Healthcare Business News

Proposed Medicare rule would mean less money for many hospitals

By Paul Demko
Posted: April 30, 2014 - 8:45 pm ET

Medicare payments for inpatient treatment at acute-care hospitals will decrease by $241 million in fiscal 2015 under a proposed rule issued by the CMS on Wednesday. The proposed change would affect roughly 3,400 hospitals nationwide.

In addition, the CMS proposes increasing Medicare payments to long-term-care hospitals by 0.8% in 2015, a bump of $44 million. The change in payment methodology would affect 435 facilities.

The proposals were part of a wide-ranging, 1,600-plus-page proposed rule issued by the CMS outlining Medicare payment and policy changes for hospitals in 2015. The policies would be effective Oct. 1.

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In response to the hostile response from healthcare providers to the so-called two-midnight rule, the agency asks for suggestions from healthcare providers on ways Medicare might approach reimbursement for short hospital stays. The American Hospital Association is suing the CMS over the policy, which indicates that most hospital visits that don't span two midnights should be billed as outpatient observation care.

Under the proposed payment rule, hospitals that successfully participate in Medicare's quality reporting system and meet the criteria for the meaningful use of health information technology will see a payment bump of 1.3%. However, because of the penalties meted out to the hospitals that don't, the CMS is projecting an overall reduction in payments.

The regulations would also update the key quality programs established under the Patient Protection and Affordable Care Act.

For instance, it proposes reducing Medicare payments by 1% to hospitals that have the highest number of patients who acquire infections or other adverse medical conditions while receiving treatment at those facilities.

Financial penalties will increase for hospitals with high readmission rates. Those penalties were capped at 1% of Medicare payments in fiscal 2013 and 2% in the current fiscal year. The maximum fine for 2015 will rise to 3% of Medicare payments.

“Today's proposal implements a number of statutory requirements that would put further stress on vital care for seniors,” AHA Executive Vice President Richard Pollack said in a statement. “Hospitals are undergoing an unprecedented amount of change. At the same time, they are struggling to manage reduced payments for hospital services that patients and communities depend on.”

In addition, the CMS proposal further prods hospitals to comply with a provision of the ACA that requires payment policies be made readily available to the public. “We encourage hospitals to undertake efforts to engage in consumer-friendly communication of their charges to help patients understand what their potential financial liability might be for services they obtain at the hospital, and to enable patients to compare charges for similar services across hospitals,” reads a fact sheet issued by the agency about the proposed rule.

The draft regulations also delay the healthcare reform law's payment reductions to hospitals that serve a disproportionate share of low-income patients. Congress called for the delay in legislation enacted in April that staved off a cut to physician reimbursement under Medicare's sustainable growth-rate formula.

Comments to the proposed rule are due by June 30. A final rule will be issued by Aug. 1.

Follow Paul Demko on Twitter: @MHpdemko

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