CMS Releases Inpatient Prospective Payment System (IPPS) Proposed Rule for Fiscal Year 2010

On May 1, 2009, the Centers for Medicare & Medicaid Services (CMS) released proposed policies and payment rates for the Medicare Inpatient Prospective Payment System (IPPS) for public view, setting forth proposed changes in operating and capital-related costs for fiscal year (FY) 2010.

Under the proposed rule, a total decrease of $979 million in combined operating and capital payments to hospitals are estimated. The proposed rule would apply to approximately 3,500 acute care hospitals paid under the IPPS, and implement certain provisions made by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) and the American Recovery and Reinvestment Act of 2009 (ARRA), beginning with discharges occurring on or after October 1, 2009. The rule also affects inpatient hospital services provided by long-term care hospitals.

CMS will accept comments on the proposed rule until June 30, 2009 and will respond to comments in a final rule to be made publicly available no later August 1, 2009. During the interim, a copy of the proposed rule may be found on the Federal Register website.

The Society’s health policy staff is reviewing the ruling to determine its financial impact (PDF, 24K) on hospital cardiac arrhythmia services and will provide a more detailed analysis in the coming weeks. In the mean time, the following is a summary of the major changes proposed by CMS:

• For FY 2010, CMS is estimating a $586 million decrease in operating payments (or 0.5 percent decrease), and $393 million decrease in capital payments (or 4.8 percent decrease), for a total of $979 million decrease in operating and capital payments to acute care hospitals.
• CMS is proposing an initial market-basket update of 2.1 percent for acute care hospitals that submit data on quality measures. Hospitals that do not submit data would receive a 0.1 percent update. The rule also proposes an adjustment of 1.9 percent to remove the effect of increases in aggregate payments due to changes in documentation and coding practices.
• Cardiac specialty hospitals are the only category of hospitals under the IPPS expected to experience payment increases in FY 2010 as compared to FY 2009 (an increase of 0.3 percent).
• FY 2009 completed the three-year transition of the MS-DRG system. For FY 2010, a methodology of 100 percent cost-based and 100 percent MS-DRGs will be used to determine relative weights.
• For FY 2010 payment determination, CMS has increased the number of quality measures from 30 to 44 for the RHQDAPU program.
• For FY 2011 payment determination and subsequent years, CMS is proposing to require hospitals to electronically acknowledge the completeness and accuracy of the data submitted for the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program.
• CMS is proposing to not adopt a regression-based cost-to-charge ratio (CCRs) for calculation of FY 2010 relative weights to minimize charge compression and improve accuracy of cost weights.
• CMS is not proposing to add or remove categories of Hospital-Acquired Conditions (HACs) at this time.
• CMS is not proposing changes to the payment implications of the Present on Admission (POA) indicator reporting options at this time. CMS is not proposing any revisions to the surgical hierarchy.
• CMS anticipates moving forward with testing the technical ability to accept data from Electronic Health Records (EHRs) for the ED, Stroke, and VTE quality measures as early as July 1, 2010.
• Beginning in FY 2010, CMS is proposing to calculate a budget neutrality factor to account for changes in MS-DRGs and relative weights separately from the budget neutrality factor to account for changes in wage data.