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Final IPPS Rule Elicits Objections from Hospital Groups

 |  By cclark@healthleadersmedia.com  
   August 05, 2013

The Inpatient Prospective Payment System rule establishes controversial terms that distinguish an inpatient admission from "observation" status, for which hospitals receive lower rates of Medicare reimbursement.

Hospital groups are angrily objecting to the final Inpatient Prospective Payment System rule specifying how hospitals are to be paid for Medicare beneficiaries' inpatient care starting Oct. 1. One group says one part of the rule "adds insult to injury" and another threatening to "proceed with our lawsuit."

The final rule, released late Friday, increases overall hospital payments by $1.2 billion, and slows the rate of anticipated cuts to hospitals that treat larger shares of the poor, a payment called disproportionate share or DSH funding.

But new requirements for the second phase of the readmission penalty mean a loss of up to 2% or $227 million total, for 2,225 hospitals— although only 18 hospitals will be fined the full 2% of the Medicare DRG rate and 153 will be penalized between 1% and 2%.


See Also: How IPPS Final Rule Affects Medical Coding


The rule also establishes controversial terms that define an inpatient admission as opposed to "observation" status, a category for which hospitals receive much lower rates because "observation" is considered an outpatient stay.

The final word on IPPS also finalizes the 1% hospital-acquired condition (HAC) penalty, required under Section 3008 of the Patient Protection and Affordable Care Act. The penalty kicks in on Oct. 1, 2014, affecting eligible hospitals whose percentage of certain reasonably preventable adverse events rank in the highest 25%. 

Two domains will be used to calculate hospitals' rates. The first is a composite measure called PSI-90, which includes 11 indicators of harm, such as pressure ulcers, hip fractures, sepsis, and deep vein thrombosis. The second is a combination of a hospital's rates of central line-associated blood stream infections (CLABSI) and catheter-associated urinary tract infections (CAUTI).

The IPPS final rule also refines the algorithm for the hospital value-based purchasing incentive program, also required by the Patient Protection and Affordable Care Act.

The Centers for Medicare & Medicaid Services' proposed and final rules are never entirely welcomed by hospitals and long-term care facilities that must conform to them. But the issue of how to define an inpatient stay versus an "observation" stay, which is reimbursed at lower outpatient rates and which costs beneficiaries more, has vexed the industry for several years.

Fearing recovery audit contractor penalties for what could be deemed inappropriate admissions, hospitals have dramatically increased the number of patients assigned to "observation" status, even though they may get the same care they otherwise would have received, and may stay as long.

That's been problematic, because if patients are not classified as inpatients for three days or more, Medicare Part A will not pay for subsequent nursing home care, and beneficiaries will be billed under Part B a larger shares of their hospital costs.

In a press statement released with the rule, CMS said the 2014 document "provides greater clarity" by specifying that "if a physician expects a beneficiary's surgical procedure, diagnostic test, or other treatment to require a stay in the hospital lasting at least two midnights, and admits the beneficiary to the hospital based on that expectation," an inpatient stay is appropriate for Medicare Part A payment.

The rule also limits hospitals to rebill Medicare Part B for hospital inpatient services inappropriately billed under Part A by one year from the date of service, applying "to admissions with dates of service on or after Oct. 1, 2013."

But Linda Fishman, senior vice president of the American Hospital Association, says that "while hospitals have wanted clarification of inpatient admission criteria, this final rule is unlikely to reduce the number of appeals of Part A claim denials, which CMS said was one of the primary goals of its rulemaking.

"In addition, we are disappointed that CMS chose to implement a .2 percent cut related to this proposal.

"Also, the final rule demonstrates that CMS is unwilling to fundamentally change its rebilling policy. While they have extended the deadline for very few additional claims, such change will have little practical effect overall. We intend to proceed with our lawsuit."

Blair Childs, senior vice president for the Premier healthcare alliance, a 2,800-hospital group purchasing and quality organization, said his company is "deeply disappointed" in the new outpatient versus inpatient definition.

"While CMS's quest for clarity is admirable," Childs said in a prepared statement, "these new medical review and admissions criteria do not provide any protections from burdensome audits and appeals, and require providers to have a sixth sense and predict the future treatment needs for patients.

"Moreover, these changes add insult to injury, imposing an associated 0.2 percent payment reduction to offset what CMS believes will be an increase in inpatient volume. We expect that this will result in even more confusion around what constitutes an appropriate inpatient hospital admission, all while cutting payments for following CMS's rules."

Childs added that Premier is concerned that some of the measures to be included in the FY 2015 HAC reduction program duplicate measures outlined for FY 2016 and future years of the value-based purchasing program, such as rates of CAUTI and CLABSI.

"Just because overlapping hospital-acquired condition measures included in both the HAC Reduction Policy and Value-Based Purchasing programs have different scoring methodologies does not erase the facts CMS has tried to ignore: these programs are duplicative, with overlapping measures that penalize hospitals multiple times for the same HACs.

"For instance, under CMS' new policies, a single blood stream infection could count in two VBP measures, two HAC Reduction program measures and in the existing HAC policy. Penalizing providers five times for the same event is certainly not what Congress envisioned."

In the final rule, however, CMS remarked that it was not precluded by PPACA from using the same measure in multiple penalty programs.

"While we are aware that some commenters object to the possibility of scoring the CAUTI and CLABSI measures under both the Hospital VBP and HAC Reduction Programs, we note that these measures cover topics of critical importance to quality improvement in the inpatient hospital setting, and to patient safety.

"The NHSN (the CDC's National Healthcare Safety Network) measures that we have proposed to adopt track infections that could cause significant health risks to Medicare patients, and we believe it is appropriate to provide incentives for hospitals to avoid them under more than one program," CMS said.

For more information, click here (PDF).

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