The Centers for Medicare & Medicaid Services (CMS) has proposed the fiscal year (FY) 2011 policies and payment rates for inpatient services furnished to people with Medicare by both acute-care hospitals and long-term care hospitals (LTCH), decreasing payments by 0.1 percent, or $142 million, compared with FY 2010.

The proposed rule does not address inpatient hospital related provisions of the recently enacted Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, according to the agency. CMS expects to provide further information on the implementation of healthcare reform provisions in these laws that affect FY 2010 and FY 2011 Inpatient Prospective Payment System (IPPS) payments in the near future.

In this action, the agency is proposing to update acute-care hospital rates by 2.4 percent for inflation, a slight increase over the FY 2010 inflation rate, and apply an adjustment of -2.9 percentage points to recoup one-half of the estimated excess spending in FY 2008 and 2009 aggregate payments, due to changes in hospital coding practices that did not reflect increases in patients’ severity of illness. Under legislation passed in 2007, CMS is required to recoup the entire amount of FY 2008 and 2009 excess spending from changes in hospital coding practices by FY 2012.

The agency is similarly proposing to update LTCH rates by 2.4 percent for inflation and apply an adjustment of -2.5 percentage points for the estimated increase in spending in FYs 2008 and 2009 due to documentation and coding that did not reflect increases in patients’ severity of illness. Based on these two proposed provisions and other proposed changes, CMS estimates that payments to LTCHs would increase by 0.8 percent or $41 million.

In response, the American Hospital Association's (AHA) CEO and President Rich Umbdenstock, said the organization was “deeply disappointed” with the proposal. “Plain and simple:  this policy will undermine hospitals' ability to care for patients and communities across the country,” he stated.

“Should this rule take effect, billions of dollars would be taken out of the system just as hospitals are grappling with sweeping changes and payment reductions contained in the new health reform legislation,” AHA said. “Not only do we believe CMS' analysis is incomplete, we disagree with any further reductions to a system in which, according to independent analyses conducted by MedPAC, hospitals already are being paid less than the cost of providing vital services.

According to CMS, the projected inflation updates for both types of hospitals may be revised in the final rule based on more recent data.

The proposed rule would apply to approximately 3,500 acute-care hospitals paid under the IPPS, and approximately 420 LTCHs paid under the LTCH Prospective Payment System, beginning with discharges occurring on or after Oct. 1. CMS noted that proposed payment rates are based on the most recently available data and may be revised in the final rule to reflect more current data.

Under current law, hospitals that successfully report quality measures included in the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program will receive the full update for 2011. Hospitals that do not participate in the quality reporting program will get the update less two percentage points. Based on the required reporting in 2009, 96 percent of participating hospitals are receiving the full update this year.

CMS also is proposing to add 45 measures to the RHQDAPU set for reporting in 2011.  However, only 10 of the proposed measures, including rates of occurrence for eight of 10 categories of conditions that are subject to the hospital-acquired conditions policy, will be considered in determining a hospital’s FY 2012 update. The remaining 35 measures—many of which CMS is proposing to be reported through registries—would be considered in determining the hospital’s FY 2013 update, and hospitals would not be required to report all of the proposed registry-based measures. The proposed use of registries would prevent hospitals from having to report the same data twice. In addition, the agency is proposing to retire one existing measure for reporting--mortality for selected surgical procedures (composite).

The proposed rule was published in the Federal Register Monday, and can be found under Special Filings at: www.archives.gov/federal-register/public-inspection/index.html.