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Hooper, Lundy & Bookman, Inc.© HFMA – August 10, 2011 Hospital IPPS Legislative and Regulatory Policy Update John R. Hellow 310-551-8155

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Presentation on theme: "Hooper, Lundy & Bookman, Inc.© HFMA – August 10, 2011 Hospital IPPS Legislative and Regulatory Policy Update John R. Hellow 310-551-8155"— Presentation transcript:

1 Hooper, Lundy & Bookman, Inc.© HFMA – August 10, 2011 Hospital IPPS Legislative and Regulatory Policy Update John R. Hellow 310-551-8155 Hooper, Lundy and Bookman, P.C. The statements and opinions contained herein represent only the views of John R. Hellow

2 Hooper, Lundy & Bookman, Inc.© 2 Medicare Spending 1999 and 2009

3 Hooper, Lundy & Bookman, Inc.© 3 Per Capita Medicare Spending by Sector 2000-2008

4 Hooper, Lundy & Bookman, Inc.© 4 Overview of Recent Developments I. Patient Protection & Accountable Care Act of (ACA), enacted March 23, 2010 II. Health Care & Education Reconciliation Act of 2010 (HCERA) (ACA fix legislation) III. FY 2011 IPPS Final Rule IV. American Jobs and Closing Tax Loopholes Act of 2010, H.R. 4213 V. Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, Pub. L. 111-192 VI. FY 2012 IPPS Final Rule

5 Hooper, Lundy & Bookman, Inc.© 5 Changes Affecting Medicare IPPS Payments to Acute Care Hospitals in FY 2011 FY 2011 Payment Changes A.Mkt. Basket +2.4% B.ACA Adj. - 0.25% C.Doc. & Co. -2.9% = -0.9% a)Extensions Act of 2007 CMS to recoup for FYs 2008-09 excess of case mix Δ – real case mix increases, during FYs 2010 and 2012 b)Disagree with CMS over real case mix increase

6 Hooper, Lundy & Bookman, Inc.© 6 Components of FY 2012 IPPS Payment Changes A. Market Basket 1. Latest Market Basket Updates can be found on CMS Website at rketBasketData.asp#TopOfPage rketBasketData.asp#TopOfPage 2. FY 2012 Final Rule Uses an Update of 3%

7 Hooper, Lundy & Bookman, Inc.© 7 Market Basket contd B. ACA Market Basket Adj. IPPS FYs 2012 – 2019 Fiscal Year Market Basket - Adjustment 2012.1% 2013.1% 2014.3% 2015.2% 2016.2% 2017.75% 2018.75% 2019.75% Similar if not identical market basket adjustments apply beginning in FY 2012 and thereafter for long term care hospitals, inpatient rehabilitation facilities, psychiatric hospitals and outpatient hospital services. There is no cut to the overall SNF market basket.

8 Hooper, Lundy & Bookman, Inc.© 8 Changes Affecting Medicare Payments to Acute Care Hospitals, contd C. Productivity Adjustment 1. Applies Beginning in FY 2012, 2. Negative adjustment of 1% for FY 2012 3. 10-year moving average of changes in the annual non-farm productivity, as determined by the Secretary, 4. Can result in a market basket increase of less than zero, 5. Payments in a current year may be less than the prior year, and 6. Applies to other provider types.

9 Hooper, Lundy & Bookman, Inc.© 9 Changes Affecting Medicare Payments to Acute Care Hospitals, contd D. Documentation and Coding Adjustments 1. Section 7(b)(1)(A) of Pub. L. 110-90 a.Make an adjustment to the average standardized amounts in order to eliminate the full effect of the documentation and coding changes on future payments. b.Does not specify when CMS must apply the prospective adjustment, but merely requires CMS to make an appropriate adjustment. c.Full prospective adjustment of 3.9 percent remaining. 2. Section 7(b)(1)(B) of Pub. L. 110-90 a.Requires CMS to make an adjustment in FYs 2010, 2011, and/or 2012 b.Determined a total recoupment of -5.8 percentage points. c.FY 2011: Finalized an adjustment of -2.9 percentage points; half of the 5.8 percentage points. d.FY 2012: Still remaining an additional 2.9 percentage points for recoupment.

