A midgame rule change from the CMS could mean a no-win situation for long-term-care hospitals, experts said last week in response to announced payment changes for the remainder of 2009 and all of 2010.
LTACs to pay for CMS error
Agency to revise relative weights rule for ’09, ’10
Late on May 29, the CMS said a misapplication in its established methodology of calculating the budget neutrality factor had caused the agency to publish an interim final rule for fiscal 2009 that revises the long-term-care hospital DRG relative weights for payment. As a result, the CMS also revised its proposed rule for fiscal 2010, which begins Oct. 1. According to a CMS official, the mistake was made last August when the CMS valued the relative weights too high as it calculated the budget neutrality factor. Because the proposed rule for 2010 was tied to those relative weights, that rule also had to be amended.
For the long-term acute-care segment, the unexpected rulemaking means a reduction in payment from the CMS for the final four months of fiscal 2009 (June through September) of 3.9%, or $43 million, according to a research note from Gary Lieberman, managing director at Wachovia Capital Markets in New York. For 2010, the industry will see an increase of 2.2%, or about $101 million, vs. the 2.8% increase (or about $129 million) that it had anticipated when the CMS published its proposed rule for fiscal 2010 last year.
Lieberman covers Louisville, Ky.-based Kindred Healthcare, a big player in the LTAC hospital segment that criticized the CMS for what the company sees as punishment to LTAC hospitals for a mistake the agency made.
As we have in the past, we will look for alternatives to mitigate some of the impact of these reimbursement reductions, Paul Diaz, president and CEO of Kindred, said in a statement released on June 1. We also will express our disappointment to CMS and other policymakers about retroactive cuts to payments under a prospective payment system, he added. Healthcare providers rely on rate consistency to plan our operations and make strategic investments in health information technology, staffing and other quality-related areas, and retroactive reductions in reimbursement with no notice in the middle of a rate year undercut those efforts, he added. Kindred said it expects the proposed rules to reduce the companys Medicare revenue to its hospitals by about $17 million for the last seven months of 2009.
From the agencys perspective, it is merely correcting a mistakeand one that actually gave LTAC hospitals a boost for most of fiscal 2009. They were advantaged by being paid more than they should have been paid, said a CMS official, who under CMS policy agreed to be quoted on the condition he not be identified. Next year, they are being paid what they should be paid. They benefited from October 2008 through May 2009. Now were putting them back to where they should have been from there.
A public comment period for the 2009 interim final rule ends on June 29, and for the fiscal 2010 rule on June 30.
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