On August 1, 2014, the Centers for Medicare and Medicaid Services (CMS) issued its annual final rule for policy and payment changes applicable to inpatient stays in acute care and long term care hospitals (Final Rule). This year’s Final Rule is more than 2,400 pages long and is expected to be published in the Federal Register on August 22, 2014. Revisions set forth in the Final Rule are effective for discharges occurring on or after October 1, 2014 (the start of the federal fiscal year (FY) 2015). CMS also issued a press release and Fact Sheet, explaining the highlights of the Final Rule.

Both acute care hospitals (Inpatient Prospective Payment System (IPPS) Hospitals) and long term care hospitals (LTCHs) are now paid primarily under prospective payment systems. CMS has estimated an increase in operating payment rates to IPPS Hospitals of 1.4%, however, when other revisions to payments are included, operating payments will decline by approximately 0.6%. In FY 2015, hospitals which do not submit required quality data or have a meaningful use of electronic health records will face a decline in payments, with an aggregate reduction in total inpatient prospective payments of a projected $756 million. Payments to LTCHs will increase by approximately 1.1%.

Provisions Applicable to IPPS Hospitals Include:

  • The Final Rule notes recent changes in the Office of Management and Budget (OMB) statistical area delineations, which impact classifications for labor market areas (impacts the wage index), rural teaching hospitals that provide graduate medical education (which may no longer be rural and therefore have the permanent cap for residents at risk), and critical access hospitals (CAHs) (which may no longer meet the definition to be a CAH and require reclassification to keep that status). For each situation, CMS has proposed transition periods or other accommodations to lessen the impact of these reclassifications.
  • Hospital-Acquired Condition (HAC) Reduction Program – Beginning in FY 2015, those hospitals in the top quartile for HACs will have their prospective payments reduced by 1%. A separate CMS Fact Sheet, entitled “CMS to Improve Quality of Care during Hospital Inpatient Stays,” discusses the quality-related provisions of the Final Rule (inkling value-based purchasing and the Readmissions Reduction Program) in depth.
  • Price transparency – CMS requires that each hospital establish and make public a list of its standard charges for items and services, and reminds IPPS Hospitals of their expectations in this Final Rule.
  • Currently, CAHs must obtain a physician certification that the individual may reasonably be expected to be discharged or transferred to a hospital within 96 hours of admission, prior to discharge. The Final Rule specifies that the time period for all certification requirements will be extended to no later than one day before the claim for payment for the inpatient service is completed (note this extension does not apply to admission orders).
  • Medicare Disproportionate Share Hospitals will see a smaller-than-anticipated pool ($7.65 billion) distributed for uncompensated care payments, a decrease from the estimated $8.56 million in the proposed rule.

Provisions Applicable to LTCHs Include:

  • CMS will delay the full application of the 25% Patient Threshold (if an LTCH admits more than 25% of its patients from a single acute care hospital, Medicare will make payments at a rate comparable to that paid to IPPS Hospitals for those patients above the 25% threshold). This delay is required by the Pathway for SGR Reform Act of 2013.
  • Two recent statutes imposed moratoria on new LTCHs, LTCH satellites, and an increase in beds in existing LTCHs and satellites, with some exceptions. CMS plans to implement the new moratoria in a similar manner as the exceptions to the original 2007 moratoria.
  • CMS is eliminating the “5% readmissions” policy, under which readmission from co-located providers in excess of 5% are paid one single LTCH payment which covers both the admission and readmission. This policy has been deemed unnecessary in light of the “interrupted stay” policy, which also provides that only one payment will be made when the patient is discharged and readmitted to a LTCH within nine days from a general acute care hospital. Although CMS had proposed to expand the nine-day period to 30 days, in response to comments it decided not to adopt proposed revisions to the policy.

Originally, this article was an alert sent to the American Health Lawyers Association’s (AHLA) Regulation, Accreditation and Payment Practice Group. For more information, visit AHLA’s website.