CMS Releases Final FFY 2014 IPPS Rule

by Baker Donelson

CMS has released its final federal fiscal year (FFY) 2014 prospective payment system (PPS) rule for inpatient stays in acute care and long-term care hospitals (LTCHs). The rule projects a net increase in operating payments to acute care hospitals in the amount of 1.2 billion dollars for FFY 2014, a 0.7% increase in comparison with FFY 2013 payments. LTCHs will see a net increase of 1.3%, or seventy-two million dollars. The final rule can be viewed here [PDF].

In addition to the usual DRG weighting adjustments and routine updates, the final rule:

  • Establishes that inpatient admissions spanning at least two midnights will be treated as presumptively appropriate for payment under Medicare Part A. An inpatient admission will presumptively be inappropriate for payment under Medicare Part A if the patient does not stay for two midnights. This presumption can be overcome by documentation supporting the admitting physician’s expectation that the patient would stay for two midnights, but that unforeseen circumstances resulted in a shorter stay.
  • Initiates the documentation and coding adjustment required under the Taxpayer Relief Act of 2012. The adjustment accounts for changes in MS-DRG documentation and coding that do not reflect real changes in case-mix. CMS estimates a total adjustment of 11 billion dollars, with the total impact to be spread over FFYs 2014-2017.
  • Includes labor and delivery days when determining the Medicare patient load for direct graduate medical education (GME) reimbursement. CMS anticipates that the inclusion of such days in the patient load calculation will reduce the total GME reimbursement.
  • Reduces the Medicare disproportionate share hospital (DSH) adjustment to 25 percent of what would otherwise be paid under the under the DSH formula. The remaining 75 percent of DSH payments will be reduced proportionately to reflect the reduction in uninsured patients nationwide, and distributed to DSH-eligible providers based on each provider’s relative share of uncompensated care.
  • Creates separate cost to charge ratios for implantable devices charged to patients, MRIs, CT scans and cardiac catheterizations.
  • Implements a payment reduction for hospitals with a high incidence of medical errors or serious infections that patients contract while in the hospital. Beginning in FFY 2015, hospitals in the lowest quartile for such errors will be reimbursed at 99% of what they would have otherwise received under the IPPS.
  • Establishes a new condition of participation for critical access hospitals (CAHs), which requires that CAHs have the capacity to treat inpatients on-site.
  • Allows the temporary changes to the Medicare-Dependent Hospital (MDH) program and the definition of low-volume hospital to expire. As we noted here, the temporary changes were set to expire at the end of FFY 2012, but were extended through FFY 2013 by the American Taxpayer Relief Act of 2012.
  • Implements a threshold of 25 percent for LTCH admissions from a single acute care hospital. LTCHs that admit more than 25 percent of their patients from a single acute care hospital will be paid at a rate comparable to IPPS rates for patients in excess of the threshold.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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