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Medical Coding News Archives

Proposed Hospital Rules Include Modest Payment Reduction

May 18, 2011:

Nannette Orme, CPC, CCS-P, CPMA, CEMC; Clinical/Technical Editor

The Centers for Medicare and Medicaid Services (CMS) estimates that its proposed changes to the inpatient prospective payment system (IPPS) for fiscal 2012 would affect 3,400 acute care hospitals and 420 long-term care hospitals (LTCH). The agency is projecting that the proposed changes, which include a hospital update of 1.5 percent, would result in a payment reduction of 0.5 percent, or $498 million.

The proposed changes were released April 20 and would take effect October 1, 2011. They include provisions resulting from the Affordable Care Act as well as updates to existing payment programs.

Donald Berwick, M.D., CMS administrator, states that these proposed changes “reflect an underlying premise that we can improve the quality and access to care while at the same time slowing the growth in health care spending.” He further comments that the keys to reducing the cost of health care are “focusing on the patient’s needs, reducing unnecessary duplicate services, and avoiding costly mistakes and preventable healthcare acquired conditions.”

The proposed guidelines center on accurate payment and high-quality service with a new readmissions reduction program; revisions to the hospital inpatient quality reporting (IQR) program, including expansion to include facilities paid under the LTCH PPS program; and an addition to the list of hospital-acquired conditions.

The proposed rules include changes to the Medicare severity diagnosis-related group (MS-DRG) for the following conditions:

  • Excisional debridement
  • Autologous bone marrow transplant
  • Rechargeable dual array deep brain stimulation system
  • Thoracic aneurysm repair

In addition, CMS will accept applications for new-technology add-on payments in 2012 by those receiving Food and Drug Administration approval for their medical service or technology by July 1, 2011.

The IPPS also includes proposals regarding:

  • Clarifications to three-day/one-day payment window rule
  • Add-on payment for inpatients with end-stage renal disease
  • Hospice care provided to inpatients
  • Clarification of “under arrangements” requirements
  • Replacement of recalled devices
  • Payment for ambulance services owned by critical access hospitals (CAH)
  • Submission of excess cost with documentation

Additional proposals are specific to long-term care hospitals. LTCHs would be required to implement a quality reporting program as a provision of the Affordable Care Act, as mentioned above. Average length of stay calculations would have to consider beneficiaries who are covered under a Medicare Advantage program and change of ownership.


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