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From Health Law Daily, March 17, 2014

Application of low-volume and Medicare dependent hospital adjustment extensions

By Jay Nawrocki, MA

CMS has released an advance copy of an Interim final rule detailing the extension of the payment adjustments for low-volume hospitals and for the Medicare Dependent Hospital (MDH) program for the first six months of Fiscal Year (FY) 2014 for hospitals paid under the Inpatient Prospective Payment System as authorized by sections 1105 and 1106 of the Pathway for SGR Reform Act of 2013 contained in the Bipartisan Budget Act of 2013 (P.L. 113-67). These adjustments apply for discharges from October 1, 2013 through March 31, 2014. Beginning with discharges on April 1, 2014, the adjustment to the payment for low-volume hospitals will revert to the payment amounts in statute prior to the adoption of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148 and 111-152) and the prior definition to low-volume hospital. CMS estimates that these two extensions will provide an additional $227 million to hospitals in FY 2014.

Low-volume adjustment. The ACA expanded the definition of low-volume hospitals and changed the methodology for determining whether a hospital met that definition for FY 2011 and FY 2012. The American Taxpayers Relief Act of 2012 (ATRA) (P.L. 112-240) applied the ACA changes for one additional year, FY 2013. During this time period a hospital qualified for the low-volume adjustment if it was more than 15 road miles from another hospital and had less than 1,600 discharges. Hospitals that met this definition were paid an adjustment ranging from an additional 25 percent for hospitals with 200 or less Medicare discharges to no adjustment for hospitals with 1,600 Medicare discharges. The Pathway to SGR Reform Act extended this definition for another six months or until March 31, 2014.

Hospitals that qualified for the low-volume payment adjustment for FY 2013 will need to do nothing to receive the adjustment for the first six months of FY 2014. Hospitals that wish to receive this adjustment for the first time in FY 2014 must notify their Medicare Administrative Contractor (MAC) that it meets the definition before March 31, 2014. CMS has compiled a list of all hospitals with discharges of 1,600 or less. The hospital needs to provide proof to its MAC by using Google Maps or some other computer software mapping program that it is greater than 15 road miles away from the nearest hospital.

The requirements for a hospital to be eligible for a low-volume adjustment for discharges after April 1, 2014, are that the hospital (1) be more than 25 road miles away from the nearest hospital and (2) that it has less than 200 discharges. This is the definition in use before the ACA changes. In addition the adjustment amount will also revert to what it was prior to the ACA changes.

The MDH adjustment. The ACA and the ATRA also extended the adjustment under the MDH program through FY 2013. Hospitals that qualified for the MDH program in FY 2013 will continue to receive this adjustment unless they took advantage of the opportunity to reclassify as a sole community hospital (SCH) as the end of FY 2013. A hospital that did reclassify as a SCH will have to cancel  that status in accordance with 42 C.F.R. sec. 412.92(b)(4) and reapply for the MDH program by March 31, 2014, as a hospital cannot be both in the MDH program and a SCH according to Soc. Sec. Act sec. 1886 (d)(5)(G)(iv)(III). In addition hospitals that cancelled their reclassification from an urban area to a rural area in order to qualify for the MDH adjustment will have to reapply to be reclassified to a rural area. CMS doubts that there is sufficient time in either case for a hospital to cancel its SCH status or be reclassified into a rural area by the application deadline of March 31, 2014.

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