CMS expects inpatient outlays to fall by nearly $500 million

Updated with comment from the Federation of American Hospitals

In a proposed rule (PDF) issued late Tuesday afternoon, the CMS said it expects Medicare operating payments to acute-care hospitals for inpatient services in 2012 to decrease by about $498 million, or about 0.5%, compared with 2011, while its payments to long-term acute-care hospitals are projected to increase by 1.9%, or about $95 million.

The agency's guidance applies to about 3,400 acute-care hospitals and about 420 LTAC hospitals for discharges that will occur on or after Oct. 1. Under the proposed rule, hospitals would see a 1.5% update, which would be increased by 1.1% in response to the legal decision in Cape Cod vs. Sebelius, but then reduced by 3.15% for a documentation and coding adjustment.

According to the rule, plaintiff hospitals in the Cape Cod case challenged the rural-floor budget neutrality for fiscal 2007 and 2008, and the District of Columbia District Court found that the Balanced Budget Act of 1997 would not permit the CMS to ignore prior-year errors in calculating these adjustments. Earlier this month, the American Hospital Association sent a letter (PDF) to CMS Administrator Dr. Donald Berwick that outlined the association's concerns about this provision.

“While Cape Cod involved only FYs 2007 and 2008, the decision may have implications for FY 2012 payment rates,” the CMS said in the rule, which totaled more than 1,000 pages.

The rule also recommends expanding the list of measures that the CMS has proposed to adopt for the fiscal 2014 hospital value-based purchasing program, and proposes to adopt a Medicare spending-per-beneficiary measure for that program. And the rule outlines a series of changes to improve the Hospital Inpatient Quality Reporting program System, or IQR.

“Specifically, CMS is proposing to align the deadlines for submitting different types of data, and to reduce the time in which hospitals must submit requested records as part of the validation process in order to improve the accuracy of that process,” the agency said in a summary of the rule, adding that it also proposes to allow quality improvement organizations to speed up medical record requests for cases involving “serious reportable events” or other circumstances that had been identified during the course of a QIO review.

Meanwhile, the agency highlighted select quality measures for LTAC hospitals, based on an Affordable Care Act requirement to establish a new quality program for hospitals paid under the LTAC proposed payment system. The law requires the CMS to apply a 2% reduction, starting in fiscal 2014, to the annual payment update for those LTAC hospitals that fail to successfully report quality data to the HHS secretary. The rule outlined a host of measures for possible inclusion in this program that included healthcare acquired conditions reporting for ventilator-associated pneumonia, surgical-site infection rate, and multidrug-resistant organism infection. Another area for this program relates to National Quality Forum-endorsed, nursing-sensitive care measures, such as patient fall rate, falls with injury and pressure ulcer prevalence.

The AHA issued a statement expressing its disappointment with the CMS guidance for acute-care hospitals, especially in regard to the adjustment for coding.

“We remain concerned that CMS continues to move forward with the proposed ‘coding offset,' which is excessive and wrongly assumes spending on inpatient hospital care has increased solely due to changes in coding,” AHA President and CEO Richard Umbdenstock said in the statement. “Independent research confirms that CMS' methodology does not recognize that hospitals are caring for patients who are older and sicker.”

Chip Kahn, president and CEO of the Federation of American Hospitals echoed that sentiment in a written statement, calling the CMS proposal to impose an additional $3 billion coding and documentation cut to fiscal 2012 Medicare hospital payments "deeply disturbing."

The CMS will accept public comments on the proposed rule until June 20 and expects to issue a final rule by Aug. 1.