Hospital inpatient Medicare payment rates will increase by an average of 0.7% in fiscal 1999 under proposed prospective payment system regulations HCFA issued last week.
The increase will be the first since fiscal 1997. Hospital inpatient reimbursement rates were frozen in fiscal 1998 under last year's balanced-budget law.
The proposed regulations also established the 10 DRGs that will be subject to reduced payment rates if a Medicare beneficiary admitted to a hospital is transferred to a home health or skilled-nursing facility earlier than the average length of stay for one of the diagnoses.
Under the regulations, hospitals will be paid a per diem rate for the days the patient spends in the hospital rather than the entire DRG payment. To account for the fact that the first days of a hospital stay are the most expensive, HCFA will pay twice the per diem rate for the first day of an inpatient stay.
The transfer provision was one of the most controversial provisions for hospitals included in last year's balanced-budget law. The change was proposed as a way to stop hospitals from "double dipping," or receiving a full DRG payment for a diagnosis then transferring the patient early to another facility also reimbursed by Medicare.
Lawmakers originally planned to subject all of the more than 500 DRGs to the same pro-rated payment scheme but settled on 10 after heavy lobbying from the hospital industry. According to HCFA, the 10 DRGs were selected because they had the highest rates of discharge to post-acute facilities.
Other proposed changes to Medicare payment rules would:
Raise Medicare capital payments to hospitals to $377.25 per discharge from $371.51.
Scrap most of a planned change in the wage-index component of the formula used to calculate Medicare hospital payment rates. The change would have reallocated millions of dollars in Medicare payments to hospitals in certain geographic areas at the expense of others (April 20, p. 8).
The proposed regulations are subject to a 60-day comment period and will take effect Oct. 1.