CMS Proposes Cutting Inpatient Payments by 0.1%

Janice Simmons, April 20, 2010

The Centers for Medicare and Medicaid Services (CMS) issued on Monday a hospital inpatient and long-term care prospective payment system proposed rule for fiscal 2011 that would cut average inpatient payments by 0.1%.

The proposed rule includes an initial market basket update of 2.4% for those hospitals that submit data on quality measures; hospitals not submitting any data would receive a 0.4% update.

However, the rule then also proposes a cut of 2.9% to eliminate the earlier effects of coding or classification changes the agency said do not reflect real changes in case mix or severity of illness. When combined with other policy changes, the average decrease in payments would be 0.1%.

However, the estimate does not include the 0.25% mandated market basket cut that was included in the healthcare reform legislation signed into law last month. When that cut is put into place, average payments will decrease by 0.35%--compared to fiscal 2010 payments, according to the American Hospital Association (AHA).

CMS is also proposing to update long term care hospital rates by 2.4% for inflation and apply an adjustment of 2.5% for the effect of documentation and coding that did not reflect increases in patients' severity of illness. Under the proposed rule, the long-term payments are estimated to increase by 0.8% or $41 million.

AHA said it was not happy with the announcement. "America's hospitals are deeply disappointed with today's proposal. Plain and simple: This policy will undermine hospitals' ability to care for patients and communities across the country," said AHA President and CEO Rich Umbdenstock in a statement Monday.

"We strongly urge CMS to rethink their analysis regarding the coding offset and hope to work with the agency to eliminate these cuts and protect healthcare that patients and communities need and deserve," Umbdenstock, ND, said.

The proposed rule will apply to approximately 3,500 acute care hospitals paid under the Inpatient Prospective Payment System (IPPS), and approximately 420 long term care hospitals paid under the Long Term Care Hospital Prospective Payment System (LTCH PPS), beginning with discharges occurring on or after October 1, 2010. Proposed payment rates are based on the most recently available data, CMS said, and may be revised in the final rule to reflect more current data.

Under the current law, hospitals that successfully report quality measures included in the Reporting Hospital Quality Data for Annual Payment Update program will receive the full update for 2011. Those hospitals that do not participate in the quality reporting program will get the update less two percentage points. Based on the required reporting in 2009, 96% of participating hospitals are receiving the full update this year.

The proposed rule was placed on display at the Federal Register on Monday. CMS will accept comments on this proposed rule until June 18, and will respond to them in a final rule to be issued by August 1.

Blair Childs, senior vice president of public affairs for Premier healthcare alliance, said the alliance supports CMS' "transparency of quality performance through the pay-for-reporting program, and that the agency has taken a gradual approach to implementing additional measures in the FY 2011 IPPS rule."

But the alliance is "extremely concerned by CMS' decision to require hospital quality reporting through registries, which are typically based on proprietary measures provided to hospitals on a fee for service basis. To ensure the integrity of the program, CMS should clarify that in order to become a qualified registry, all measures tied to payment must be transparent and publicly available.

"Without this transparency, CMS risks creating de facto monopolies, requiring hospitals to spend substantial sums to access registries that must be followed in order to qualify for payment. This point becomes even more critical as quality measures form the basis for national payment reforms such as value-based purchasing.

"Further, while we support rate-based measurement of hospital-acquired condition as part of the pay-for-reporting program, these measures may form the basis for payment cuts in FY 2013. Thus, we urge CMS to work closely with organizations like Premier to ensure that these measures are scientifically valid and fair."

Janice Simmons Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at
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