Coding adjustment less than expected
WASHINGTON – At the beginning of August, the Centers for Medicare & Medicaid Services issued its final rule updating Medicare inpatient payment policies and rates for hospitals in fiscal year 2012, and some observers were surprised by the results.
In April, CMS had proposed a documentation and coding offset of 3.15 percent in FY 2012, with an additional 0.75 percent reduction in payments to be made in subsequent years. Yet the final rule reduced the 2012 payment reduction to only 2.0 percent, although CMS still intends to reduce the rate by 3.9 percent over a multi-year period.
The final rule updates payment policies and 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 applies to approximately 3,400 acute care hospitals and 420 LTCHs in the United States.
The changes mean that the FY 2012 operating rate will increase by 1.0 percent compared to FY 2011, instead of decreasing by 0.6 percent as originally proposed by CMS.
“CMS has developed its update policy in response to many comments expressing concerns about our original proposal,” said Jonathan Blum, CMS deputy administrator and director for the Center for Medicare. “We believe that our final policy strikes the appropriate balance between providing a fair update to hospitals and ensuring careful stewardship of the Medicare Trust Fund.”
CMS projects that total IPPS payments to acute care hospitals for services in FY 2012 will increase by $1.13 billion over FY 2011. Medicare payments to LTCHs in FY 2012 are projected to increase by $126 million over FY 2011.
The final rule also strengthened the Hospital Inpatient Quality Reporting (IQR) Program, an incentive-based program to reduce preventable hospital readmissions and improve care coordination.
CMS is implementing a Hospital Readmissions Reduction Program that reduces payments beginning in FY 2013 – for discharges on or after Oct. 1, 2012 ‑ to certain hospitals that have excess readmissions for certain selected conditions. The rule also adopts a Medicare spending per beneficiary measure for both the Hospital IQR Program and the new Hospital Inpatient Value-Based Purchasing program required by the Affordable Care Act.
In releasing the final rule, CMS administrator Donald Berwick, MD, said the new quality reporting and value-based purchasing approach were part of a “comprehensive strategy being implemented across Medicare’s payment systems that is intended to reduce overall costs.”
Under the HIQR Program, CMS adopted several new measures for FY 2014 and FY 2015 payment determinations. These changes increase the program’s measure set to 76 measures.
The final rule also set the rate-of-increase percentage for IPPS-excluded hospitals such as cancer and children's hospitals at 3.0 percent.
Blair Childs, senior vice president of Public Affairs at the Premier healthcare alliance, endorsed the reduction of the documentation and coding offset, but nevertheless said the adjustment methodology is flawed.
“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 said. “When this cut is added to a 2.9 percent retrospective adjustment that CMS is retaining to recoup higher payments made in 2009, the agency is in effect reducing hospital reimbursements by approximately $5 billion in fiscal year 2012.”
For more on policy and legislation, see bit.ly/hfn-policy.