What Your Hospital Needs to Know About Medicare’s IPPS Payment Policies

By Lloyd Arakelian on November, 27 2012
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Lloyd Arakelian

New Rule Brings New Provisions to Existing Policies

Authors: Lloyd Arakelian and Carol Hamel

CMS has issued its final rule, which updates FY 2013 Medicare payment rates and policies under the Inpatient Prospective Payment System, also known as the IPPS. Although much attention has focused on the 2.8% increase to payment rates for general acute care hospitals, the 1,100-page rule also implements the key elements of two new programs under the Inpatient Quality Reporting (IQR) Program and the Affordable Care Act, among other things. Your hospital could lose part of its operating payments if you fail to meet these programs’ standards.

Understanding readmissions changes

Under the Hospital Readmissions Reduction Program, facilities that have excess 30-day readmissions for three certain conditions (pneumonia, heart attack and heart failure) will receive reduced payments beginning in FY 2013 (for discharges on or after Oct. 1, 2012). The final rule also details which hospitals will be subject to the program and the method used to calculate the hospital’s readmission adjustment factor. In addition, the rule outlines which portion of the IPPS payment will be used to calculate the readmission adjustment amount.

The rule limits the readmission adjustment factor to a 1% reduction for FY 2013. (But it increases to 2% and 3% in FY 2014 and 2015, respectively.) Moreover, it explains that CMS will apply that adjustment factor to the hospital’s base operating diagnosis-related group payment amount. The rule also establishes a process for hospitals to review their admission information and submit corrections before any of the readmission rates are made available to the public. In some situations, certain readmissions won’t count toward the excess readmission rate. For instance, certain planned readmissions (that is, coronary artery bypass graft following a heart attack) and hospital-to-hospital transfers are excluded from readmissions when calculating the rate.

HVPB provisions

The Hospital Value-Based Purchasing (HVBP) Program adjusts payments starting in FY 2013, and annually after that, based on how well hospitals perform or improve their performance on a selected set of quality measures. Hospitals can earn back up to 1% of their base operating amount, which CMS will remove from their 2013 payments in order to fund payments under the HVBP program.

The rule also finalizes details on how and when each facility will receive its Total Performance Score (TPS) as well as on other policies for the FY 2015 program. Plus, it outlines an appeals process in regard to the calculation of the performance assessment portion of a TPS.

Other key provisions

Hospitals that don’t successfully participate in the IQR program will receive a rate increase of just 0.8%, rather than the slightly larger 2.8% increase provided to hospitals that meet the requirements. Participation in the program is completely voluntary. But, as of now, hospital participation has increased substantially — to more than 99% of Medicare-participating hospitals reimbursed under the IPPS.

The rule also includes new measures that must be reported for perinatal care and readmissions, as well as a measure related to whether hospitals use surgery checklists. A new survey measure has also been added to the Hospital Consumer Assessment of Healthcare Providers and Systems measures to assess the level of quality care for patients as they transition from one care setting to another.

Comply or lose out

Finally, if your hospital doesn’t comply, it stands to lose up to 4% of its operating payments if it doesn’t satisfy the standards of the three programs described in this article. Be sure to put the necessary measures in place in order to maintain compliance.

For any questions on the new policies or any health care issue, contact us here or give us a call at 716.847.2651.

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