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Hospitals Protest Modest Increases in Medicare Payment Rule

By Kerry Young, CQ Roll Call

April 20, 2015 -- The American Hospital Association (AHA) is upset that a Medicare payment proposal would give its members only a small bump in funds at a time when the group says they are being asked to make many changes in their approach to the delivery of care.

In a statement about the fiscal 2016 payment rule for many services delivered in hospitals, Rick Pollack, executive vice president of the AHA, noted the proposal carries forward many congressionally mandated policies. The Centers for Medicare and Medicaid Services (CMS) has estimated the planned changes would raise operating payments by 0.3 percent through the inpatient prospective payment system.

"These very modest increases will make it even more challenging for hospitals to deliver care patients and communities expect," Pollack said.

In the rule, CMS estimates that the proposed rule would result in a net increase of about $121 million for hospitals for inpatient services.

Medicare, which covers about 54 million elderly and disabled, is one of the largest sources of revenue for hospitals, accounting for about a fifth of hospitals' overall revenues in 2012, according to the Medicare Payment Advisory Commission. Medicare that year spent about $120 billion through its acute inpatient prospective payment system, making up about a quarter percent of the program's expenses.

The fiscal 2016 inpatient prospective rule runs to more than 1,500 pages, covering hundreds of tweaks to current policies and new proposals. Among them are changes to extraordinary circumstances policies, meant to apply to reduced payments for excess rates of readmission and for patient acquiring infections in hospitals. Extraordinary circumstances policies allow a waiver on use of data in cases where disasters such as hurricanes and flood affect a hospital.

The AHA said it is concerned about a CMS policy that was not address in the proposal. The group and the agency have been at odds for several years about when patients' short visits to hospitals should merit the more generous reimbursement made through Medicare Part A claims, and when they should be billed for observation services. Hospitals have been able to hold somewhat at bay the use of recovery audit contractors, whose work could put them at risk of missing out on any payment for a blown call on how to bill Medicare for services delivered.

In a statement about the proposal payment rule, CMS explained that it had set a benchmark of expecting stays lasting at least two nights to qualify as inpatient care, while shorter ones could be covered as outpatient services. CMS said that it expects to include "a further discussion of the broader set of issues related to short inpatient hospital stays, long outpatient stays with observation services" in another of the payment proposals, the one for calendar 2016 for outpatient services.

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