Summary
Establishes a new program whereby inpatient hospital service payments are reduced if their preventable readmission rates exceed certain levels. Payments may be reduced by up to 1% in FY13 phasing up to 3% in FY15 and thereafter.
Implementation Status
CMS implemented the readmissions program effective FY13. For more details, including the final FY13 inpatient hospital regulation, which outlines the key parameters of the program, visit CMS’s website dedicated to this program.
On April 26, 2013, CMS issued a proposed rule updating FY 2014 Medicare payment policies and rates for inpatient stays at general acute care and long-term care hospitals (LTCHs). Both the Medicare Inpatient Prospective Payment System (IPPS) and LTCH proposals, following CMS’ consideration of public comments and upon finalization, take effect October 1, 2013. Under the proposed rules, CMS estimates that gross hospital payments will be $27 million higher in FY14 than they were in FY15 (which reflects the ACA Medicare DSH cuts, which are expected to result in a -0.9% cut to hospital payments). Gross LTCH payments under the proposed rule will increase by 1.1% or $62 million, with the proposed implementation of the 25% Rule costing the sector $190 million. CMS fact sheets on the rule are available here and here. Comments on the proposal are due by June 25, 2013.
On August 2, 2013, CMS issued its FY 2014 Medicare Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) PPS final rule under which gross hospital payments will be $1.2 billion higher in FY 2014 than they were in FY 2013 – much higher than the $27 million increase initially proposed. The final rule addresses a number of IPPS and LTCH payment and quality-related provisions authorized or amended by the ACA.
On May 1, CMS issued a proposed rule updating FY 2015 Medicare payment policies and rates for inpatient stays at general acute care and LTCHs. Under the proposed rule, hospitals that participate in the Hospital Inpatient Quality Reporting (IQR) Program and are ‘meaningful users’ of EHRs would receive a 1.3% payment update. However, the 1.3% rate increase, when coupled with the payment policy reductions – including those under the Hospital Readmissions Reduction Program, the Hospital Acquired Condition (HAC) Reduction Program, Medicare DSH changes as well as “the expiration of certain statutory provisions that provided special temporary increases in payments to hospitals and other proposed changes” – would ultimately decrease IPPS operating payments by approximately 0.8% or $241 million over FY 2015 payment levels. Also of note, gross LTCH payments under the proposed rule would increase by 0.8% or $44 million over FY 2014 payments, with a delay (pursuant to the statutory mandate) in the full application of the 25% Rule patient threshold, among other key LTCH policy changes denoted further below. Comments are due by June 30, 2014. CMS fact sheets are available here and here. A CMS press release is available here.
On May 7, HHS issued a report, delineating a number of Department-led quality improvement initiatives aimed at reducing hospital readmissions, adverse drug events (ADEs), and other forms of patient harm – including falls and hospital acquired conditions (HACs). HHS estimates that these efforts have prevented an estimated 15,000 deaths and saved roughly $4.1 billion in costs over the 2011-12 period. In particular, the report touts these achievements in the broader context of the ongoing Partnership for Patients initiative (Partnership), as well as measures under the ACA that seek to improve patient safety.
On August 4, CMS issued a final rule updating FY 2015 Medicare payment policies and rates for inpatient stays at general acute care and LTCHs. The final rule also codifies “two interim final rules with comment period relating to criteria for disproportionate share hospital [DSH] uncompensated care payments and extensions of temporary changes to the payment adjustment for low-volume hospitals and of the Medicare-Dependent, Small Rural Hospital (MDH) Program.”
Under the final rule, hospitals that participate in the Hospital Inpatient Quality Reporting Program and are ‘meaningful users’ of EHRs would receive a 1.4% payment update – up slightly from the agency’s 1.3% proposed increased. However, the 1.4% rate increase, when coupled with payment policy reductions enumerated further below – including reductions under the Hospital Readmissions Reduction Program, changes to Medicare DSH payments, and so forth – are projected to decrease IPPS operating payments by approximately 0.6%” (compared to the net decrease of 0.8% under the proposed rule) – or by roughly $756 million in FY 2015.
