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CMS releases final rule on Medicare payment systems

Posted on August 2, 2012 | No Comments

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Key Developments
Implementation Briefs

The Centers for Medicare & Medicaid Services (CMS) released a final rule yesterday which revises the Medicare hospital inpatient prospective payment systems (IPPS). The rule will increase inpatient hospital Medicare payments by about $2 billion and long-term care hospital payments by about $92 million in fiscal year 2013. The rule sets Medicare reimbursement rates for 440 long-term care hospitals.

The rule also address value-based purchasing under the Affordable Care Act (ACA) and includes provisions to strengthen a variety of quality reporting programs, such as the hospital value-based purchasing program.

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The Centers for Medicare and Medicaid Services (CMS) issued a final rule revising the Medicare hospital inpatient prospective payment systems (IPPS). In adherence to the Affordable Care Act (ACA), part of the rule would effectively reduce payments to disproportionate share hospitals (DSH), which serve the most vulnerable patients. DSH payment reductions are a result of the expansion of Medicaid, however in states that chose not to expand, hospitals still risk losing some payment for uncompensated care.
A final rule released on Tuesday indicates that federally qualified health centers (FQHCs) may receive a 32% payment boost under Medicare's new payment system. Effective October 1st of this year, Medicare will pay FQHCs a per member per day fee of $158.85, which will be adjusted for geographic differences in healthcare costs. The Centers for Medicare and Medicaid Services (CMS) currently does not adjust payments for FQHC patients. Another rule released by CMS discusses inpatient payment regulations for 2015. Per the Hospital Readmission Reduction Program, Medicare payments to physicians with poor readmission rates could be reduced by as much as 3%. Hospitals with poor performance regarding hospital acquired conditions may face an additional penalty. Other payment rules released by CMS include skilled nursing facilities, rehabilitation facilities, and psychiatric facilities, which all call for payment increases of 2%, 2.2%, and 2.1% respectively.
In an expansion to the hospital charges data released last month, the Centers for Medicare and Medicaid Services (CMS) provided data describing charges for 30 different outpatient procedures. The data include charge estimates for Ambulatory Payment Classification Groups, which are paid under the Medicare Outpatient Prospective Payment System. Presented data are hospital-specific and report charge values collected during calendar year 2011. CMS also released data on geographic variations in Medicare public use and Medicare utilization by those with chronic conditions.
In an effort to increase health care affordability and transparency, the Centers for Medicare and Medicaid Services (CMS) published data pertaining to hospital charges for the 100 most common services provided during Medicare inpatient stays. With more than 163,000 entries, the data released by CMS indicated wide variation in costs, both across the country and within similar regions. For instance, a joint replacement procedure can cost $5,300 in Ada, Oklahoma, while a similar procedure may cost upwards of $223,000 in Monterey Park, California. Similarly, heart failure treatments can cost anywhere between $9,000 and $51,000 in Jackson, Mississippi. To further promote the spirit of the Affordable Care Act (ACA), the US Department of Health and Human Services (HHS) will also be offering grants for entities to collect and analyze medical pricing and reimbursement data to aid consumers in their health care decision-making and promoting cost-effective care.
The Centers for Medicare and Medicaid Services (CMS) released a proposed rule of more than 1400 pages describing the new Medicare payment schedule for 2014. The annual Acute Care Hospital Inpatient Prospective Payment System (IPPS) rule proposes that general acute-care hospitals will see a payment increase of 0.8% and long-term care hospitals will see their payments rise by 1.1%. Pursuant to the Affordable Care Act (ACA), the NRPM also details the new penalty program for hospitals that do not reduce nosocomial infections, adding hip and knee implants and chronic obstructive pulmonary disorder to the 30 day readmission penalty program. Another component of the proposed rule alters Medicare disproportionate share hospital (DSH) payments. Additional payments to each hospital will be made based upon its percentage of the total uncompensated care rendered at all DSH hospitals at a given time, ultimately reducing overall DSH payments by 0.9%. Furthermore, hospitals that do not participate in the Hospital Inpatient Quality Reporting (IQR) Program will be subject to additional penalties. Comments will be due by June 25th, 2013.
The Government Accountability Office (GAO) yesterday released an update regarding high risk government programs. In the report, GAO detailed 30 high risk areas, including Medicare and Medicaid. GAO assigned Medicare as a high risk area because while the program covered beneficiaries at an estimated cost of $555 billion, the program reported improper payments estimated to be more than $44 billion. GAO identified several opportunities to modify Medicare to streamline program operations. Such opportunities include...
The Middle Class Tax Relief and Job Creation Act of 2012 required that the Government Accountability Office (GAO) examine private-sector initiatives that base or adjust physician payment rates on quality and efficiency, and the applicability of these initiatives to the Medicare program. The resulting GAO report provides information on private entities with payment incentive initiatives, physician perspectives on themes within those initiatives, and the extent to which CMS’s financial incentive initiatives for Medicare physicians reflect such themes. The report identifies several common themes among private entities that provide incentives for high-quality, efficient care, and selected physician organizations generally support these themes:
  • Private entities generally measure performance and make incentive payments at the physician-group level rather than at the individual-physician level. Physician organizations favor this approach.
  • Private entities use nationally endorsed performance metrics and noted the need for a standardized set of metrics across all payers. Physician organizations concur that a standardized set of metrics would be less administratively complex.
  • Most private entities in GAO's study provide financial incentives tied to meeting absolute benchmarks--fixed performance targets--or a combination of absolute benchmarks and performance improvement. Physician organizations prefer incentives tied to absolute benchmarks over those based on how physicians perform relative to their peers. Physician organizations also favored incentives that reward improvement because baseline levels of performance vary.
  • While private entities' incentive payments vary in size and in method, private entities typically provide such payments within 7 months of the end of the performance measurement period. Physician organizations stated that financial incentives should be distributed soon after the measurement period to have the greatest effect on performance.
The Centers for Medicare & Medicaid Services (CMS) is currently making efforts to transform the physician payment system in Medicare reflect the themes that GAO identified among selected private entities with physician payment incentives.
According to a study released last week by Dobson DaVanzo and Associates, the Medicare program could save as much as $100 billion over the next decade and the Part A trust fund could be extended by two-and-a-half years if post-discharge patients were served in a more clinically appropriate post-acute care setting. Experts have estimated that the Medicare trust fund will go bankrupt by 2024 without reform. The consulting group's report offers ideas regarding how the Medicare system could improve the efficiency and quality of care delivered to effectively bend the cost curve and thus extend the solvency of the program. The report found that Medicare savings can be achieved by identifying the patient pathways to the receipt of care, targeting ways to avert readmissions, and placing patients in the most clinically appropriate and cost-effective setting.
Historically, the Medicare program has passively purchased health care services for Medicare beneficiaries. Hospitals and other providers delivered services to Medicare beneficiaries and the Medicare program paid for the services without any indication of the quality or value of the care delivered. However, as costs have continued to escalate at an explosive pace without discernible improvements in the quality of care delivered, Congress and Medicare administrators have re-evaluated this passive payment methodology. Premised on the belief that the Medicare program must transition to be an active purchaser of high quality, cost-effective care, value-based purchasing uses financial incentives to both incentivize improved quality of care delivery and reduction of costs.