Corporate Compliance

Note from the Instructor: Multiple Final Rules Result in Payment Increase to Most Providers except General Acute Care Hospitals

Medicare Insider, August 12, 2014

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This week’s note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, CPC, regulatory specialist for HCPro.  
This week, CMS published a number of final rules in the Federal Register for various hospital and other payment systems. They published rules for general acute care hospitals, long term acute care hospitals (LTACH), inpatient psychiatric facilities (IPF) and inpatient rehabilitation facilities (IRF). In addition, the hospice and skilled nursing facility final rules were also published this week. Overall, most provider types included in these rules will see a payment increase in FY 2015, not only to operating rates, but also to their overall payments to their industries. 
The IRFs will see an overall increase of $180 million attributable to a 2.2% update in their operating rates. The IPFs will see an overall increase of $120 million attributable to a 2.1% update in their operating rates including to the Federal Per Diem Base Rate and rates for Electroconvulsive Therapy (ECT). In the final rules, there was also information on the ICD-9 to ICD-10 transition for both these payment systems. For IRFs, there was information on General Equivalency Mapping for conditions affecting the inpatient grouper (e.g. comorbidities) and presumptive compliance rules. For IPFs, CMS discussed the elimination of 156 non-specified conditions for comorbidity adjustments.
The LTACH industry will see an increase of $62 million with an update of 2.2% in their operating rates. The SNF industry will also see an increase of $750 million resulting from a 2.0% update to their operating rates and hospice will see an increase of $230 million resulting from a 2.1% update to their operating rates.
The exception to the overall growth in payment rates for FY 2015 is general acute care hospitals paid under the IPPS system. Although they will see a 1.4% update to their payment rates, overall CMS projects that payments will decrease by $756 million. The IPPS will also see a change in how the Inpatient Quality Reporting (IQR) adjustment is applied to the standardized amounts and the addition of a reduction to the standardized amount for non-compliance with Electronic Health Record (EHR) requirements. Failure to meet each of these will result in a .25% reduction in the market basket update for these hospitals, which could total ½ the total market basket update they would otherwise be entitled.
Other quality adjustments include the new Hospital Acquired Condition (HAC) reduction program which will result in a 1% reduction for hospitals with the highest rate of HACs (highest quartile) compared to other hospitals. The Hospital Readmission Reduction Program penalty will increase to a maximum of 3% for FY 2015 and chronic obstructive pulmonary disease and hip/knee arthroplasty will be added to the list of monitored conditions this year. Coronary artery bypass graft procedures to be added to that list in 2017. The pool for the Value Based Purchasing program, in which hospitals can be rewarded or penalized for meeting certain quality based measures, will increase to 1.5% this year as well.
Also affecting rates for FY 2015 is the change to the Labor Markets that CMS uses to establish wage indices. CMS is implementing changes in labor markets based on Office of Budget and Management labor areas from 2010 census data. This will result in a decrease in the wage index for some hospitals and skilled nursing facilities. For those providers negatively affected, CMS is implementing a one year 50/50 blend of the wage index calculated under the old labor market areas and the new areas. A very few hospitals were moved from urban designation to rural, resulting in a lower wage index. These hospitals will have a three year transition period to the new wage indices. Additionally, for critical access hospitals (CAH) located in formerly rural areas that are now designated urban, they will have a two year transition period to apply to be reclassified to retain their CAH status.

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