On August 1, 2012, the Centers for Medicare and Medicaid Services (“CMS”) published a display copy of the Final Rule for the FFY 2013 Inpatient Prospective Payment System (“PPS”). Hospitals will see an approximately 2.3% net increase in payments in FFY 2013.
Documentation and Coding Adjustment
CMS continues to refine payments via documentation and coding adjustments (“D&CAs”) to address payment inconsistencies that occurred in the initial years of the Medical Severity Diagnosis Related Group (“MS-DRG”) system. For FFY 2013, there will be a +1.0% adjustment to the standardized amount, and Sole Community Hospitals (“SCHs”) that are paid a hospital-specific rate will see a -0.5% adjustment.
Hospital Acquired Conditions
The policy to limit payment for certain conditions acquired after a patient’s admission continues in FFY 2013. Hospitals are required to carefully document all “present on admission” conditions to avoid payment reductions for hospital acquired conditions (“HACs”). There are two new HACs for FFY 2013: Surgical Site Infection (“SSI”) following Cardiac Implantable Electronic Device (“CIED”) Procedures and Iatrogenic Pneumothorax with Venous Catheterization. The former HAC does not have a specific ICD-9 code and will be identified by diagnosis codes 996.61 or 998.59, combined with any of the following procedure codes: 00.50, 00.51, 00.52, 00.53, 00.54, 37.80, 37.81, 37.82, 37.83, 37.85, 37.86, 37.87, 37.94, 37.96, 37.98, 37.74, 37.75, 37.76, 37.77, 37.79 or 37.89. Iatrogenic Pneumothorax with Venous Catheterization also does not have a specific ICD-9 and will be identified when diagnosis code 512.1 is present with procedure code 38.93.
Hospital Readmission Reduction Program
CMS continues to develop the Hospital Readmission Reduction Program, which will reduce a hospital’s base operating DRG payment for excess readmissions of heart attacks, heart failure and pneumonia. Finalized within this rulemaking is the definition of “base operating DRG payment,” which will be the basis from which payments are reduced: the wage-adjusted DRG operating payment in addition to any applicable new technology adjustments. Common add-on payments, like DSH, IME and outlier, and low-volume adjustments are not included in the definition. MedPAR data from FFYs 2008-2011 will be the data used to calculate the FFY 2013 readmissions payment adjustment factors. SCHs will be included in this program, as will current Medicare Dependent Hospitals (“MDHs”); payment reductions to SCHs and MDHs will be based on the base operating DRG payment as if the hospitals had been paid the standardized amount, even if the SCH was paid a hospital-specific rate on its claims. Hospitals need to continue to monitor the CMS Hospital Compare website.
Hospital Inpatient Quality Reporting Program
The Final Rule implements changes to the Hospital Inpatient Quality Reporting (“IQR”) Program that will not take effect until FFY 2015. First, CMS reduces the number of quality reporting measures from 72 to 59. Second, CMS is making a number of other programmatic changes to lessen the burden of participation on hospitals, including reducing the number of hospitals that will have to validate their data annually.
MS-DRG Changes
CMS had proposed changes to the MS-DRG relative weights by adding a separate cost to charge ratio for implantable devices, MRIs, CT scans and cardiac catheterization. However, data issues prevented the agency from finalizing the proposed changes. It will be evaluated in the FFY 2014 Rulemaking. Beginning in FFY 2013, if influenza is present with a pneumonia secondary diagnosis, it will be assigned to MS-DRGs 177, 178 and 179 instead of MS-DRGs 193, 194 and 195.
In anticipation of the conversion to the ICD-10 Code System effective October 1, 2014, there are no changes to the ICD-9 or ICD-10 coding systems for FFY 2013.
Sole Community Hospitals and Medicare Dependent Hospitals
In the FFY 2013 Proposed Rule, CMS attempted to create a policy requiring hospitals that mistakenly had been given SCH status or no longer qualified for SCH status to repay the SCH benefits retroactively. However, in the Final Rule, CMS implements a policy that will revoke SCH status for non-qualifying hospitals 30 days after CMS determines the hospital no longer qualifies for SCH status. CMS is careful to state that in cases of fraud, recoupment of incorrect payments would take place. Additionally, if CMS discovers information that suggests a hospital was not forthcoming with information in its initial SCH classification that would have prevented the hospital from qualifying, that, too, will result in CMS recouping payments.
