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Hospital Inpatient Reg Lessens Cuts for Safety-Net Facilities

By John Reichard, CQ HealthBeat Editor

August 6, 2013 -- The hospital industry is praising Medicare officials for wielding their regulatory powers to lessen fiscal 2014 cuts to facilities that treat large numbers of poor people.

But industry groups didn’t have much else good to say about the final Medicare hospital inpatient payment rule.

The health law requires cuts in Medicare and Medicaid “disproportionate share hospital,” or DSH, payments because millions of uninsured people will get health benefits under the law.

These DSH payments offset some of the costs to hospitals of treating patients who are unlikely to pay their medical bills because their incomes are so low. But because of expanded coverage under the health law (PL 111-148, PL 111-152) fewer people should be unable to pay and DSH payments are scheduled to drop.

However, hospitals say it’s a different story now that coverage under the law is expected to expand more slowly. That’s because the Supreme Court’s 2012 ruling on the health law made Medicaid expansion optional, and because the Obama administration delayed the start of the employer health coverage mandate until 2015.

The Centers for Medicare and Medicaid Services (CMS) is listening, at least to a point.

“We appreciate that CMS decreased the size of the overall cut to DSH spending—cutting nearly $550 million in fiscal 2014, as opposed to the proposed cut of $1 billion,” said Linda E. Fishman, senior vice president with the American Hospital Association (AHA). But Fishman said language in the rule intended to clarify the criteria for a hospital inpatient admission that is covered by Medicare Part A—and not by Part B governing outpatient services—isn’t satisfactory.

“This final rule is unlikely to reduce the number of appeals of Part A claim denials, which CMS said was one of the primary goals of its rulemaking,” Fishman said in an Aug. 2 AHA statement. AHA said it intends to pursue litigation relating to the issue.

Another hospital group, Premier Healthcare Alliance, wasn’t happy about it either. The new criteria “do not provide any protections from burdensome audits and appeals, and require providers to have a sixth sense and predict the future treatment needs of patients,” said Blair Childs, the group’s senior vice president. “Moreover, these changes add insult to injury, imposing an associated 0.2 percent payment reduction to offset what CMS believes will be an increase in inpatient volume.”

CMS said in announcing the rule that “if a physician expects a beneficiary’s surgical procedure, diagnostic test or other treatment to require a stay in the hospital lasting at least two midnights, and admits the beneficiary to the hospital based on that expectation, it is presumed to be appropriate that the hospital receive Medicare Part A payment.”

John Reichard can be reached at [email protected].

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