CMS also finalized its proposal to continue its slow phase-in of the ATRA’s coding intensity adjustment, leaving ~$8 billion to be recouped in FYs ‘15 and ‘16.
Gross LTCH payments under the final rule would increase by 1.1% – up from the 0.8% CMS put forward in its proposed rule, with a delay (pursuant to the statutory mandate) in the full application of the 25% Rule patient threshold, among other key LTCH policy changes denoted further below.
CMS fact sheets are available here and here. An agency press release is available here.
On Apr. 17, as part of a proposed rule updating FY 2016 Medicare payment policies and rates for inpatient stays at general acute care and LTCHs, CMS proposed “a refinement to the pneumonia readmissions measure, which would expand the measure cohort for the FY 2017 payment determination and subsequent years.”
On a related note, on May 26, CMS released an extensive proposed rule (press release; fact sheet) on Medicaid and CHIP managed care that seeks to acknowledge increased enrollment in managed care delivery systems and promote cross-market alignment with Marketplace QHPs and Medicare Advantage (MA).
On July 31, CMS released the FY 16 inpatient prospective payment system (IPPS) and long-term care hospital PPS final rule affecting discharges beginning on Oct. 1, 2015. The rule also includes an embedded interim final rule with comment period effectuating the statutory extension of the Medicare-dependent, small rural hospital Program and changes to the low-volume payment adjustment. The rule addressed this provision of the ACA.
On Feb. 19, 2016, CMS released its estimates of the CY 2017 Medicare Advantage (MA) Advanced Notice and Draft Call Letter delineating the agency’s planned changes in the MA capitation rate and risk adjustment methodologies, as well as key policy changes under Part D. An agency press release is available here. CMS estimates that, on average, MA plans will see a +1.35 percent revenue increase relative to CY 2016 due to Advance Notice policies.
On Apr. 19, 2016, CMS released the FY 2017 inpatient prospective payment system (IPPS) and long-term care hospital PPS and policy proposed rule that, once, finalized, will apply to discharges beginning on or after Oct. 1, 2016. Under the rule, CMS estimates a net average payment increase of 0.7 percent (a roughly $539 million increase in spending, including capital) in FY 2017 for the IPPS. For LTCH’s, and stemming largely from the application of statutory site-neutrality provisions in the Pathway for SGR Reform Act, CMS estimates that FY 2017 payments will decrease by an estimated $355 million or -6.9 percent in FY 2017.
On Aug. 2, 2016, CMS released the FY 2017 inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) PPS and policy final rule. The final rule governs FY 2017 payments to approximately 3,330 acute care hospitals and 430 LTCHs through the IPPS and LTCH PPS, respectively, and effectuates key policy changes. Under the rule, net payments to inpatient hospitals will increase by 0.95 percent on average compared with FY 2016. For the IPPS, the rule finalizes the 1.5 percent documentation and coding recoupment cut, as proposed, and delays the proposed incorporation of S-10 data into uncompensated care calculations. LTCH PPS payments will decrease by 7.1 percent under the LTCH PPS amid the ongoing implementation of site neutrality and will increase by 0.7 percent for cases qualifying for the higher standard rate. The aforementioned provisions are addressed in this regulation.
2017
On April 27, CMS released its proposal to revise the Medicare IPPS/LTCH PPS for FY 2018. This provision of the ACA is addressed in the rule.
On Aug. 3, CMS finalized a rule to revise the Medicare hospital inpatient prospective payment system (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System for FY 2018. This provision of the ACA is addressed in the rule.