10 Hooper, Lundy & Bookman, Inc.© Example of Proposed Adjustments to IPPS Update for FY 2012 and Possible Adjustments Thereafter 2011 2012 Est. 2013 Est. 2014 Est. 2015 Est. 2016 Market Basket2.4%3.0%2.9%3.0%2.9% ACA Reductions Market Basket-0.25%-0.1% -0.3%-0.2% ProductivityNA-1.0% -1.1%-1.0% Subtotal2.15%1.9%1.8%1.6%1.7% MS-DRG DCI Adjustments 08-09 Recoupment -2.9%0.0 (net)2.9%NA Prospective ReductionNA-2.0%-1.9%NA Cape Cod Decision1.1% Net Update-0.9%1.0%2.8%1.6%1.7% 10

11 Hooper, Lundy & Bookman, Inc.© 11 Changes Affecting Medicare Payments to Acute Care Hospitals, contd E. Medicare DSH Reductions – Reduced to 25% of current level + addl amount calculated as product of three factors : 1. Aggregate amount of payments by which total DSH payments have been reduced; 2. FYs 2014 – 2017 a factor of 1 minus percentage change from 2013 in number of uninsured individuals under 65, minus 0.1% (for 2014) and minus 0.2 % (for 2015, 2016 and 2017); for fiscal years 2018 - 2019, a factor of 1 minus the percentage change of uninsured minus 0.2 %; 3. A factor equal to the percent, for each hospital, that represents the quotient of (i) the amount of uncompensated care for such hospital, as estimated by the Secretary for a period chosen by the Secretary, and (ii) the aggregate amount of uncompensated care for all Medicare DSH hospitals.

12 Hooper, Lundy & Bookman, Inc.© 12 Changes Affecting Medicare Payments to Acute Care Hospitals, contd F. DSH Changes CMS Ruling 1498-R 1. CMS recalculates SSI percentage based on new matching method; 2. CMS includes non-covered/exhausted Part A days in DSH in Medicare fraction but not Medicaid fraction; 3. CMS includes L&D days in DSH calculation; and 4. Moots PRRB appeals seeking relief on three SSI related issues.

13 Hooper, Lundy & Bookman, Inc.© 13 Changes Affecting Medicare Payments to Acute Care Hospitals, contd G. Hospital Value-Based Purchasing –ACA § 3001 1. ACA Requirements a.Applies to discharges on and after 10/1/2012; b.Funded through base operating DRG reductions, 1 percent in 2013, 1.25 percent in 2014, 1.5 percent in 2015, 1.75 percent in 2016 and 2 percent thereafter; c.Incentive measures include ACI, HF, pneumonia, certain surgeries, patient experience of care (i.e., HCAHPS survey), healthcare acquired infections and spending per beneficiary; d.Incentives distributed by performance score and vary on score; e.Certain hospitals excluded –cited for immediate jeopardy, or too few measures or cases; and f.New measure must be posted on Hospital Compare website 1 year prior to implementation.

14 Hooper, Lundy & Bookman, Inc.© 14 Value Based Purchasing, contd 2. April 29, 2011 Final and FY 2012 Final Rules a.2011 Final Rule set measures to be used in 2013, discharges on and after 10/1/2012 and initial measure set for FY 2014 b.2012 Final Rule adds total spending per beneficiary efficiency measure to FY 2014 initial set with May 15, 2012 as the beginning of the performance measure period. 1)Equation used to measure efficiency has errors, but example is correct. 2)Spending per beneficiary will span 3 days prior to and 30 days after discharge c.Eight HAC measures in final rule to begin March 3, 2012.