The MDH program is still set to expire on September 30, 2012. CMS finalizes a policy in this Final Rule to permit any MDH that files its SCH application before August 31, 2012 the ability to begin MDH payments on October 1, 2012. The MDH must specifically request that its SCH status take effect with the expiration of the MDH program.
Low Volume Payment Adjustments
Low volume payment adjustments are reverting back to the previous criteria in effect before certain changes in FFY 2011 and FFY 2012: a 25% add-on payment for hospitals that are more than 25 road miles from the nearest subsection (d) hospital and have less than 200 discharges (Medicare and all payors) per year. Low volume payment adjustment requests for FFY 2013 must be made in writing to the hospital’s Fiscal Intermediary or Medicare Administrative Contractor no later than September 1, 2012.
Indirect Medical Education and Graduate Medical Education
There are a number of developments with IME and GME payment policies. For FFY 2013, the IME formula multiplier continues to be 1.35. CMS estimates that the multiplier will yield 5.5% in additional Inpatient PPS payments for every 10% increase in the resident to bed ratio.
CMS cautions hospitals to abide by the usual claim filing limits for the “no pay” claims submitted to capture Medicare Advantage data for IME and direct GME payments. The usual claim filing limits will also apply to the “no pay” claims to capture Medicare Advantage data for the additional payment made to providers with nursing or allied health education program payments. These no pay claims also have an effect on hospitals’ disproportionate share (“DSH”) payments.
Following a recent CMS policy change to include Labor and Delivery days in the DSH calculation, CMS finalizes a proposal to include Labor and Delivery Days in the bed count by removing those beds from the exclusion list at 42 C.F.R. § 412.105(b)(4).
Although most teaching hospitals have a cap on the number of residents that it can count, dating back to 1997, there are limited opportunities to change the cap through the addition of new residency programs. In those instances, CMS has allowed new programs three years to build up. Following industry concern that three years is not long enough to adequately build a new program, CMS is amending the regulation at 42 C.F.R. § 413.79 to allow a five-year window to grow a new program.
The Affordable Care Act permitted the residency slots of hospitals that weren’t utilizing the full number of residency slots under their respective caps to be redistributed to existing hospitals. In this final rulemaking, CMS states that it will update the cost report to require these hospitals receiving new slots to report whether the new slots are being used. All of these slots will be removed for any hospital that does not use its entire allotment of new slots within four years of receiving the new slots and cannot maintain the use of its entire allotment through the fifth year.
The Affordable Care Act also created a process to redistribute the residency slots of closed teaching hospitals. The initial redistribution occurred in 2011, but CMS refines the process going forward by creating an application deadline 60 days from a CMS notification that it will be doing a residency slot redistribution and by creating an additional criterion to identify hospitals seeking to use all new redistribution slots for primary care or general surgery residency programs. The latter change is to encourage development of new residency slots for primary care and general surgery. CMS also announces the availability of additional residency slots coming from recently closed hospitals and establishes an October 29, 2012 deadline to apply for those slots.
Wage Index Reform
The conversation regarding wage index reform continues, but it will see no changes in FFY 2013. The current wage index system aggregates wage data within the geographic Core Based Statistical Area (“CBSA”) where the hospital is located. CMS continues to consider options for wage index reform. The Commuting Based Wage Index (“CBWI”) aggregates wage data based upon the residences of the hospital’s employees. The CBWI would create different wage levels within a CBSA, but it would seek to address the large variations that can currently exist in adjacent CBSAs. However, it could incentivize hospitals to hire workers in counties with higher wages. The Institute of Medicine (“IOM”) prefers to use wage data for all health care workers living in the area, as opposed to employed in the area. The IOM model also uses data from the Bureau of Labor Statistics, rather than hospital cost reporting data. MedPAC would also favor using the Bureau of Labor Statistics data, as well as a blend of CBSA and county definitions. Additional consideration will be given to wage index reform following the American Hospital Association’s publication of a comprehensive report in early 2013.
The Final Rule will appear in the Federal Register on August 31, 2012. The display copy may be accessed here.
If you have any questions regarding this article, please contact Elizabeth A. Elias at 317-977-1468 or eelias@hallrender.com or your regular Hall Render attorney.
