Revenue Cycle

CMS issues final proposed rule for 2005 inpatient payment increases

Patient Financial Services Weekly Advisor, May 14, 2004

Acute-care hospitals, with a focus on rural facilities, are the target of CMS' latest announcement on inpatient payment increases and other payment-policy changes for 2005.

CMS announced its final proposed rule May 12 during a telephone press conference.

According to CMS Administrator Mark B. McClellan, MD, PhD, important provisions in the Medicare Prescription Drug Improvement and Modernization Act of 2003 led CMS to implement new steps to improve quality of care and provide additional relief to rural hospitals.

The rule encompasses a wide variety of changes, including

1. Updating the labor markets that are used to determine hospital payment rates in fee-for-service, resulting in an increase in payment.

  • It translates into a 4.7% increase in payments for urban areas; 6% increase for rural areas
  • Medicare payments to approximately 3,900 acute-care hospitals under the inpatient prospective payment system (IPPS) are projected to be $105 billion in 2005, up from a projected $100 billion in fiscal year 2004

    2. Increasing the number of payment improvements, based on a fair market value update for hospitals. CMS will look at 10 proven quality indicators as payment incentives. Hospitals must provide better information about their services to show improved care, McClellan said. "We're linking payment with quality."

    3. Changes in wage index that reflect rural, remote hospitals that have a lower number of Medicare discharges.

    4. Increasing payments for certain new medical technologies.

    5. Provisions for ownership of a hospital-within-a-hospital.

    To read the release, which includes a link to the final proposed rule, click here.

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