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CMS Issues Final FY2014 Payment and Policy Changes for Acute and Long-Term Care Hospitals

Posted on 8/2/2013 by NTOCC ®

On Friday, August 2nd, the Centers for Medicare & Medicaid Services (CMS) issued the final rule for hospitals paid under the Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital Prospective Payment System (LTCH PPS). Specifically, the rule increases hospital inpatient payments by 0.7 percent, long-term care hospitals will get an increase of 1.3 percent and hospice pay will increase 1.7 percent in fiscal 2014. In addition to setting payment rates for hospital inpatient services, the rule updates and lays out a framework for implementation of several programs aimed at improving quality of care including the new Hospital-Acquired Conditions Reduction Program, which would begin in 2015, the Hospital Value-Based Purchasing (VBP) program and Readmissions Reduction program.

As you know, NTOCC submitted comments to the proposed rule which was issued in May.  Specifically, NTOCC strongly supported adding the proposed all-cause unplanned readmission measure for 30 days post-discharge from long-term care hospitals, and we are pleased that CMS included this measure in the final rule and recognized that “while some readmissions are unavoidable, such as those resulting from the inevitable progression of disease or worsening of chronic conditions, readmissions may also result from poor quality of care or inadequate transitions between care settings.”


NTOCC also strongly supported the inclusion of the new process measure for the Inpatient Psychiatric Facility Quality Reporting Program (IPFQR) which would assess follow-up care after hospitalization for mental illness. However, CMS did not add any new measures to the IPFQR Program for the FY 2015 payment determination, as they “believe that keeping the same measures for the FY 2015 payment determination will allow IPFs one additional year during which they could ramp up recordkeeping and improve quality of care on existing measures.”

In addition, the rule finalizes CMS’ clarification of its policy on the medical necessity of inpatient admissions spanning two midnights or more, and CMS’ recognition of the “recent increases in the length of time that Medicare beneficiaries spend as hospital outpatient receiving observation services.”  CMS states that if physicians expect beneficiaries to stay in the hospital for at least two midnights, CMS will direct audit contractors to presume an inpatient stay is appropriate.

NTOCC provided comments to CMS in May on this issue and highlighted the challenges for Medicare beneficiaries who are hospitalized under observation status, but not formally admitted as an inpatient, and then need skilled nursing facility (SNF) care.  As you know, Congress and provider and patient groups have raised concerns about how hospitals use observation stays and short inpatient stays.  Under current law, to qualify for the Skilled Nursing Facility (SNF) benefit, Medicare requires that the patient must have an inpatient stay of three or more consecutive days.  However, hospitals are increasingly classifying patients as “outpatients” despite the fact that they stay for many days and nights and receive the care and medical services as if they were inpatients.  These beneficiaries face greater financial liability towards accessing skilled nursing care, and many are forced to forgo care because the costs are too burdensome. 

While NTOCC supports CMS providing clarity on when a beneficiary would appropriately qualify for admission as an inpatient, as presumably that would decrease the number of beneficiaries inappropriately held for multiple days under “observation status,” NTOCC also urged CMS to further expand the type of patient classification which would qualify for the SNF benefit to ensure that time spent in observation stay could be counted toward meeting the three-day prior inpatient stay requirement needed to qualify for Medicare SNF coverage. 

To view the CMS Fact sheet please click here.  Click here to view the final rule.