CMS Proposes 1.1% Increase in Inpatient Payments for FY 2016

On Friday, CMS issued its inpatient prospective payment system proposed rule for fiscal year 2016, MedPage Today reports (Frieden, MedPage Today, 4/18).

The proposed rule — which would affect about 3,400 acute-care facilities — adjusts for things such as productivity improvement, coding changes and market conditions in the region in which the hospital is located (CMS fact sheet, 4/17).

Overall, the proposed rule would increase FY 2016 Medicare operating payments to acute-care hospitals by 1.1%, a slight decline from last year’s 1.4% raise (MedPage Today, 4/18). Specifically, the proposal includes:

  • A 2.7% market-basket update for facilities that were meaningful users of electronic health records in FY 2014 and submitted data on quality metrics;
  • A 0.8% cut to meet the requirements of the American Taxpayer Relief Act of 2012;
  • A 0.6% productivity cut; and
  • A 0.2% market-based cut, as required by the Affordable Care Act (AHA News, 4/17).

According to CMS, hospitals that do not participate in quality reporting programs will face a 25% reduction in the market-based update for FY 2016, while organizations that have not yet attested to meaningful use will see a 50% decline in the update (MedPage Today, 4/18).

After accounting for increases and cuts to IPPS payment policies, the proposed rule is expected to increase hospital operating payments by 0.3% (CMS fact sheet, 4/17). As a result, the proposal would increase acute-care hospital payments by $120 million in FY 2016, compared with FY 2015 (Dickson, Modern Healthcare, 4/17).

Proposal Also Includes DSH Cuts, Other Changes

Under the proposal, CMS would pay $1.3 billion less in Medicare Disproportionate Share Hospital uncompensated care funds in FY 2016 than in FY 2015, in part because of the decline in the uninsured population post-ACA.

The rule also outlined changes to three ACA-created penalty programs:

  • The Hospital-Acquired Condition Program;
  • The Hospital Readmissions Reduction Program; and
  • The Value-Based Purchasing Program.

CMS also noted it will alter its quality reporting program by adding eight new measures for the FY 2018 payment determination (AHA News, 4/17).

However, the agency did not address proposed changes to the two-midnight rule. The proposed rule did acknowledge that the agency is examining the issue and would offer more details of potential alternatives when it publishes its rule for the hospital outpatient prospective payment systems later this year (Modern Healthcare, 4/17).

American Hospital Association Executive Vice President Rick Pollack said it “will make it even more challenging for hospitals to deliver care patients and communities expect” (AHA News, 4/17).

CMS will accept comments on the proposed rule from April 30 to June 16 and is expected to issue a final rule Aug. 1 (Modern Healthcare, 4/17).

Update to Long-Term Care Hospital Reimbursements

In addition, the agency estimates the payments to long-term care hospitals under the new system will decrease by 4.6%, or about $250 million, in the next fiscal year because of a site-neutral policy for less acute cases (Modern Healthcare, 4/17).

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