior vice president at advisory firm Avalere Health.

The overall payment schedule affects all acute-care hospitals, which have until June 25 to respond to the proposed rule. Payments for general acute-care hospitals will rise by 0.8% in 2014, which the agency estimates will increase total payments to these facilities by $27 million. Medicare payments to the nation's long-term care hospitals would increase by 1.1%, or about $62 million in fiscal 2014 compared with 2013.

On the other hand, the proposal would also pay for a one-year freeze in Medicare physician payments as required by the American Taxpayer Relief Act enacted on Jan. 2 by imposing $11 billion in Medicare acute-care hospital payment cuts over the next four years. The rule proposed a 0.8% cut for fiscal 2014, instead of a 9.3% cut necessary to recover the full amount in one year.

The CMS estimates the reduction would recoup $0.96 billion in the first year and about $10.4 billion over the following three years by imposing a succession of 0.8% cuts. “CMS expects to make similar adjustments in FYs 2015, 2016, and 2017 in order to recover the full $11 billion required by the law,” CMS noted in a news release announcing the regulation.

The more than 1,400 pages of proposed regulations apply to about 3,400 general acute-care hospitals and 440 LTAC hospitals starting Oct. 1, 2013.

The proposed rule's changes to Medicare disproportionate share hospital payments for facilities that serve higher numbers of low-income patients would leave about a quarter of the payments untouched. But the remaining three-quarters of the payments would fluctuate depending on hospitals' rates of uninsured.

“Each Medicare DSH will receive its additional amount based on its share of the total amount of uncompensated care for all Medicare DSH hospitals for a given time period,” said the rule. The change is projected to reduce payments overall by 0.9% compared with current Medicare DSH payments.

The National Association of Public Hospitals and Health Systems immediately blasted the Medicare DSH proposal. “The DSH methodology has long been criticized for failing to account for the costs of providing care to uninsured individuals,” said Beth Feldpush, senior vice president for policy and advocacy at NAPH, in a prepared statement. “Rather than taking into account the cost of providing care to the uninsured, CMS has instead continued to rely on the same unsound proxy that ignores uninsured individuals and instead focuses on Medicaid and low-income Medicare patients.”

The proposal also slaps new penalties on hospitals that fail to participate in the Hospital Inpatient Quality Reporting (IQR) program, which is fewer than 1% of all hospitals. They would receive a 2 percentage point reduction in the proposed increase. The hospital IQR program now evaluates 57 quality measures, including heart attack, heart failure and pneumonia, related to healthcare-associated infections, surgery and patient experience, in assessing hospitals' ability to improve quality.

The changes in the quality incentive programs were mandated by Affordable Care Act. The Hospital-Acquired Condition reduction program that starts in 2015 will penalize hospitals that rank among the lowest-performing quartile of hospitals in curbing hospital-acquired conditions by 1% of their total payments. It also proposed adding the two measures—hip and knee arthroplasty and COPD—to the conditions used in calculating readmission penalties, which can be as high as 2% of Medicare reimbursement.

Avalere's Johnson said he was surprised that vascular conditions were not added to the Hospital Readmissions Reduction Program. It's clear that the CMS is taking admission and medical review criteria for inpatient services very seriously, he noted.

In its news release, the CMS said the proposed policy addressed concerns from hospitals that they need more guidance on when a patient is treated and paid by the Medicare program as an inpatient.

“At the same time, the proposed change would help beneficiaries who in recent years have been staying in the hospital longer as outpatients because of the hospital's uncertainty about Medicare payment if they admit the patient to the hospital,” the release said.

Follow Jessica Zigmond on Twitter: @MHjzigmond

Follow Rich Daly on Twitter: @MHrdaly

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