Inpatient Facility Coding & Compliance Alert

Grab the mixed bag of these six opportunities.

Here is your peek at some really dynamic changes with rise in inpatient payment rates, and equalizing payment differences across different hospital services! 

The Medicare Payment Advisory Commission (MedPAC) met on January 15-16, 2015, to finalize recommendations regarding 2015 payments for Inpatient Rehabilitation Facility (IRF), Long Term Care Hospital (LTCH), Ambulatory Surgical Center, Outpatient Dialysis, and Hospice services. These recommendations will be included in MedPAC’s 2015 March Report to Congress on Medicare payment policy.

Background: MedPAC formulates payment update recommendations every year for fee-for-service (FFS) Medicare services. Every year, MedPAC scrutinizes the indicators of payment adequacy and reevaluates any prior year assumptions using the most recent data available to make sure its recommendations accurately reflect current conditions. 

The commission also decided to rerun several of the payment updates recommended in last year’s report, including those pertaining to hospital payments. For these issues, MedPAC will include the draft recommendations presented at the commission’s December meeting. Read on for a lowdown on what to expect from Medicare in the year that lies ahead.

Tune in to the Announcements

According to AHA news in January 2015, MedPAC recommended that Congress may:

1. Increase Medicare payment rates for the hospital inpatient and outpatient prospective payment systems by 3.25 percent in 2015, noting that its recommendation is 5.25 percent if the sequester continues in 2015.

2. Reduce or eliminate payment differences between hospital outpatient departments and physician offices for selected procedures. “This will have a significant impact, mainly on hospitals,” explains Duane C. Abbey, PhD, president of Abbey and Abbey Consultants Inc., in Ames, IA. “The severity of the impact will depend on how the changes are implemented.  Note that CMS has now started to study off-campus provider-based clinics with an apparent intent to reduce payments.”

3. Pay long-term care hospitals the same rates as general acute-care hospitals for cases involving patients who are not deemed “chronically critically ill,” defined as an intensive care unit stay of at least eight days. 

4. MedPAC advises that savings accrued thereby may be used to create a new outlier pool for CCI (chronically critically ill) cases treated in inpatient PPS hospitals.

5. Require Medicare to freeze rates for ambulatory surgical centers, dialysis, hospices and long-term care hospitals in 2016 at current reimbursement rates. MedPAC expects little to no impact on beneficiaries’ access to those services if rate increases are suspended, and that collectively keeping reimbursement rates the same for those services would save the program more than $1 billion.

6. Make pay rates more equivalent for long-term care hospitals (LTCHs) and acute-care hospitals when they treat similar patients who spend fewer than eight days in an intensive-care or critical-care unit. The panel suggested a three-year phase-in for this recommendation, ending in 2018.

Good news or bad? “This equalization between LTCHs and acute-care hospitals may or may not generate a significant impact. Much study and analysis is needed to look at the cost structures for these two types of hospitals and the services proffered for equalization,” says Abbey. He adds that, “this same process is really needed for similar services provided by hospitals as inpatient versus the same services as outpatient, particularly with observation services.”

MedPAC also reviewed and shared the trends in certain hospital services and reimbursement patterns from 2011-2013. 

IRF report card: MedPAC discussed the data accumulated from 1,160 IRFs that treated 373,000 FFS cases in 2013, when Medicare FFS spending touched $6.8 billion. The supply of services and volume stayed stable during the period of study, with an average occupancy rate of 63 percent. The quality of services also showed small improvement from 2011-2013, with the access to capital being very good for many facilities. The 2013 margin was 11.4 percent. MedPAC projected the margin of 12.6 percent for IRFs for 2015.

LTCH analysis: Scrutinizing the adequacy indicators for LTCHs, MedPAC revealed that Medicare FFS spending totaled $5.5 billion for approximately 138,000 cases in 2013.As per MedPAC, indicators of access to care are favorable, with growth in payment per case between 2012 and 2013.However; there were volume decreases similar to other inpatient settings, with many beneficiaries receiving similar services in other settings. MedPAC affirmed that access to capital is presently adequate with a limited activity from prior and current moratoria. The 2013 margin was 6.6 percent; and MedPAC projected a margin of 4.6 percent for IRFs for 2015.

Contemplating the Future Concerns

AHA expressed their joy as well as their concerns regarding the payment recommendations.

“We are pleased that MedPAC recommended a substantial update for hospitals in 2015, recognizing that even efficient hospitals will have negative margins,” said Linda Fishman, AHA senior vice president for public policy analysis and development in an article published in AHA News on Jan. 16. “However, we are troubled by the suggestion to reduce or eliminate payment differences between hospital outpatient departments and physician offices for 66 ambulatory payment classifications, which could threaten access to care for Medicare beneficiaries. In addition, the LTCH recommendation is at odds with the sweeping LTCH payment reforms recently enacted by Congress in the Bipartisan Budget Act, and we are troubled by the lack of analysis evaluating the consequences this recommendation would have on the LTCH field and the beneficiaries it serves.”

Prospective implications: These update recommendations can significantly change the revenues providers receive from Medicare and help create pressure for broader reforms to address the fundamental problem in FFS payment systems—that providers are paid more when they deliver more services without regard to the quality or value of those additional services.