Statutory Text
SEC. 3025. HOSPITAL READMISSIONS REDUCTION PROGRAM. (a) IN GENERAL.—Section 1886 of the Social Security Act (42 U.S.C. 1395ww), as amended by sections 3001 and 3008, is amended by adding at the end the following new subsection: ‘‘(q) HOSPITAL READMISSIONS REDUCTION PROGRAM.— ‘‘(1) IN GENERAL.—With respect to payment for discharges from an applicable hospital (as defined in paragraph (5)(C)) occurring during a fiscal year beginning on or after October 1, 2012, in order to account for excess readmissions in the hospital, the Secretary shall make payments (in addition to the payments described in paragraph (2)(A)(ii)) for such a discharge to such hospital under subsection (d) (or section 1814(b)(3), as the case may be) in an amount equal to the product of—øAs revised by section 10309¿ ‘‘(A) the base operating DRG payment amount (as defined in paragraph (2)) for the discharge; and ‘‘(B) the adjustment factor (described in paragraph (3)(A)) for the hospital for the fiscal year. ‘‘(2) BASE OPERATING DRG PAYMENT AMOUNT DEFINED.— ‘‘(A) IN GENERAL.—Except as provided in subparagraph (B), in this subsection, the term ‘base operating DRG payment amount’ means, with respect to a hospital for a fiscal year—‘‘(i) the payment amount that would otherwise be made under subsection (d) (determined without regard to subsection (o)) for a discharge if this subsection did not apply; reduced by ‘‘(ii) any portion of such payment amount that is attributable to payments under paragraphs (5)(A), (5)(B), (5)(F), and (12) of subsection (d). ‘‘(B) SPECIAL RULES FOR CERTAIN HOSPITALS.— ‘‘(i) SOLE COMMUNITY HOSPITALS AND MEDICARE- DEPENDENT, SMALL RURAL HOSPITALS.—In the case of a medicare-dependent, small rural hospital (with respect to discharges occurring during fiscal years 2012 and 2013) or a sole community hospital, in applying subparagraph (A)(i), the payment amount that would otherwise be made under subsection (d) shall be determined without regard to subparagraphs (I) and (L) of subsection (b)(3) and subparagraphs (D) and (G) of subsection (d)(5). ‘‘(ii) HOSPITALS PAID UNDER SECTION 1814.—In the case of a hospital that is paid under section 1814(b)(3), the Secretary may exempt such hospitals provided that States paid under such section submit an annual report to the Secretary describing how a similar program in the State for a participating hospital or hospitals achieves or surpasses the measured results in terms of patient health outcomes and cost savings established herein with respect to this section. ‘‘(3) ADJUSTMENT FACTOR.— ‘‘(A) IN GENERAL.—For purposes of paragraph (1), the adjustment factor under this paragraph for an applicable hospital for a fiscal year is equal to the greater of— ‘‘(i) the ratio described in subparagraph (B) for the hospital for the applicable period (as defined in paragraph (5)(D)) for such fiscal year; or ‘‘(ii) the floor adjustment factor specified in subparagraph (C). ‘‘(B) RATIO.—The ratio described in this subparagraph for a hospital for an applicable period is equal to 1 minus the ratio of— ‘‘(i) the aggregate payments for excess readmissions (as defined in paragraph (4)(A)) with respect to an applicable hospital for the applicable period; and ‘‘(ii) the aggregate payments for all discharges (as defined in paragraph (4)(B)) with respect to such applicable hospital for such applicable period. ‘‘(C) FLOOR ADJUSTMENT FACTOR.—For purposes of subparagraph (A), the floor adjustment factor specified in this subparagraph for— ‘‘(i) fiscal year 2013 is 0.99; ‘‘(ii) fiscal year 2014 is 0.98; or ‘‘(iii) fiscal year 2015 and subsequent fiscal years is 0.97. ‘‘(4) AGGREGATE PAYMENTS, EXCESS READMISSION RATIO DEFINED.—For purposes of this subsection: ‘‘(A) AGGREGATE PAYMENTS FOR EXCESS READMIS- SIONS.—The term ‘aggregate payments for excess readmissions’ means, for a hospital for an applicable period, the sum, for applicable conditions (as defined in paragraph (5)(A)), of the product, for each applicable condition, of— ‘‘(i) the base operating DRG payment amount for such hospital for such applicable period for such condition; ‘‘(ii) the number of admissions for such condition for such hospital for such applicable period; and ‘‘(iii) the excess readmissions ratio (as defined in subparagraph (C)) for such hospital for such applicable period minus 1. ‘‘(B) AGGREGATE PAYMENTS FOR ALL DISCHARGES.