Under a proposed federal rule, some 3,400 acute care hospitals would receive a net .8% reimbursement increase, including sequestration cuts, but would face penalties for new categories of readmitted patients, and new measures in quality incentive pay starting Oct. 1.
The Centers for Medicare & Medicaid Services issued its heavily anticipated proposed rule governing acute care payment for FY 2014 on Friday, shortly after the stock market closed.
The 1,424-page proposal includes clarification on which patient stays qualify as legitimate hospitals admissions, an effort to resolve confusion that has resulted in hospitals placing 8% of its patients in "observation" status, up from 3% in 2006, and absorbing less than half of the payment it would normally receive for a patient officially admitted.
It also exempts certain planned admissions from the readmissions penalty.
The agency will accept comments on the rule until June 25 and will issue a final rule by Aug. 1. The major proposals are outlined here:
Readmissions
The agency wants to expand the conditions and procedures calculated for the 30-day readmission penalty, which increases Oct. 1 to 2% of a hospital's Medicare base DRG, to include patients admitted for exacerbation of chronic obstructive pulmonary disease (COPD) and patients admitted for elective total hip or total knee arthroplasty (THA/TKA).
These would be added to the current conditions: acute myocardial infarction, congestive heart failure and pneumonia.
The agency is adding COPD because it was the fourth leading reason for readmissions according to a 2007 Medicare Payment Advisory Commission report, and because there is wide variation in the rates (from 18% to 25%) of COPD hospital readmissions "supporting the finding that opportunities exist for improving care" that can result in fewer COPD readmissions.
The agency wants to add hip and knee surgeries to the readmission algorithm because together they "account for the largest procedural cost in the Medicare budget," 1.4 million surgeries between 2008 and 2010, and because evidence shows "variation in readmissions of patients with THA/TKA." While the readmission rate for these orthopedic procedures was lower, an average of 5.7%, it ranges from 3.2% to 9.9%.
A section of the Patient Protection and Affordable Care Act calls for CMS to add four conditions or procedures to the algorithm for readmissions penalty by FY 2014, "to the extent practicable." The four include COPD, coronary artery bypass graft surgery, percutaneous coronary intervention (PCI) and other vascular conditions.
The agency is foregoing addition of PCI and vascular conditions because inpatient admissions for both "seem to be decreasing" as they are increasingly performed in hospital outpatient departments. It is exploring adding CABG in the future.
The agency proposes to greatly broaden the number of procedures that would be exempted from being considered a readmission. These include obstetrical delivery, transplant surgery, maintenance chemotherapy, and rehabilitation.
"Otherwise, a planned readmission is defined as a nonacute readmission for a scheduled procedure." It added that "admissions for acute illness or for complications of care are never planned."
Value-Based Purchasing Incentive Program
The measures for which hospitals may receive an incentive payment, (1.25% of a hospital's Medicare base DRG, which is withheld from all eligible hospitals for a $1.1 billion estimated pool) as of Oct. 1 were previously finalized.
For the first time, the algorithm includes three measures of 30-day mortality, weighted at 25% of the VBP algorithm. Patient experience scores as measured by the HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) survey remains at 30% and clinical processes of care, the remaining 45%.
FY 2015 Hospital-Acquired Conditions Penalty and timeline
The proposed rule lays out the ground rules for a new penalty program for the 25% of hospitals that have the highest number of eight hospital-acquired conditions, as measured over a two-year period beginning July 1, 2011. The penalty would kick in with payments for care, next year, as of Oct. 1, 2014.
The HAC penalty is mandated by the PPACA.
These eight conditions would be divided between two domains, and risk-adjusted for hospital's patient severity mix. The first domain would include six patient safety indicator measures developed by the Agency for Health Care Research and Quality (AHRQ). They are:
- Rates of pressure ulcers
- Number (not rate) of foreign surgical objects left inside patients
- Rate of iatrogenic pneumothorax
- Rate of postoperative physiologic and metabolic derangement (signs of uncontrolled blood sugar)
- Rate of post-operative pulmonary embolism or deep vein thrombosis
- Rate of accidental puncture and laceration
The second domain would include two healthcare associated infection measures. They are:
- Rates of central line-associated bloodstream infections
- Rates of catheter-associated urinary tract infections.
Each domain would be weighted 50% for a penalty that would amount to 1% of a hospital's Medicare base DRG payment.
Disproportionate share hospitals
As expected, CMS proposes to dramatically cut pay for hospitals that previously received disproportionate share funds for taking care of larger numbers of uninsured or underinsured. "Hospitals will receive 25% of their current Medicare DSH payments beginning in FY 2014," the agency said in a news release.
New definition of an admission
The agency is redefining or clarifying the definition of an inpatient admission as that which spans at least two midnights, an effort to clarify policies that have pushed hospitals to classify patients not as inpatients, but as on "observation status."
If a patient is in the hospital for a shorter period, "will presumptively be inappropriate for payment under Medicare Part A," the agency said in a news release.
This presumption may be overcome, however, if the medical record documentation supports a physician's "expectation that the beneficiary would need care spanning at least two midnights" but unforeseen circumstances shortened that duration.
"This proposed policy would address longstanding concerns from hospitals that they need more guidance on when a patient is appropriately treated and paid by Medicare as an inpatient" and would " help beneficiaries who in recent years have been having longer stays as outpatients because of hospital uncertainties about payment if they admit the patient to the hospital," the media release states.
Late Friday, the American Hospital Association issued a statement saying that said it is "pleased" that CMS "used its discretion to dampen" the impact of the sequester, so that hospitals will still receive higher payment rates in FY 2014. "We continue to believe that these excessive cuts are not warranted; however, CMS' proposal has provided hospitals with additional time to manage enormous changes to patient care delivery."
However, the AHA said that while it appreciated CMS' efforts to clarify "when an inpatient admission is appropriate—such as for a patient on observation status—we are concerned that this could be applied in a way that undermines medical judgment. We are also disappointed that CMS has proposed payment reductions in applying this policy. Hospitals always strive to provide the right care at the right time in the right setting.
Premier Healthcare Alliance's president Blair Childs said in a statement that Premier is pleased that CMS is broadening the number of conditions that would be exempt from the readmissions penalty "since these readmissions are not the result of gaps in care or poor quality," and will "result in a more accurate payment calculation.
However, he added, Premier is disappointed that CMS failed to introduce a socioeconomic risk adjustment in the readmissions algorithm. Research shows that socioeconomic factors "are more closely linked to high readmissions than poor quality of care, hospitals that serve high percentages of lower income patients will be disproportionately penalized for circumstances beyond their control."
Childs added that CMS inclusion of rates of central line-associated blood stream infections, catheter-associated urinary tract infections and AHRQ patient safety indicators "in both the value-based purchasing and the hospital acquired condition reduction programs, with additional overlaps in measured conditions proposed for the future," the proposed rule amounts to a "triple dip" into hospital payments, a three-time penalty for the same infection.
CMS has posted a searchable fact sheet for further information about the proposed rule.