CMS has released its final federal fiscal year (FFY) 2013 prospective payment system (PPS) rule for inpatient stays in acute care and long-term care hospitals (LTCHs). The rule projects a 2.3 percent increase in operating payments to acute care hospitals for FFY 2013, with total expenditures on inpatient hospital services to increase by about $2 billion in FFY 2013. The final rule is generally effective for discharges on or after October 1, 2012.

Among other changes, the final rule:

- Establishes the Hospital Readmissions Reduction Program, as required by Section 3025 of the Affordable Care Act (ACA). The program will reduce payments (effective for discharges on or after October 1, 2012) to hospitals with an "excess readmission ratio." The term "excess readmission ratio" is a hospital-specific concept, which is based on CMS's projected readmission rates for a given hospital. The program will utilize three 30-day readmission measures – Acute Myocardial Infarction, Heart Failure, and Pneumonia – and compare each hospital's readmission ratio for those measures with the national average. Hospitals with an excessive rate of readmissions will have all Medicare payments reduced by a maximum of 1%. CMS will use a minimum of three years' data to determine a provider's readmission ratio. In order to establish the readmission ratio for the current fiscal year, CMS will look back to a prior three year period, so a hospital with excess readmissions during the three year period of July 1, 2008 to June 30, 2011 will see adjustments to its FFY 2012 payments...