The former Governor of Kansas has been appointed and confirmed as the Secretary of Health and Human Services. Kathleen Sebelius took over the reigns of HHS in early May, and certainly is in for a challenge. Not only in the midst of the alleged pandemic from the H1N1 flu virus, but the new Administration’s health care reform initiatives and the continuing need to alter the way healthcare in the U.S. is provided, tracked and reimbursed is expected to be a key focal point.

Various notices have been released recently by CMS that will affect upcoming payments and payment policy of several Medicare provider types. A brief recap and synopsis follows:

• Skilled Nursing Facility (“SNF”) operators are apparently howling as the government proposes slashing Medicare payments by $1.05 billion in announcing the proposed 2010 payment rates.¹  Although CMS has proposed a rate increase of 2.1%, the notice includes a recommended recalibration and rebalance of the case mix indexes ("CMIs") that would result in a reduction in payments to nursing homes of $1.050 billion, or 3.3%. Accordingly, average RUG rates to SNFs for the 2010 rate year (10/1/09 - 9/30/10) would decline by 1.2%. The actual impact for an individual facility could vary depending on its own CMI and the influence of the wage index on the labor component of the rate. The overall impact of the proposed rule from a payment perspective is a reduction of Medicare reimbursements to nursing facilities by ~$390 million, or 1.2% lower than payments for RY 2009. CMS is also proposing to revise the CMI classifications to a RUG-IV methodology in RY 2011, reflecting data derived from the recently completed Staff Time and Resource Intensity Verification (“STRIVE”) project. The American Health Care Association has estimated that the states of California, Florida, New York, Texas and Ohio will be particularly hard hit as a result of the 2010 recalibration adjustment.

• CMS has issued a proposed notice on 2010 Medicare reimbursements for acute care and long-term care hospitals. The highlights from the respective CMS press releases² are as follows:

  2010 IPPS Rates: The DRG rates paid for Medicare services to hospitals reimbursed under the inpatient prospective payment system ("IPPS") would see rate levels increased by a 2.1% MBI factor to account for inflation based on the applicable market basket, but offset by a -1.9% adjustment to remove the effect of increases in aggregate payments due to changes in hospital coding practices that do not reflect increases in patient's severity of illness. Thus, the net change in rates is a nominal increase of .2%. The press release also mentions that the adjustment of -1.9% is a partial adjustment of what CMS believes is necessary to account for the overall adjustment needed to rebase rates over time, and therefore additional adjustments of approximately -6.6% may be needed in 2011 and 2012. CMS has requested public comments on this matter and possible alternative adjustments for the 2010 through 2012 rate years.

  2010 LTCH Rates: Payment rates to long-term care hospitals will have a net adjustment to its prospective rates, somewhat similar as IPPS hospitals, with an MBI of 2.4% (the market basket differs for LTCHs compared to general acute care hospital providers) and an adjustment of -1.8% for a net increase of .6%.

• Inpatient Rehabilitation Facilities (“IRFs”) may experience a 2.4% MBI applied to their payment rates for RY 2010 (discharges occurring on or after 10/1/09 through 9/30/10) according to a proposed notice issued by CMS.³ The MBI hike is expected to result in $140 million of increased Medicare reimbursements to the country’s +200 freestanding and over 1,000 IRF units in acute care hospitals.
  

• Key components of the rulemaking notice:

  IRFs are paid on a per-discharge basis and the PPS rate encompasses the inpatient operating costs and capital costs, including routine and ancillary costs of furnishing rehabilitation services.

  For the 2010 rate year, the standardized rate (prior to application of the case-mix group (“CMG”) weights for the 100 distinct CMGs, labor component and other possible adjustments) will be adjusted to $13,587.

  Wage indices have been updated based on recent available data for adjusting the labor component of the standard rate, which accounts for 75.904% of the total rate.

  The proposed rule sets the outlier threshold at $9,976 to maintain estimated outlier payments at 3% of total estimated aggregate IRF payments for RY 2010, with the outlier re-set estimated to increase payments by $10 million.

  In other provisions, the IRF proposed rule aims to clarify requirements for preadmission screening to determine whether a patient should receive rehab services in an IRF or in a less-intensive setting. The rulemaking also emphasizes the importance of post-admission treatment and ongoing care coordination throughout the patient’s stay in the rehab facility.

• Inpatient Psychiatric Facilities (“IPFs”) are slated to receive a rate increase to the prospective Medicare payment levels in RY 2010 (period from 7/1/09 to 6/30/10), with total Medicare payments to IPFs increasing by $87 million over the 2009 period. The majority of the rate change, with a 2010 per diem rate of $651.76, is due to a 2.1% MBI increase. It is noted that the average increase is estimated at 2%, although geographical differences will impact the adjusted rate under the proposed rulemaking notice.⁴ The fixed dollar threshold outlier amount is proposed at $6,565 to maintain the necessary CMS budget neutrality outlier policy.

• CMS issued a proposed notice⁵ that projects Medicare payments to certified Hospice providers to decrease by about 1.1%. The net reduction is the result of a 3.2% decrease in payments because of the phase-out of a temporary adjustment used to calculate the Medicare hospice wage index and the estimated 2.1% MBI rate hike afforded to payment levels of fiscal 2010. CMS is also proposing to adopt a MedPAC recommendation that would increase accountability in the physician certification and recertification process, partly due to concern of the high length of stay exhibited by many hospice providers.

¹ Per the Federal Register dated 5/12/09 announcing the proposed rates.
² The CMS press releases are dated 5/1/09. Federal Register notices are to be
      issued with the full proposed rule by mid-May.
³ Per the Federal Register dated 5/6/09.
⁴ Per the Federal Register dated 5/1/09.
⁵ As published in the Federal Register dated 4/24/09.

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