On April 30, the Centers for Medicare & Medicaid Services (CMS) released its 1,688-page proposed rule updating federal fiscal year (FY) 2015 payment rates and policies for inpatient stays at general acute care and long-term care hospitals (LTCHs). CMS will accept comments on the proposed rule through June 30. The final rule will be published by August 1.
With respect to rates, CMS projects a 1.3% payment rate update to general acute care hospitals and a 0.8% update to LTCHs.
Significantly, CMS proposes to calculate hospital wage indexes using the most recent labor market area delineations issued by the Office of Management and Budget (OMB) based on 2010 Census data. To mitigate potential negative payment impacts, CMS proposes two transition periods: (1) a one-year transition for any hospital that would have a decrease in its actual payment wage index due to the use of the new OMB delineations, and (2) a three-year transition for hospitals now located in an urban county that would become rural under the new delineations.
Among other things, the proposed rule details CMS’ plans to change MS-DRG classifications and recalibrate relative weights, to revise policy regarding indirect medical education and direct graduate medical education costs, and to reform the calculation of disproportionate share hospital (DSH) payments.
CMS is not proposing any changes to the highly controversial “two-midnight” rule. Instead, the agency is soliciting comments on an alternative payment methodology (APM) for short inpatient hospital stays. Presumably, the APM would reimburse short stays in a new way, rather than trying to categorize them as inpatient admissions or observation care.
On the subject of price transparency, CMS identifies ways in which hospitals can comply with the Affordable Care Act’s requirements to disclose charges for their services online or in response to a specific request.
Most importantly, the proposed rule addresses in significant detail the operations and impact of CMS’ four key programs aimed at improving hospital efficiency and quality of care.
Hospital-Acquired Condition (HAC) Reduction Program. Beginning in FY 2015, hospitals scoring in the top quartile for the rate of HACs (i.e. the poorest performers) will have their Medicare inpatient payments reduced by 1%. This new program expands on existing payment reductions made when certain conditions that are reasonably preventable are acquired in the hospital. The proposed rule explains how scores will be calculated, and thus gives a hospital a roadmap to avoid future penalties.
Hospital Value-Based Purchasing (VBP) Program. The VBP program adjusts hospital payments based on the quality of care they deliver to patients. Hospitals with scores above the mean will receive additional payments while poorly performing hospitals will see reductions; thus, the program is budget-neutral. For FY 2015, CMS estimates $1.4 billion will be reallocated among hospitals based on these scores. A hospital’s VBP score is based on its scores on specified quality measures, patient satisfaction scores, and (new in 2015) an efficiency measure known as the Medicare Spending Per Beneficiary Ratio.
Hospital Readmissions Reduction Program. In FY 2015, hospitals can lose up to 3% of their Medicare inpatient admissions based on their readmission rates. For FY 2015, CMS proposes to assess penalties using five readmissions measures endorsed by the National Quality Forum. CMS estimates that hospital readmissions in Medicare were cut 150,000 between January 2012 and December 2013.
Quality Reporting Programs. CMS intends to revise measures for the Hospital Inpatient Quality Reporting (HIQR), LTCH Quality Reporting, and PPS-Exempt Cancer Hospital Quality Reporting Programs. For 2015 and 2016, CMS proposes to align the reporting and submission timelines for clinical quality measures for the meaningful use program with the reporting and submission timelines of the HIQR.
As we dig deeper into the new proposed rule, we will provide additional updates highlighting key provisions. If your organization has specific questions regarding the impact of specific proposals, please contact the experts listed below at PYA, (800) 270-9629.
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