On Friday, April 26, 2013, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule that updates Medicare payment policy and rates under the Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System for fiscal year (FY) 2014.  The proposed rule also outlines certain features of the Affordable Care Act (ACA), including patient safety programs to reduce hospital-acquired conditions and readmissions as well as the value-based purchasing program.

Major provisions of the proposed rule include:

• 0.8 percent increase in FY 2014 IPPS operating rates for inpatient stays in acute care hospitals paid under the IPPS and that participate in the Hospital Inpatient Quality Reporting (IQR) program. Acute care hospitals that do not participate in the IQR program will receive a 2 percent reduction in the proposed IPPS increase.

• 1.1 percent increase in Medicare payments to long-term care hospitals in FY 2014.

• Introduction of a presumption that hospital inpatient admissions that span at least two midnights (i.e., more than one Medicare utilization day) are appropriate for Medicare Part A payments, and inpatient admissions that span less than two midnights (i.e., less than one Medicare utilization day) are not appropriate for Part A payments.  Medical record documentation may be used to overcome the presumption.

• Update in payment policy for Medicare Disproportionate Share (DSH) hospitals in FY 2014, when DSH hospitals will receive 25 percent of the amount they previously would have received under the current formula. The remaining 75 percent of DSH payments will be paid as additional payments after a reduction based on the percentages of uninsured individuals, such that DSH hospitals will receive an annual amount based on each hospital’s share of the total amount of uncompensated care for all Medicare DSH hospitals.

• 1 percent reduction in payments to hospitals that rank among the lowest-performing 25 percent with regard to hospital-acquired conditions—FY 2015.

Additional information on the proposed rule, including proposed updates to documentation and coding adjustment recoupment, graduate medical education policy, and additional ACA quality proposals is available via CMS’s fact sheet. Comments on the proposed rule are due by June 25, 2013. A final rule is scheduled to be issued by August 1, 2013.