—The term ‘aggregate payments for all discharges’ means, for a hospital for an applicable period, the sum of the base operating DRG payment amounts for all discharges for all conditions from such hospital for such applicable period. ‘‘(C) EXCESS READMISSION RATIO.— ‘‘(i) IN GENERAL.—Subject to clause (ii), the term ‘excess readmissions ratio’ means, with respect to an applicable condition for a hospital for an applicable period, the ratio (but not less than 1.0) of— ‘‘(I) the risk adjusted readmissions based on actual readmissions, as determined consistent with a readmission measure methodology that has been endorsed under paragraph (5)(A)(ii)(I), for an applicable hospital for such condition with respect to such applicable period; to ‘‘(II) the risk adjusted expected readmissions (as determined consistent with such a methodology) for such hospital for such condition with respect to such applicable period. ‘‘(ii) EXCLUSION OF CERTAIN READMISSIONS.—For purposes of clause (i), with respect to a hospital, excess readmissions shall not include readmissions for an applicable condition for which there are fewer than a minimum number (as determined by the Secretary) of discharges for such applicable condition for the applicable period and such hospital. ‘‘(5) DEFINITIONS.—For purposes of this subsection: ‘‘(A) APPLICABLE CONDITION.—The term ‘applicable condition’ means, subject to subparagraph (B), a condition or procedure selected by the Secretary among conditions and procedures for which— ‘‘(i) readmissions (as defined in subparagraph (E)) that represent conditions or procedures that are high volume or high expenditures under this title (or other criteria specified by the Secretary); and ‘‘(ii) measures of such readmissions— ‘‘(I) have been endorsed by the entity with a contract under section 1890(a); and ‘‘(II) such endorsed measures have exclusions for readmissions that are unrelated to the prior discharge (such as a planned readmission or transfer to another applicable hospital). ‘‘(B) EXPANSION OF APPLICABLE CONDITIONS.—Beginning with fiscal year 2015, the Secretary shall, to the extent practicable, expand the applicable conditions beyond the 3 conditions for which measures have been endorsed as described in subparagraph (A)(ii)(I) as of the date of the enactment of this subsection to the additional 4 conditions that have been identified by the Medicare Payment Advisory Commission in its report to Congress in June 2007 and to other conditions and procedures as determined appropriate by the Secretary. In expanding such applicable conditions, the Secretary shall seek the endorsement described in subparagraph (A)(ii)(I) but may apply such measures without such an endorsement in the case of a specified area or medical topic determined appropriate by the Secretary for which a feasible and practical measure has not been endorsed by the entity with a contract under section 1890(a) as long as due consideration is given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. ‘‘(C) APPLICABLE HOSPITAL.—The term ‘applicable hospital’ means a subsection (d) hospital or a hospital that is paid under section 1814(b)(3), as the case may be. ‘‘(D) APPLICABLE PERIOD.—The term ‘applicable period’ means, with respect to a fiscal year, such period as the Secretary shall specify. ‘‘(E) READMISSION.—The term ‘readmission’ means, in the case of an individual who is discharged from an applicable hospital, the admission of the individual to the same or another applicable hospital within a time period specified by the Secretary from the date of such discharge. Insofar as the discharge relates to an applicable condition for which there is an endorsed measure described in subparagraph (A)(ii)(I), such time period (such as 30 days) shall be consistent with the time period specified for such measure. ‘‘(6) REPORTING HOSPITAL SPECIFIC INFORMATION.— ‘‘(A) IN GENERAL.—The Secretary shall make information available to the public regarding readmission rates of each subsection (d) hospital under the program. ‘‘(B) OPPORTUNITY TO REVIEW AND SUBMIT CORRECTIONS.—The Secretary shall ensure that a subsection (d) hospital has the opportunity to review, and submit corrections for, the information to be made public with respect to the hospital under subparagraph (A) prior to such information being made public. ‘‘(C) WEBSITE.