Press Releases

CMS ANNOUNCES POLICY AND PAYMENT RATE CHANGES FOR INPATIENT STAYS IN ACUTE CARE ANDLONG-TERM CARE HOSPITALS IN FISCAL 2010

The Centers for Medicare & Medicaid Services (CMS) today announced that acute care hospitals will receive an inflation update in their payment rates of 2.1 percent in fiscal year 2010.  Earlier this year, CMS had proposed to reduce payments to account for the effect of increases in aggregate payments due to changes in hospital coding practices that do not reflect increases in patient’s severity of illness. 

The update was included in a final rule making policy changes and setting payment rates for inpatient services in general acute care hospitals paid under the Inpatient Prospective Payment System (IPPS), as well as long-term care hospitals (LTCHs), paid under the LTCH PPS.  The changes will be effective beginning with discharges on or after Oct. 1, 2009. 

“The policies and payment rates in this final rule will ensure that Medicare beneficiaries continue to have access to high quality inpatient care in both short-stay acute care and long-term care hospitals,” said Jonathan Blum, director of the CMS Center for Medicare Management.  “In developing the final rule, CMS has paid careful attention to comments submitted by the public to proposals issued in May.”

In fiscal 2008, CMS adopted Medicare severity diagnosis related groups (MS-DRGs) that better account for the severity of patient illnesses and the cost of treating Medicare patients.  Prior experience, however, shows that hospitals were likely to change their coding practices as they adopted the new classifications, causing Medicare spending to increase.  Therefore, in the IPPS final rule for fiscal 2008, CMS adopted adjustments to hospital rates in fiscal 2008 through fiscal 2010 to ensure spending neither increased nor decreased, as authorized by statute. 

Congress later halved the adjustments for fiscal 2008 and 2009, but directed CMS to adjust future rates and recoup excess spending for 2008 and 2009 if the lower adjustments under the new law led to an increased spending due solely to hospitals’ documentation and coding practices.  In the proposed IPPS rule for fiscal 2010, CMS proposed to reduce future rates based on the observed increase in spending due to documentation and coding that occurred in fiscal 2008.  However, information on the extent of documentation and coding effects on 2009 spending is not yet known.  Therefore, CMS has decided not to implement an adjustment for fiscal 2010 until it has a full year of fiscal 2009 data.  Based on a complete analysis of   fiscal 2008 and fiscal 2009 data CMS will consider phasing in future adjustments over an extended period beginning in fiscal 2011. 

In response to the public comments, CMS has also decided to continue to apply the capital indirect medical education (IME) adjustment to payment rates for teaching hospitals.  In fiscal 2008, CMS adopted regulations to phase-out the additional capital payment made to teaching hospitals.  Congress restored the 50 percent reduction that CMS applied beginning in fiscal 2009.  CMS decided based on updated analysis of hospital capital margins and input from commenters not to go forward with full phase-out as previously planned next year.  Teaching hospitals will continue to receive the full capital IME adjustment in fiscal 2010. 

The final rule also provides for an inflation update of 2.5 percent to payment rates for inpatient services furnished by long-term care hospitals (LTCHs).  These hospitals typically treat patients requiring long-stay hospital-level care.  To qualify for the higher payment rates under the LTCH PPS, the hospital’s average length of stay, taking into account all patients, must be greater than 25 days.  The LTCH update is calculated using a special rate of inflation index that reflects the different mix of resources used by rehabilitation, psychiatric, and long term care hospitals.

Similar to the policy approach being taken for hospitals paid under the IPPS, CMS is not making any adjustment to the LTCH rates in RY 2010 for the effect of changes in documentation and coding that occurred in FISCAL 2008, the first year under the severity-adjusted patient classification system.  However, CMS is finalizing its proposal to adjust the RY 2010 LTCH rates by -0.5 percentage points to account for the effect of changes in documentation and coding that occurred in fiscal 2007 under the previous patient classification system. 

In this rule, CMS is also finalizing the corrections to Medicare’s fiscal 2009 LTCH payments for patients discharged on or after June 3, 2009 through Sept. 30, 2009 that were adopted on an interim basis on June 3, 2009 pending public comment. 

            CMS is also finalizing the expansion of hospital quality measurement.  “In keeping with CMS’s ongoing efforts to create incentives for improved quality in its payment systems, the final rule expands the number of quality measures that hospitals must report in 2010 to receive a full market basket update in 2011,” said Blum.

Under current Medicare law, IPPS hospitals that successfully report the 2010 quality measures included in the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program will receive the full market basket update in 2011.  Hospitals that do not participate in the quality reporting program will receive the update less two percentage points.  Ninety-seven percent of participating hospitals received the full update last year.  The final rule adds four new measures for which hospitals must submit data under the RHQDAPU program to receive the full market basket update.  Two of these measures are additions to the existing Surgical Care Improvement Project (SCIP) measure set, and CMS believes that the other two measures will promote hospital participation in nursing-sensitive care and stroke care registries.

            The final rule will apply to approximately 3,500 acute care hospitals paid under the IPPS, and 400 long-term care hospitals paid under the LTCH PPS.  Except as otherwise specified in the rule, the changes will become effective beginning with discharges occurring on or after Oct. 1, 2009.

The final rule was placed on display at the Federal Register today, and can be found under Special Filings at:

www.archives.gov/federal-register/public-inspection/index.html.

It will appear in the August 27, 2009 Federal Register.

For more information, please see:

www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp.

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