Corporate Compliance

Note: Proposed FY 2010 IPPS Rule - An overview

Medicare Insider, May 5, 2009

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Editor’s note: Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc., is the author of this week’s note from the instructor.

On Friday May 1, CMS released the proposed inpatient prospective payment system (IPPS) rule for FY 2010.  Hospitals, including long-term-care hospitals (LTCs) and certain other non-IPPS hospitals (e.g., CAHs), are encouraged to review the proposed rule and to provide written comments to CMS by 5:00 p.m. E.S.T. on June 30, 2009. 

The following is a brief summary of key proposals:

Continuing emphasis on quality improvement and quality-based purchasing of inpatient hospital services. In FY 2009, IPPS hospitals are subject to 43 quality reporting measures in order to be eligible to receive the full hospital market basket update in FY 2010.  Failure to do so would result in an annual update that is 2 percentage points less than the full update.  CMS is proposing to add the following 4 additional quality reporting measures in order for hospitals to receive the full update in FY 2011:

  • SCIP Infection 9
  • SCIP Infection 10
  • Participation in a Systematic Clinical Database Registry: Nursing Sensitive Care
  • Participation in a Systematic Clinical Database Registry: Stroke Care

CMS is not planning to add any hospital-acquired-conditions (HACs) in FY 2010.  In FY 2009, there are 10 HACs in effect.  All of the current HACs rise to the level of CCs, or MCCs, which are secondary diagnoses that require additional hospital resources to treat.  Ordinarily, the presence of these additional diagnoses would result in higher-paying MS-DRG assignment to cover the additional resources necessary.  However, when acquired during an inpatient stay, the presence of the HACs is ignored for purposes of MS-DRG assignment.  In other words, CMS does not want to reward hospitals for making patients sick.

Payment factor updates. CMS is proposing an operating full market basket update for FY 2010 of 2.1%.  Unfortunately, at the same time, CMS is also proposing to reduce payment rates by a documentation and coding adjustment of 1.9%.   The documentation and coding adjustment is designed to ensure that Medicare spending for inpatient stays in these hospitals does not increase or decrease as a result of changes in hospitals’ coding practices following adoption of the MS-DRG system in FY 2008.  However, CMS is requesting public comment on whether to make a different adjustment than the one proposed.  There is a cumulative documentation and coding adjustment of -1.5%  (-.6% for FY 2008 and -.9% for FY 2009) currently in effect for FY 2009.  Because Medicare spending for inpatient days was higher in FY 2008 than the initial projections (including the FY 2008 -.6% adjustment), additional adjustments will be necessary, but Medicare has decided to defer them until FYs 2011 and beyond.

For FY 2010, CMS is also proposing to increase the IPPS outlier threshold from the current $20,045 to $24,240, and to decrease the labor-related portion of the operating standardized amount from the current 69.7% to 67.1%.  The latter change would reduce the upward wage-index adjustment for hospitals with a wage index greater than 1. 

For purposes of determining the disproportionate share hospital (DSH) adjustment, CMS is proposing some changes in the calculation of patient days.  Labor and delivery bed days are to be included, but observation bed days, are to be excluded.  Observation days are also to be excluded for purposes of calculating the operating indirect medical education (IME) adjustment.  As directed by the American Recovery and Reinvestment Act of 2009 (ARRA), CMS is also proposing to revise the regulations to provide for the full capital IME adjustment in FY 2009, rather than the formerly approved 50% reduction, as part of the phasing out of the capital IME adjustment.  The ARRA, however, does not affect the phase-out approved for FY 2010 and subsequent years.

This is just a brief summary of key proposed changes.  Hospitals are encouraged to carefully review the proposed FY 2010 IPPS Rule, to consider the implications for hospital operations, and to provide relevant comments, supported by appropriate documentation, to CMS for consideration in the final rulemaking process.

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