WASHINGTON – The Centers for Medicare & Medicaid Services late last week issued a hospital inpatient and long-term care prospective payment system final rule for fiscal year 2011 that would decrease average inpatient payments by 0.4 percent.
The final rule includes an initial market basket update of 2.35 percent (which includes the 0.25 percentage point cut mandated by the Patient Protection and Affordable Care Act) for those hospitals that submit data on quality measures. Hospitals not submitting data would receive a 0.35 payment update.
The rule applies to approximately 3,500 acute care hospitals paid under the Inpatient Prospective Payment System and approximately 420 long-term care hospitals paid under the LTCH Prospective Payment System for discharges occurring on or after Oct. 1, 2010.
The rule also applies a "document and coding" cut of 2.9 percent to eliminate the effect of coding or classification changes the agency says do not reflect real changes in case-mix. According to CMS officials, hospital coding practices following adoption of the Medicare severity DRGs increased aggregate payments to hospitals but did not reflect actual increases in patients' severity of illness.
Under legislation passed in 2007, CMS is required to recoup all FY 2008 and 2009 excess spending due to changes in hospital coding practices no later than FY 2012. The agency determined that a 5.8 percent cut was necessary to recoup the overpayments. The 2.9 percent cut for FY 2011 is one half of this amount.
CMS officials estimate that payments to general acute care hospitals for operating expenses in FY 2011 will decline by 0.4 percent, or $440 million, compared with FY 2010 under the final rule, taking into account all factors that would affect spending.
Response from provider organizations was swift and generally negative.
"America's hospitals strongly disagree with the Centers for Medicare & Medicaid Services' final inpatient rule," said AHA president and CEO Rich Umbdenstock. "In issuing its final rule, CMS failed to listen to concerns from members of Congress. ... CMS also failed to acknowledge independent studies that show CMS' methodology does not take into account what we all know: hospital patients are increasingly sicker."
Blair Childs, senior vice president of public affairs at the Premier healthcare alliance, said the 2.9 percent cut for FY 2011 "inappropriately cuts payments to such a degree that patient care could be put at risk."
"Numerous analytical studies ... show that CMS' methodology for determining this payment reduction is flawed," Childs said. "A significant portion of the payments CMS attributes to changes in documentation and coding are actually due to hospitals' treatment of more complex and severely ill patients."
