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CMS IPPS Policy Detailed

Doreen V. Bentley, August 3, 2010

On July 30, CMS issued the inpatient prospective payment system (IPPS) final rule to update policies and rates for fiscal year (FY) 2011, which maintains long-standing CMS policy and implements some provisions of the Patient Protection and Affordable Care Act (PPACA).

CMS updated acute care hospital rates by 2.35%. This update reflects a market basket increase of 2.6% for inflation, which is a slight increase over the FY 2010 inflation rate. The final rule reduces the 2.6% inflation update by 0.25%, as required by PPACA.

CMS finalizes 2.9% DCA to offset overpayments

Despite strong opposition from the hospital community, CMS also finalized its proposed documentation and coding adjustment (DCA) of -2.9% to offset overpayments that resulted from documentation and coding practices under the new Medicare severity DRG (MS-DRG) system that in their opinion, did not reflect actual increases in patient severity. CMS states in the final rule:

Under legislation passed in 2007, CMS is required to recoup the entire amount of FY 2008 and 2009 excess spending due to changes in hospital coding practices no later than FY 2012. CMS has determined that a -5.8% adjustment is necessary to recoup these overpayments. The -2.9% adjustment for FY 2011 is one-half of this amount.

But many in the provider community argued that the increased payments were actually a product of faulty calculations by CMS and, indeed, the severity of illness of the patients did increase.

“The truth is that the overpayment of hospitals is really related to inappropriate definitions of codes and inappropriate advice on how to use and sequence ICD-9 codes for DRG assignments. This has led to a massive maximization of DRGs with MCCs [major complications and comorbidities] at the expense of the DRGs that really reflected what was wrong with the patient,” says Robert S. Gold, MD, CEO of DCBA Inc., in Atlanta.

As recently as last week, in a letter to CMS, the American Hospital Association (AHA), the Federation of American Hospitals, and the Association of American Medical Colleges cited two independent studies that underscore their concerns about CMS’ methodology for determining the effect changes in documentation and coding have had on the Medicare patient case mix index.

“Obviously, I am saddened by the enormity of the documentation and coding adjustment, however CMS has been forthright with their promise to implement this, even though I do not agree with their methodology,” says James S. Kennedy, MD, CCS, managing director at FTI Healthcare in Atlanta.

The American Hospital Association expressed its disappointment with the finalized DCA in Friday’s AHA News Now daily report.

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