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From Health Law Daily, August 5, 2013

Hospitals will see an increase in IPPS and LTCH payments in FY 2014 but may see lower DSH payments as a result of ACA adjustments

By Jay Nawrocki, MA

An additional $1.2 billion will be paid to hospitals under the Inpatient Prospective Payment System (IPPS) for services provided during fiscal year (FY) 2014 which starts on October 1, 2013, according to a final rule released August 2. An additional $72 million will be paid to the approximately 440 hospitals that receive payment under the Long-Term Care Hospital Prospective Payment System (LTCH PPS) for services provided during FY 2014. This is a 0.7 percent increase in IPPS payments and a 1.3 percent increase for LTCH PPS payments. The Final rule also implements the first reduction in payments to disproportionate share hospitals (DSH) enacted in the Affordable Care Act (ACA) (P.L. 111-148 and 111-152) as a result of a decline in the number of uninsured, and explains how the reduction in payment program also required by the ACA to begin in FY 2015 for hospital-acquired conditions (HAC) will work. The Final rule also clarifies when payments under IPPS begin, to address concerns that beneficiaries are spending too much time as outpatients under an observation status. TheFinal rule will be published in the Federal Register on August 19, 2013.

Inpatient stays defined. If a beneficiary’s stay in a hospital crosses two or more midnights, CMS says it “is presumed to be appropriate that the hospital receive Medicare Part A payment,” according to a CMS Fact Sheet. A physician will need to make a formal order for an inpatient stay if the physician expects a beneficiary’s surgical procedure, diagnostic test or other treatment will require a stay in a hospital over two midnights. Physicians will have to provide documentation in the beneficiary’s medical record that supports their determination for the need of an inpatient stay lasting at least two midnights as medically necessary.

The Final rule adopts the provisions of a Proposed rule from March 18, 2013 that allows hospitals one year from the time of the provision of service to bill Medicare under Part B for services originally billed under Part A but that were later found to be not reasonable or necessary under Part A. This change applies to services that will be provided after October 1, 2013, but CMS Ruling-1455-R which has the same policy will apply to inpatient claims prior to October 1, 2013, that were denied after September 30, 2013. CMS hopes this change in reimbursement policy for observation services will address hospitals’ concerns about reimbursement and beneficiaries’ concerns that they are kept in observation status for long periods of time because hospitals are unsure about how they will be reimbursed.

DSH payment adjustment. The first adjustment to DSH payments as a result of the ACA will occur in FY 2014. In accordance with sec 3133 of the ACA, hospitals in FY 2014 will receive 25 percent of the amount they would have received under the current methodology used to determine their DSH payment. The remaining 75 percent will be determined based on changes in the percentage of individuals that are uninsured. This amount will be calculated based on the hospital’s share of uncompensated care relative to all hospitals that are to receive DSH payments. CMS estimates that this new payment formula will result in a 0.4 percent reduction in the amount of DSH payments made in FY 2014 as compared to FY 2013. CMS will make these new uncompensated care payments through the claims processing system as opposed to the biweekly payments CMS had discussed in the Proposed rule.

Reductions for readmissions. Beginning in October of 2012, hospitals had their payments reduced up to 1 percent if they did not meet 30-day readmission rate standards for heart attack, heart failure and pneumonia. This reduction, as required by law, will be increased to 2 percent during FY 2014. In FY 2015 readmission rates for hip and knee surgery as well as chronic obstructive pulmonary disease will be added to the list of procedures for which readmission reductions will apply.

Expiring LTCH, MDH, and low-volume hospital policies. If a long-term care hospital receives more than 25 percent of its patients from one acute care hospital, all patients above that 25 percent threshold will be paid under IPPS instead of under the LTCH PPS. There was a statutory moratorium on implementing this policy from December 2007 to December 2012 which CMS extended for FY 2013. The moratorium will now expire and the payment policy will go into effect for FY 2014.

The Medicare-Dependent Hospital (MDH) program will expire at the end of the FY 2013, September 30, 2013, and no new MDH payment designations will be made for discharges occurring after October 1, 2014.

CMS will return to the definition of low-volume hospital and payment adjustment that was in place prior to FY 2011 beginning on October 1, 2013. The ACA and American Tax Relief Act of 2012 (P.L. 112-240) provided for different methodology for FY 2011 to FY 2013 which is now expiring.

Market basket changes. The hospital market basket was rebased for FY 2014. The FY 2014 market basket used data from FY 2010 instead of FY 2006 which was previously used. For FY 2014 the hospital market basket increased 2.5 percent. This increase was reduced by (1) 0.5 percent for the multi-factor productivity adjustment as required by the ACA; (2) an additional 0.3 percent also as required by the ACA; (3) a 0.8 percent as required by the ATRA to recoup $11 billion for documentation and coding overpayments for the prior years; and (4) 0.2 percent to adjust for the offset of the effect of the policy on inpatient admissions spanning two midnights. There will be reductions during the next three years as well as the 0.8 reduction this year to recoup $11 billion for the prior year documentation and overpayments as required by the ATRA.

MainStory: TopStory ReimbursementNews IPPSNews LTCHNews

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