IPPS Proposed Rule Pinches Hospitals

Christopher Cheney, May 7, 2014

The impact of proposed changes to Medicare's Inpatient Prospective Payment System in 2015 will vary from hospital to hospital, but federal officials predict providers will take a $241 million payment hit next year.

Medicare and Medicaid have been under the budget knife for years. The proposed 2015 IPPS rules from the federal Centers for Medicare & Medicaid Services released last week have hospital officials asking a pressing payment question: How low can you go?

"It's really starting to chip away at hospitals," says Joanna Hiatt Kim, vice president of payment policy at the American Hospital Association. "We really can't pin it on CMS because they are implementing cuts in a statutory manner."

The IPPS applies to nearly 4,000 acute care and long-term care hospitals across the country. In the proposed rules for 2015, CMS presents two classes of factors that will affect Medicare payments next year: set factors that will impact all hospitals covered in the proposed rules, and variable factors that will differ from hospital to hospital.

The set factors in CMS' proposed 2015 IPPS rules establish a baseline 1.3 percent increase in Medicare payments. The elements of that baseline figure are as follows:

  • 2.7 percent hike, "market basket" update
  • 0.4 percent reduction, productivity adjustment
  • 0.2 percent reduction, Patient Protection and Affordable Care Act
  • 0.8 percent reduction, documentation and coding
Christopher Cheney

Christopher Cheney is the senior finance editor at HealthLeaders Media.


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