CMS Issues Medicare Final Payment Rule; Strengthens Tie Between Payment and Quality Improvement

August 2, 2011

The U.S. Centers for Medicare and Medicaid issued a final rule on August 1, 2011, that will update fiscal year 2012 payment policies and rates for hospitals.  The rule will impact Medicare payments to general acute care hospitals and inpatient stays for long-term hospitals.

“The final rule continues a payment approach that encourages hospitals to adopt practices that reduce errors and prevent patients from acquiring new illnesses or injuries during a hospital stay,” said CMS Administrator Donald M. Berwick, M.D. “This approach is part of a comprehensive strategy being implemented across Medicare’s payment systems that is intended to reduce overall costs by improving how care is delivered.”

The final rule serves to update the payment policies and rates for acute care hospitals paid pursuant to the Inpatient Prospective Payment System (IPPS), and also hospitals paid under the Long Term Care Hospital Prospective Payment System (LTCH PPS).  It will strengthen the Hospital Inpatient Quality Reporting (IQR) Program by putting increased emphasis on the prevention of healthcare-associated infections (HAIs) in general acute care hospitals.  The rule also establishes the framework for a new quality reporting program applicable to hospitals and paid under the LTCH PPS.

The final rule implements statutory provisions of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act) as well as other federal legislation.

Payment Projections

CMS has made projections that total Medicare operating payments paid to acute care hospitals for inpatient services in FY 2012 will increase by $1.13 billion, or 1.1 percent, as compared to FY 2011.

Medicare payments to LTCHs for FY 2012 are also projected to increase.  Projections are $126 million or 2.5 percent in FY 2012 as compared to 2011.

Improvements in Patient Care

The Affordable Care Act incentivizes the reduction of preventable hospital readmissions and improved care coordination in hospitals by requiring CMS to implement a Hospital Readmissions Reduction Program that reduces payments to certain hospitals having excess readmissions for certain conditions. The August 1 final rule finalizes the readmissions measures for three conditions:  acute myocardial infarction (heart attack), heart failure, and pneumonia.  The rule also finalizes the methodology used to calculate excess readmission rates for these conditions.

The rule also promotes the goal of providing high quality care to Medicare beneficiaries at lower cost and greater efficiency by adopting a Medicare spending per beneficiary measure for the Hospital IQR Program and the New Hospital Inpatient Value-Based Purchasing (VBP) program.  The measure will require assessing beneficiary Part A and Part B spending during a time span three days prior to hospital admission through 30 days post patient discharge.

Hospital-Acquired Conditions (HACs)

The Affordable Care Act requires CMS to address certain hospital-acquired conditions (HACs), including infections that are high cost, high volume, or both; “are assigned to a higher paying MS-DRG when present as a secondary diagnosis”; and “could reasonably have been prevented through the application of evidence-based guidelines.”

In finalizing the rule, CMS discussed proposed changes to hospital-acquired conditions (HACs), including infections, that would be subject to the statutorily required FY 2012 quality adjustment in MS-DRG payments.

After considering public comments, through the final rule, CMS has adopted the following list of categories (along with applicable ICD-9-CM codes) that identify hospital-acquired conditions (HACs) and surgical site infections:

  • Foreign object retained after surgery
  • Blood incompatibility
  • Pressure ulcer stages III & IV
  • Falls and Trauma
  • Catheter-associated urinary tract infection
  • Vascular catheter-associated infection
  • Manifestations of poor glycemic control
  • Surgical site infection, mediastinitis, following coronary artery bypass grafts (CABG)
  • Surgical site infection following some orthopedic procedures
  • Surgical site infection following bariatric surgery for obesity.
  • Deep vein thrombosis and pulmonary embolism following certain orthopedic procedures

Read the August 1, 2011, CMS Press Release here.

Click here to download the final rule.

{ 1 comment… read it below or add one }

Barbara Robinson August 3, 2011 at 10:21 am

This is fascinating. I wonder, though, how much cost will be involved for hospitals in collecting and reporting the data with regard to the HACs. It is refreshing to see that finally positive patient outcomes will be rewarded.

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