Medicare Announces Pay Increases for Psychiatric, Skilled Nursing and Rehabilitation Providers in Fiscal Year 2015

Foley & Lardner LLP

According to the rules released last Thursday by the Centers of Medicare and Medicaid Services (CMS), Medicare will increase payment to inpatient psychiatric hospitals, inpatient rehabilitation facilities and skilled nursing facilities in fiscal year 2015. The finalized payment policies boost reimbursement to psychiatric hospitals and rehabilitation facilities past amounts originally proposed by CMS in May 2014.

Under the Inpatient Psychiatric Facilities Prospective Payment System final rule, psychiatric hospitals will see payments increase by 2.5 percent in fiscal year 2015, representing a 0.4 percent hike over the 2.1 percent increase set forth in CMS’ proposed rule. The increased payments, totaling roughly $120 million, will benefit the nation’s 1,600 psychiatric hospitals.

In addition to the increased payment, regulators also finalized new modernization and quality initiatives for inpatient psychiatric hospitals. Some of the new regulations tie full reimbursement by Medicare to reporting by psychiatric facilities on their use of electronic health records and implementation of patient experience surveys. Additionally, beginning in 2017 psychiatric hospitals will be required to screen patients for tobacco use and help smokers quit smoking and will have to track the number of patients and personnel who receive flu vaccinations.

In the Inpatient Rehabilitation Facilities final rule, Medicare heightens payments to inpatient rehabilitation facilities by 2.4 percent, a 0.2 percent increase over the proposed 2.2 percent bump. This hike translates into aggregate payments of $180 million in the industry and applies to the nation’s roughly 1,200 inpatient rehabilitation facilities. Under the new rule, inpatient rehabilitation facilities are also required to report new quality metrics related to a pair of bacterial infections.

The SNF Prospective Payment System for FY 2015 final rule affects roughly 15,000 skilled nursing facilities and boosts payments to such facilities by 2 percent. This increase is equal to the payment hike proposed by CMS in May and is estimated to infuse $750 million into the industry.

In addition to the above final rules, on August 4, 2014, CMS issued a final rule that will update fiscal year 2015 Medicare payment rates under the Inpatient Prospective Payment System and the Long-Term Care Hospital Prospective Payment System by increasing payments for acute care hospitals by 1.4 percent in fiscal year 2015 and by 1.1 percent for long-term are hospitals. The final rule will be applicable to discharges on or after October 1, 2014 and will apply to an estimated 3,500 acute care hospitals and 435 long-term care hospitals.

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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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