15 Hooper, Lundy & Bookman, Inc.© 15 Changes Affecting Medicare Payments to Acute Care Hospitals, contd H. Payment Adjustment for HACS – ACA § 3008 1. Discharges on and after 10/1/2014 – hospitals in top quartile of risk adjusted HAC measure receive only 99% of total PPS payments; 1. Public disclosure of HACs in such hospitals; 1. Report by 1/1/2012 about extending to other provider types; and 1. FY 2012 Rule: a.Adds 5 non-controversial ICD-9 codes to existing HACs, and b.Defers adding contrast induced acute kidney failure.

16 Hooper, Lundy & Bookman, Inc.© 16 Changes Affecting Medicare Payments to Acute Care Hospitals, contd I. Hospital Readmissions Reduction Program 1. ACA Provisions a.Fiscal years commencing and and after 10/1/2012; b.Conditions subject to measure are high value or high volume as selected by Secretary; c.Law compares risk adjusted actual and expected readmissions; d.Excludes readmissions unrelated to prior discharge or planned readmissions e.Adjustment factor is the greater of: (a) 1 minus the ratio of payments for excess aggregate readmissions for a condition to the aggregate payments for such condition (expected readmissions?) admissions, or (b) a floor adjustment of.99 for FY 2013,.98 for 2014, or.97 for FY 2015 and thereafter; f.Applies to base operating DRG.

17 Hooper, Lundy & Bookman, Inc.© 17 Hospital Readmissions Reduction Program, contd 2. FY 2012 Final Rule a. Two part rulemaking – this year focus is on conditions and readmissions for FY 2013, measures and methods to determine readmission rates and public reporting, FY 2013 rulemaking will focus on payment. b. Current Rulemaking – 1)Conditions – heart attack, heart failure and pneumonia 2)No additional modifications for unrelated readmissions or planned readmissions beyond what is in measure specifications – CMS view is that this is statutory

18 Hooper, Lundy & Bookman, Inc.© 18 Hospital Readmissions Reduction Program, contd 3)Risk Adjustment Measures – only include diagnosis, age and gender, CMS said no to including race and life circumstances 4)Performance Measurement Period – Proposed 3 years July 1, 2008 to June 30, 2011 – Industry wants shorter more current data and CMS is reviewing periods between 1 and 3 years.

19 Hooper, Lundy & Bookman, Inc.© 19 Changes Affecting Medicare Payments to Acute Care Hospitals, contd J. Hospital Wage Index – ACA §§ 3137 and 3141 1. Section 508 reclassifications extended to 9/30/2010; 2. Criteria used to determine geographic reclassifications must revert to the criteria that were in effect as of September 30, 2008, until 1 year after wage index reform report submitted by HHS; a)Geographic Reclass window closed before more lenient criteria restored b)CMS should reopen window only for newly qualified 3. Effective for discharges occurring on or after October 1, 2010, the wage index for hospitals located in frontier states shall not be lower than 1; and 4. Budget Neutrality calculated on national basis.

20 Hooper, Lundy & Bookman, Inc.© 20 Wage Index Changes, contd 5. Pension Costs – FY 2012 Proposed Rule a.Wage Index Purposes 1)Must be funded 2)Contributions reported on cash basis 3)Use three year average for wage index in 2013 and beyond 4)Industry view is this favors underfunded plans vs overfunded plans b.Cost-Finding Purposes a.Same as above but not three year averaged, but b.Limited to 150% of consecutive 3-year average in 5 most recent c.Exception process for unusual situations on the 150% limit 6. Expiration of Imputed Rural Floor –CMS extends for FY 2012 and 2013 in Response to Comments

21 Hooper, Lundy & Bookman, Inc.© 21 Wage Index Changes, contd 7. Adjustment Based on Commuting Patterns a. Outmigration calculated using FY 2005 Final Rule, plus b. Use of post reclassified wage indices

22 Hooper, Lundy & Bookman, Inc.© 22 Changes Affecting Medicare Payments to Acute Care Hospitals, contd K. MDH Program extended through 10/1/2012, ACA § 3124. L. Temporary Improvements Low Volume Hosp., ACA § 3125. 1. Within 15 versus 25 mile from nearest hosp., 2. Less than 1600 Medicare discharges, previously Total 800 discharges, 3. Percentage increase in payments from 25% to 0% based on decreasing scale from 200 to 1600 Medicare discharges, 4. Hospitals with 201 to 300 Medicare discharges = add-on of 23.33 %, and with 301 to 400 discharges = 21.66 %