—Such information shall be posted on the Hospital Compare Internet website in an easily understandable format. ‘‘(7) LIMITATIONS ON REVIEW.—There shall be no administrative or judicial review under section 1869, section 1878, or otherwise of the following: ‘‘(A) The determination of base operating DRG payment amounts. ‘‘(B) The methodology for determining the adjustment factor under paragraph (3), including excess readmissions ratio under paragraph (4)(C), aggregate payments for excess readmissions under paragraph (4)(A), and aggregate payments for all discharges under paragraph (4)(B), and applicable periods and applicable conditions under paragraph (5). ‘‘(C) The measures of readmissions as described in paragraph (5)(A)(ii). ‘‘(8) READMISSION RATES FOR ALL PATIENTS.— ‘‘(A) CALCULATION OF READMISSION.—The Secretary shall calculate readmission rates for all patients (as defined in subparagraph (D)) for a specified hospital (as defined in subparagraph (D)(ii)) for an applicable condition (as defined in paragraph (5)(B)) and other conditions deemed appropriate by the Secretary for an applicable period (as defined in paragraph (5)(D)) in the same manner as used to calculate such readmission rates for hospitals with respect to this title and posted on the CMS Hospital Compare website. ‘‘(B) POSTING OF HOSPITAL SPECIFIC ALL PATIENT READ- MISSION RATES.—The Secretary shall make information on all patient readmission rates calculated under subparagraph (A) available on the CMS Hospital Compare website in a form and manner determined appropriate by the Secretary. The Secretary may also make other information determined appropriate by the Secretary available on such website. ‘‘(C) HOSPITAL SUBMISSION OF ALL PATIENT DATA.— ‘‘(i) Except as provided for in clause (ii), each specified hospital (as defined in subparagraph (D)(ii)) shall submit to the Secretary, in a form, manner and time specified by the Secretary, data and information determined necessary by the Secretary for the Secretary to calculate the all patient readmission rates described in subparagraph (A). ‘‘(ii) Instead of a specified hospital submitting to the Secretary the data and information described in clause (i), such data and information may be submitted to the Secretary, on behalf of such a specified hospital, by a state or an entity determined appropriate by the Secretary. ‘‘(D) DEFINITIONS.—For purposes of this paragraph: ‘‘(i) The term ‘all patients’ means patients who are treated on an inpatient basis and discharged from a specified hospital (as defined in clause (ii)). ‘‘(ii) The term ‘specified hospital’ means a subsection (d) hospital, hospitals described in clauses (i) through (v) of subsection (d)(1)(B) and, as determined feasible and appropriate by the Secretary, other hospitals not otherwise described in this subparagraph.’’. (b) QUALITY IMPROVEMENT.—Part S of title III of the Public Health Service Act, as amended by section 3015, is further amended by adding at the end the following: ‘‘SEC. 399KK ø42 U.S.C. 280j–3¿. QUALITY IMPROVEMENT PROGRAM FOR HOSPITALS WITH A HIGH SEVERITY ADJUSTED READMISSION RATE. ‘‘(a) ESTABLISHMENT.— ‘‘(1) IN GENERAL.—Not later than 2 years after the date of enactment of this section, the Secretary shall make available a program for eligible hospitals to improve their readmission rates through the use of patient safety organizations (as defined in section 921(4)). ‘‘(2) ELIGIBLE HOSPITAL DEFINED.—In this subsection, the term ‘eligible hospital’ means a hospital that the Secretary determines has a high rate of risk adjusted readmissions for the conditions described in section 1886(q)(8)(A) of the Social Security Act and has not taken appropriate steps to reduce such readmissions and improve patient safety as evidenced through historically high rates of readmissions, as determined by the Secretary. ‘‘(3) RISK ADJUSTMENT.—The Secretary shall utilize appropriate risk adjustment measures to determine eligible hospitals. ‘‘(b) REPORT TO THE SECRETARY.—As determined appropriate by the Secretary, eligible hospitals and patient safety organizations working with those hospitals shall report to the Secretary on the processes employed by the hospital to improve readmission rates and the impact of such processes on readmission rates.’’.