Hospital Associations Raise Concerns Over 2013 IPPS Proposed Rule

The recent release of the Inpatient Prospective Payment System (IPPS) Proposed rule for fiscal year (FY) 2013 has not been completely well-received by hospitals. Specifically, CMS has come under criticism with regard to documentation and coding adjustments that followed the implementation of Medicare severity diagnosis-related groups (MS-DRGs) in 2007.

Some aspects of the Proposed rule, released on May 11, 2012, have received positive comments, in particular, the implementation of the value-based purchasing program. According to a previous blog post, IPPS hospitals will receive $904 million more in 2013 than in 2012 under the rule.  Public comments were requested by CMS to be made by June 25th.

Leading the criticism of documentation and coding adjustments are two hospital associations: (1) the American Hospital Association (AHA), on behalf of 5,000 member hospitals, health systems, and health care organizations; and (2) the Federation of American Hospitals (FAH), representing 1,000 investor-owned or managed community hospitals and health systems. Both associations point to the “flawed methodology” CMS is using for determining the effect of documentation and coding. Specifically, the associations point to the 0.8 percent payment reduction, proposed to continue for FY 2013, which CMS bases on its conclusion of a continued increase in case mix in FY 2010 due to coding and documentation improvements. AHA cites, however, that CMS is “comparing hospitals’ documentation and coding practices to their documentation and coding practices under an entirely different system in FY 2007; doing so is highly inappropriate.” Both associations claim that the cuts are excessive. 

Charles N. Kahn III, President and CEO of FAH, in his letter to Marilyn Tavenner, Acting Administrator of CMS, went on to spell out the problems he saw with CMS’ methodology for determining outlier fixed-loss thresholds and the level of outlier payments as well.  According to Kahn, “much more needs to be done to improve the accuracy of CMS’s projections and substantially reduce, if not eliminate, chronic payment shortfalls, which total more than $5 billion since 2003.” Kahn also pointed to “a troubling lag in using the most current cost report data, which resulted in the proposed rules’ excessive estimate of FY 2012 outlier payments, and by extension, an FY 2013 proposed fixed-loss threshold that is still too high, even after CMS’s welcome and prompt correction of an error in the proposed rule.”  FAH is also concerned that the proposed discretionary budget neutrality adjustment for long-term care hospitals (LTCHs) is unnecessary because any remnants of the 2.5% excess payments that are believed to have occurred in FY 2003 has already been eliminated from past and future LTCH prospective payment system (LTCH PPS) payments.

Rick Pollack, Executive Vice President of AHA, also raised issues in his letter to Tavenner regarding the Hospital Readmissions Reduction Program, which will reduce payments to hospitals with higher-than expected readmission rates starting in 2013.  Required by to the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), the program mandates that readmission measures account for readmissions that are planned and related to the initial admission, but CMS has not excluded those readmissions, despite requests from the public to do so.  Pollack also raised concerns about Sole Community Hospital (SCH) classification, which does not require re-approval except for when there is a change in the circumstances under which classification was approved.  In the 2013 proposed rule, however, CMS proposes that SCHs be required to report to their fiscal intermediary anything that could have affected its initial classification, or CMS may revoke the SCH classification retroactive to when it was grants.  AHA disagrees with the policy, calling it “inappropriately punitive.”

Just how responsive and receptive CMS will be to these issues is yet to be seen.  CMS will address these, and all other comments and concerns by others, in its IPPS Final rule for FY 2013, which should be issued by August 1, 2013. Stayed tuned for further analysis once the Final rule is released…