CMS Issues Final Rule Increasing Pay Rates for Certain Hospital Services

On Monday, CMS issued its inpatient prospective payment system final rule for fiscal year 2012, increasing Medicare payment rates for inpatient services at acute care hospitals by 1%, Modern Healthcare reports (Daly, Modern Healthcare, 8/1).

According to AHA News, the final rule includes a 2% cut -- instead of the proposed 3.15% cut -- to compensate for changes in documentation and coding (AHA News, 8/1). Overall, the update -- which will apply to approximately 3,400 acute-care facilities -- is expected to increase operating payments by $1.13 billion in FY 2012 compared to FY 2011.

The rule also includes an update to the long-term acute care hospital prospective payment system, which increases Medicare payment rates for those facilities by 1.8%. Overall, LTAC payments are expected to increase by $126 million in FY 2012 compared with FY 2011.

Rule Strengthens Quality Reporting

According to CMS, the final rule strengthens the Hospital Inpatient Quality Reporting Program by emphasizing infection prevention in acute care facilities, and establishes a quality reporting framework for a new program that will apply to LTAC hospitals (CMS release, 8/1).

Under the rule, LTAC facilities will be required to begin reporting on quality measures in October 2012, and be subject to a 2% payment penalty for noncompliance beginning in October 2013 (AHA News, 8/1).

Medicare also will add a reporting measure to monitor spending per beneficiary from the three days before admission to 30 days after discharge for the IQR program and for the value-based purchasing program established under the federal health reform law.

Rule Reduces Payments for 'Excess Readmissions'

Meanwhile, the new rule outlines a new Hospital Readmissions Reduction Program that will reduce payments to hospitals with "excess readmissions" of myocardial infarction, heart failure and pneumonia patients starting in FY 2013. The final rule establishes the methodology used to determine excess readmission rates (Modern Healthcare, 8/1).

Hospitals Respond

The final payment update comes after hospitals voiced strong opposition to CMS' initial proposed rule, which called for cutting FY 2012 Medicare operating payments to acute care hospitals by 0.55%.

According to CMS Deputy Administrator Jonathan Blum, the agency "has developed its update policy in response to many comments expressing concerns about our original proposal" (Norman, CQ HealthBeat, 8/1).

Although American Hospital Association President Richard Umbdenstock says the group is disappointed with the coding cuts included in the final rule, he says hospitals "are pleased that [CMS] acknowledged the earlier plan would have been detrimental to hospitals' mission of caring" (AHA News, 8/1).