Medicare Rule on Hospital Pay Wants
Charges Public, Emphasis on Better Care
Rule updates Medicare payment
policies and rates for inpatient stays at general acute care, long-term
4, 2014 – A final rule that updates Medicare payment policies and rates
for inpatient stays at general acute and long-term care hospitals (LTCHs)
for FY 2015 was issued today. The provision that will grab the attention
of seniors supports price transparency by emphasizing the Obamacare
requirement that hospitals most make their charges available to patients
and the public. Hospital administrators may pay more attention, however,
to mandated improvements in the quality of care that limit payment for
hospital acquired conditions (HACs) and readmissions.
The rule, which updates Medicare
payment policies and rates for inpatient stays at general acute care and
long-term care hospitals (LTCHs) for fiscal year (FY) 2015, builds on
the administration’s efforts for better hospital patient outcomes and
slowing the long-term health care cost growth, according to the
announcement by the Centers for Medicare & Medicaid Services (CMS)..
“Today’s policies further support
our efforts to continue improving the care our Medicare beneficiaries
receive while also cutting the growth of Medicare costs,” said CMS
Administrator Marilyn Tavenner. “This final rule builds on our recent
efforts to improve hospital performance while giving hospitals the
clarity and resources they need to deliver the best possible patient
CMS announced that the payment rate
update to general acute care hospitals will be 1.4 percent in FY 2015.
The rate update for long term care hospitals will be 0.9 percent. The
difference in the update is accounted for by different statutory and
regulatory provisions that apply to each system.
The final rule also summarizes
ideas received from stakeholders on an alternative payment methodology
for short stay inpatient cases that also may be treated on an outpatient
Improving Patient Care
Hospital Value-Based Purchasing
Program. The Hospital Value-Based Purchasing
(VBP) Program, which was established by the Affordable Care Act, adjusts
payments to hospitals under the IPPS based on the quality of care they
furnish to patients. For FY 2015, as directed by the law, CMS is
increasing the applicable percent reduction, the portion of Medicare
payments available to fund the value-based incentive payments under the
program, to 1.5 percent of the base operating DRG payment amounts to all
participating hospitals. CMS estimates that the total amount available
for value-based incentive payments in FY 2015 will be approximately $1.4
Hospital Readmissions Reduction
Program. The maximum reduction in payments
under the Hospital Readmissions Reduction program will increase from 2
to 3 percent as required by law. For FY 2015, CMS will assess
hospitals’ readmissions penalties using five readmissions measures
endorsed by the National Quality Forum. CMS estimates that hospital
readmissions in Medicare declined by a total of 150,000 from January
2012 through December 2013.
Hospital Acquired Condition
Reduction Program. CMS is implementing the
Affordable Care Act’s Hospital Acquired Condition Reduction Program.
Beginning in FY 2015, hospitals scoring in the top quartile for the
rate of HACs (i.e. those with the poorest performance) will have their
Medicare inpatient payments reduced by one percent. This new program
builds on the progress in this area achieved through the existing HAC
program, which is currently saving approximately $30 million annually by
not providing additional Medicare payment for treatment of certain
conditions that are reasonably preventable when those conditions are
acquired after the beneficiary has been admitted to the hospital for a
Quality Reporting Programs.
The rule’s changes to Medicare quality incentive programs will continue
to encourage high quality care while decreasing the time and effort it
takes for providers to report the information. It will also align
certain reporting requirements in both the Electronic Health Record (EHR)
Incentive Program and the Hospital Inpatient Quality Reporting (IQR)
Program. The final rule revises measures for the Hospital Inpatient
Quality Reporting, LTCH Quality Reporting and PPS-Exempt Cancer Hospital
Quality Reporting Programs.
Wage Index - Updated Labor
Market Areas. The law requires that
Medicare adjust its inpatient hospital payment for area differences in
the cost of labor—an adjustment known as the wage index. CMS is
revising the labor market areas used for the wage index based on the
most recent Office of Management and Budget (OMB) Core-Based Statistical
Area delineations that are based on 2010 Census data.
In order to mitigate potential
negative payment impacts due to the adoption of the new OMB
delineations, CMS is adopting a one-year transition during FY 2015 that
would be based on a 50/50 blend of the former wage index and the new
wage index. The new wage index will take effect in full in FY 2016.
This will be for all hospitals that
would experience a decrease in their wage index exclusively due to the
implementation of the new OMB delineations, and a three-year transition
for the relatively few hospitals currently located in an urban county
that would become rural under the new OMB delineations.
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