23 Hooper, Lundy & Bookman, Inc.© 23 Changes Affecting Medicare Payments to Acute Care Hospitals, contd M. Proposed FY 2012 Operating Outlier Threshold 1. CMS proposed $23,375 2. Industry proposes $21,660 a. CMS underestimating prior year underpayment b. CMS not correctly measuring CCR rate of change c. CMS including HMO days, and improper charges (e.g., clotting factor 3. CMS settled on $22,385

24 Hooper, Lundy & Bookman, Inc.© 24 Proposed FY 2011 Operating Outlier Threshold, contd

25 Hooper, Lundy & Bookman, Inc.© 25 Outlier Reconciliation Change Request 7192 Effective April 1, 2011 Available on CMS website Outlines Guidelines for Medicare Contractors for Outlier Reconciliation for IPPS, IRF, IPS, LTCH and OPPS

26 Hooper, Lundy & Bookman, Inc.© 26 Changes Affecting Medicare Payments to Acute Care Hospitals, contd N. Hospital Inpatient Quality Reporting Program (formerly known as RHQDAPU) 1. Retirement of Measures a)Retire Agency for Health Research and Quality (AHRQ) composite surgical mortality measure, 1)Measure developer does not support the use of this measure for public reporting and comparison across hospitals, 2)Measure was neither NQF-endorsed nor HQA approved b)Retiring 8 Measures for FY 2014 1)Seven measures topped out – uniformly high 2)One measure – timing of receipt of initial antibiotic – created adverse unintended consequences

27 Hooper, Lundy & Bookman, Inc.© 27 Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program, contd 2. EHR – CMS is considering future efforts on requiring EHR vendor certification that incorporates quality measure data that can be directly transmitted to CMS data warehouse 3. 4 New Measures for 2014 a)Central line insertion adherence percentage b)Catheter-Associated urinary tract infection c)Medicare spending per beneficiary d)Participation in systemic clinical data base registry for general surgery 4. 17 New Measure Proposed Measures for 2015 included 3 new healthcare associated infections

28 Hooper, Lundy & Bookman, Inc.© 28 Hospital Services Furnished Under Arrangement 1. FY2012 Proposed Rule Clarifies Under Arrangement for Routine Services 2.Routine Services cannot be provided under arrangement, only diagnostic or therapeutic services a. If provided in the hospital, they are considered to be provided by the hospital and subject to hospital quality controls b. If provided outside the hospital they are under arrangement and prohibited; c. If provided in another hospital the patient must be discharged to the other hospital

29 Hooper, Lundy & Bookman, Inc.© 29 Changes in CoPs Hospital Rehabilitation and Resp. Therapy A. Rehab Services 1. Can be ordered by all licensed practitioners if, 2. Privileges authorized by medical staff 3. In accordance w/hosp policies and state law 4. Ordering practitioner responsible for care of patient. B. Respiratory Care Services 1. NP and PAs included in licensed practitioners 2. Same as Rehab above 3. No requirement that MD countersign orders

30 Hooper, Lundy & Bookman, Inc.© Budget Control Act of 2011 A.Established Sequestration Process By Amending Gramm-Rudman if Legislature Cannot agree on at least $ 1.2 Trillion in Additional Cuts by January 15, 2012; A.Sequestration Must Result in at least $1 Trillion of the $1.2 Trillion Required in Cuts; A.Medicare is Limited to a 2% Cut for Patient Care Services for Parts A and B and monthly contract amounts for Parts C and D per Gramm-Rudman Section 256(d); A.Anything not Covered by Section 256(d) is not Similarly Limited in the Size of Cuts; and B.The 2% limit on Medicare is Expected to Save $48 Billion from FFY 2013-21.

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