Rural and critical-access hospitals were among the biggest winners last week when the CMS issued final inpatient regulations for 2005 that set Medicare rates for the coming year and dole out money from last year's Medicare reform law.
Officially, payments to hospitals that reported quality data to the CMS by Aug. 1 will increase 3.3% next year; hospitals that did not submit data will receive a 2.9% increase. The rate changes implement a provision of the Medicare law that ties a full inflationary pay increase to hospitals' participation in the voluntary quality-reporting initiative.
"For the first time, Medicare is paying hospitals for performance and it is working," CMS Administrator Mark McClellan told reporters last week. Taken in its entirety, the inpatient regulation will increase payments to urban hospitals by an average of 5.7% in 2005. Rural hospitals will see an average 6.2% bump, McClellan said.
In fiscal 2005, Medicare payments to 3,900 acute-care hospitals will reach approximately $105 billion, up from $100 billion this year, according to the CMS. Next year is the first during which rural hospitals will begin receiving some
$25 billion set aside in the Medicare reform law to boost their payments over the next 10 years.
Under the regulation, effective Oct. 1, critical-access hospitals-which are reimbursed at 100% of costs instead of under a prospective payment system-will be allowed to designate up to 25 beds for acute or post-acute care. In a change from current policy, critical-access facilities, which serve mostly remote areas, will be able to set aside up to 10 beds for psychiatric and rehabilitation services and not have them counted against the overall 25-bed limit.
The final inpatient regulation also lowers the threshold required to qualify for Medicare outlier payments, which help hospitals offset the cost of the most expensive cases. In 2005, the threshold will be set at $25,800, down from the $31,000 in place now and the threshold of $35,085 that had been proposed in earlier versions of the regulations but were opposed by providers.
Tenet Healthcare Corp., which is facing a federal investigation into its outlier billing practices, expects no more than a "moderate impact on reimbursements" from the new threshold, a company spokesman said.