Corporate Compliance

Note from the instructor: CMS releases proposed FY 2015 IPPS payment adjustments, Part I

Medicare Insider, May 20, 2014

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This week’s note from the instructor is written by Judith Kares, JD,regulatory specialist for HCPro.
 
Note from the instructor: CMS releases proposed FY 2015 IPPS payment adjustments, Part I
 
On Thursday of last week, CMS published the proposed Inpatient Prospective Payment System (IPPS) rule for FY 2015 in the Federal Register. For those of you who have not had an opportunity to review the previously released display copy, the proposed FY 2015 IPPS rule (the “Proposed Rule”) can be found at 79 Fed. Reg. 27978–28384. I encourage all of you to take advantage of the opportunity to review it carefully and provide your comments and concerns to CMS by June 30.
 
During this and the next two issues of the Medicare Insider, we are going to review certain proposed adjustments to hospital inpatient reimbursement for inpatient admissions covered under Part A. All three of the adjustments to be discussed are part of CMS’ movement toward “pay for performance,” as part of its overall Hospital Quality Improvement Program. 
 
Two of these adjustments were initially introduced at the beginning of FY 2013 and continue in effect during the present FY. These adjustments arise under the Hospital Readmission Reduction Program (HRRP) and the Hospital Value-Based Purchasing Program (HVBPP). CMS has proposed that these two programs continue for most IPPS hospital discharges during FY 2015, with certain changes. The proposed changes to the HRRP will be the focus of this week’s note, and the proposed changes to the HVBPP will be the focus of next week’s note. The third adjustment will become effective for certain IPPS hospital discharges occurring on and after October 1, 2014 (the beginning of FY 2015) under the yet to be finalized Hospital-Acquired Condition Reduction Program (HACRP). This new program will be the focus of the June 3 edition of the Medicare Insider.
 
On the way to pay for performance
 
Under its overall Hospital Quality Improvement Program, CMS has been moving toward pay for performance for several years, beginning with a (2%) reduction in payment for inpatient services when hospitals fail to meet certain quality indicator reporting requirements. This action was followed by CMS’ decision to deliberately ignore the presence of certain conditions that were not documented as being present at the time of admission for purposes of DRG assignment when these conditions have been identified by CMS as Hospital Acquired Conditions (HAC). CMS has determined HACs would not arise after admission if the hospital were providing an acceptable quality of care. CMS then introduced the HRRP and the HVBPP in FY 2013. 
 
Application of HRRP and HVBPP adjustments to “base operating portion of the DRG payment”
 
For hospitals subject to adjustments under the HRRP and HVBPP, the adjustments are made to what CMS refers to as the “base operating portion of the DRG payment.” This refers to the wage-index and/or COLA-adjusted applicable standardized amount for that hospital, plus any applicable new technology add-on payment. In addition, if applicable, the base operating amount used is based on the acute or post-acute transfer amount.
 
The base operating amount does not include, however, disproportionate share hospital, indirect medical education, or low volume LV hospital adjustments or any applicable inpatient operating outlier payment. In addition, CMS clarified in the FY 2014 IPPS Final Rule that, for purposes of the HRRP adjustment, the base operating amount does not include any otherwise applicable HVBPP adjustment, and vice versa.
 
Basis of HRRP reductions for FYs 2013, 2014, and 2015
 
For discharges during FY 2013 and 2014, the HRRP requires a reduction to most hospitals’ base operating DRG payments to account for excess readmissions of selected applicable conditions—acute myocardial infarction, heart failure, and pneumonia. CMS has proposed the addition of two applicable conditions for FY 2015: chronic obstructive pulmonary disease, and total hip arthroplasty and total knee arthroplasty. CMS does not propose to make any additions in FY 2016, but does plan to add coronary artery bypass graft surgery as a sixth condition for FY 2017. CMS has listed the ICD-9-CM Diagnosis Codes that identify the proposed conditions for FY 2015 in the Proposed Rule. (See 79 Fed. Reg. 28115-28116.)
 
For purposes of the HRRP, a “readmission” is a readmission occurring when a patient is discharged from an applicable hospital (initial index hospitalization) and then admitted to the same or another acute care hospital within 30 days from the date of discharge from the initial hospitalization. Only one readmission during the 30 days following the discharge from the initial hospitalization will count as a readmission for purposes of calculating the excess readmission ratio. In addition, certain readmissions, including planned readmissions, are not counted for these purposes. In the FY 2014 Final Rule, CMS also clarified that an unplanned readmission after a planned readmission within 30 days of an initial index discharge will not be counted as a readmission, nor will certain patients (e.g., those who leave against medical advice and those under 65) be factored into the calculation.
 
Finally, although most short-term, acute care hospitals, particularly those paid under the IPPS, are subject to the HRRP, there are some exceptions. Puerto Rico hospitals are generally exempt, and Maryland waiver hospitals are exempt for services provided during FYs 2013, 2014 and during the duration of CMS’ new Maryland All-Payer Model, a 5-year hospital payment model, pursuant to an agreement entered into effective January 1, 2014. 
 
Determining a hospital’s HRRP adjustment factor and impact on reimbursement to hospitals subject to an HRRP reduction
 
For FY 2014, an applicable hospital’s HRRP adjustment factor is the higher of a hospital-specific ratio or a floor adjustment factor of .98, resulting in a maximum reduction in base operating DRG payments of 2%. For FY 2015, CMS proposes that an applicable hospital’s HRRP adjustment factor will increase to the higher of a hospital-specific ratio or a floor adjustment factor of .97, resulting in a maximum reduction in base operating DRG payments of 3%.
 
For FY 2015, CMS is proposing that the ‘‘applicable period’’ for the HRRP be the 3-year period from July 1, 2010 to June 30, 2013. In other words, CMS is proposing that the excess readmissions ratios and the payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2015 would be calculated based on data from the 3-year time period of July 1, 2010 to June 30, 2013.
 

As noted above, hospitals are encouraged to review these changes in the proposed FY 2015 IPPS rule to determine the potential impact on their operations if CMS were to finalize them.

 



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