The Centers for Medicare & Medicaid Services has issued its proposed update for Medicare payment policies and rates for hospitals in fiscal year 2012, and as always, its not great news for providers.
While CMS is emphasizing the quality reporting measures tied to reimbursement in the update, what the proposed rule ultimately offers is more payment cuts for hospitals.
The rule updates rates for acute care hospitals paid under the Inpatient Prospective Payment System (IPPS), as well as hospitals paid under the Long Term Care Hospital Prospective Payment System (LTCH PPS). It includes an initial market-basket update of 2.8 percent for those hospitals that submit data on quality measures, while hospitals not submitting data would receive a 0.8 percent update.
The emphasis on quality measures falls in line with the laudable attempt to decrease preventable complications and reduce hospital readmissions.
CMS proposes measures for rates of readmissions for three conditions – acute myocardial infarction, heart failure, and pneumonia and suggests a methodology that would be used to calculate excess readmission rates for the program. The payment adjustments will apply to hospital payments in FY 2013, beginning with discharges on or after Oct. 1, 2012.
The proposed rule also lays the groundwork for a quality-reporting program for long-term care facilities by proposing a measure set for reporting in FY 2013, for payment determination in FY 2014.
The hospital industry has been generally supportive of quality reporting, and also praised the 1.1 percent increase to IPPS rates that restores prior rural floor budget neutrality adjustments.
However, the proposed rule makes a productivity cut of 1.2 percent and an additional market basket cut of 0.1 percent as mandated by the Patient Protection and Affordable Care Act of 2010. The rule also proposes a 3.15 percent payment reduction to eliminate the effect of coding or classification changes the agency says do not reflect real changes in case-mix.
The American Hospital Association has pointed out that this cut represents more than $3 billion, and CMS admits that Medicare operating payments to acute care hospitals for discharges occurring in FY 2012 would decrease by a projected $498 million in FY 2012, relative to FY 2011.
The AHA notes that, when coupled with other policy changes, the average decrease in payments would be 0.55 percent.
Blair Childs, senior vice president of Public Affairs at the Premier healthcare alliance,says CMS’ methodology for determining the coding reduction is flawed. Like most of the hospital industry, Premier contends that a significant portion of the payments CMS attributes to changes in documentation and coding are actually due to hospitals’ treatment of more complex and severely ill patients.
Childs says that, when hospitals are “making large investments in accountable care and health information technology, now is not the time to take such a large percentage of income away.”
We agree, and as Medicare reimbursement rates already do not cover the cost of hospital services, additional cuts in the immediate wake of a deep recession aren’t going to help the industry climb out.
Richard Pizzi can be contacted at Richard.pizzi@medtechmedia.com