Spring may bring new growth throughout the country, but in Washington, D.C., it brought a group of rules designed to control growth of healthcare spending. Recent Centers for Medicare and Medicaid Services final and proposed rules detailed payment updates and policy changes for inpatient rehabilitation facilities, long-term care hospitals, skilled nursing facilities, and home health agencies with the common goal of encouraging quality and efficiency.
Inpatient Rehabilitation Facilities
On May 2, CMS issued a proposed rule for the inpatient rehabilitation facility prospective payment system that is estimated to increase Medicare payments in FY08 by approximately $150 million.
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The proposed rule would continue the existing phase-in to a 75 percent compliance threshold, a requirement that when fully implemented will require that at least 75 percent of an inpatient rehabilitation facility's total inpatient population has one of the 13 designated medical conditions for which intensive inpatient rehabilitation services are considered medically necessary. The compliance threshold increases to 65 percent for cost reporting periods beginning during the 12-month period starting on July 1, 2007. For cost reporting periods beginning on and after July 1, 2008, the compliance percentage is 75 percent.
The proposed rule also would increase the high-cost outlier threshold to $7,522 from $5,534 in FY07, based on an analysis of 2005 data that indicates that this threshold would maintain estimated outlier payments at 3 percent of total payments under the inpatient rehabilitation facility PPS.
Although the higher threshold would mean that fewer cases would qualify for outlier payments, a lower outlier threshold would require an across-the-board reduction in the base payment for an inpatient rehabilitation facility stay to maintain budget neutrality. The high-cost outlier threshold may be updated for the final rule based on analysis of 2006 data. The proposed rule would also clarify that short-stay transfer cases that meet the criteria to qualify for outlier payments are eligible to receive the additional payments. Comments on the proposed rule will be accepted until July 2.
Long-Term Care Hospitals
On May 1, CMS issued a final rule under which Medicare total payments to long-term care hospitals are expected to exceed $4 billion for rate year 2008. The rule is designed to ensure appropriate payment for treatment of severely ill or medically complex patients, while providing incentives for more efficient care.
CMS is updating the long-term care hospital PPS federal rate by 0.71 percent to $38,356.45 for RY08. This update reflects the rehabilitation, psychiatric, and long-term care market basket of 3.2 percent and an adjustment of 2.49 percent to account for coding practices. CMS analysis of the latest available long-term care hospital claims data indicates that a significant portion of the estimated 3.49 percent increase in observed case mix between FY04 and FY05 is due to changes in coding practices and documentation rather than to the treatment of more resource-intensive patients. Therefore, the standard federal rate for RY08 has been adjusted by the most recent estimate of the market basket for RY08 (3.2 percent) and -2.49 percent, the difference between the observed case mix increase in FY05 (3.49 percent) and the real case mix increase (1 percent) due to increases in patient severity. The payment per discharge to long-term care hospitals is significantly higher than the federal rate for acute care hospitals paid under the inpatient PPS, which for FY07 is about $5,300 per discharge.
The final rule sets the outlier fixed-loss amount for RY08 at $22,954, up from $14,887 in RY07. According to CMS, this revision to the threshold is necessary to limit estimated aggregate outlier payments to 8 percent of total estimated payments under the long-term care hospital PPS. The final rule does not revise the long-term care diagnosis-related groups and relative weights.
Skilled Nursing Facilities
Medicare payments to skilled nursing facilities would increase by an estimated $690 million in FY08, according to a proposed rule issued by CMS on April 30. The 3.3 percent increase would affect payment rates to nursing facilities that furnish certain skilled nursing and rehabilitation care to Medicare beneficiaries recovering from serious health problems.
Under Medicare's skilled nursing facility PPS, each facility is paid a daily rate based on the relative needs of individual Medicare patients, adjusted for local labor costs. The daily rate covers the costs of furnishing all covered nursing facility services, including routine services such as room, board, nursing services, and some medical supplies, together with related costs such as therapies, drugs, and lab services: and capital costs including land. buildings, and equipment. Public comments on the proposal will be accepted until June 29.
Home Health
On April 27, CMS issued a proposed rule tot home health that contains the first refinements to the Medicare home health PPS since 2000 and also contains the annual update to the Medicare home health PPS payment rates of 2.9 percent. CMS estimates that the refinements and updates in the proposed rule will generate an additional $140 million in payments to home health agencies in CY08.
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