American Society of Hematology

FY 2014 Hospital Inpatient Prospective Payment System Proposed Rule: Summary of Major Provisions

Published on: May 23, 2013

On May 10, 2013, the Centers for Medicare and Medicaid Services published in the Federal Register the proposed rule for FY 2014 updating the hospital inpatient prospective payment system (IPPS) for services provided between October 1, 2013 and September 30, 2014. The proposed rule can be found on the Government Printing Office website. CMS will accept comments on the proposed rule until June 25, 2013.

Update Factor
For hospitals which successfully participate in the Hospital Inpatient Quality Reporting (IQR) program, overall payment rates will be increased by 0.8 percent in FY 2014. This reflects a hospital market basket update of 2.5 percent reduced by several factors mandated by the Affordable Care Act and offsets due to added costs included in the proposed rule. Hospitals that do not successfully participate in the IQR program will receive a reduction of 2.0 percent. The updates included in the proposed rule do not include any payment reductions due to the congressionally mandated reductions in Medicare spending due to sequestration. CMS is calculating the market basket update using 2010 as its base year, rather than the 2006 base year currently being used.

Medicare Disproportionate Share Hospitals (DSH)
Hospitals that see a disproportionate share of indigent patients currently receive an upward adjustment in their payments. Since the number of uninsured patients is expected to drop significantly in 2014 due to provisions of the Affordable Care Act, Medicare DSH payments will be reduced beginning in FY 2014. For all hospitals, CMS estimates that payments will be 0.9 percent lower in FY 2014.

Criteria for Case to be Classified as Inpatient Service
Over the years, there has been confusion as to when a patient should be classified as an inpatient as opposed to an outpatient or in observation status. CMS is proposing that admissions spanning at least two midnights will presumptively qualify as inpatient admissions for payment (under Medicare Part A); when an admission spans less than two midnights, it will be considered an outpatient visit (paid under Medicare Part B). CMS does allow that documentation in the medical record can overcome these presumptions. For example, a patient who is only in the hospital for one midnight census can be considered an inpatient if he or she left earlier than expected by the physician and the documentation in the medical record supports the physician's expectation that the patient would be in the hospital longer.

New Technology – Kcentra
Under the inpatient hospital prospective payment system, hospitals can receive an additional payment to the DRG for new technologies that provide substantial clinical improvement and add significant cost relative to the DRG payment rate. The add-on payment is provided for a 2-3 year period; after which time it is anticipated that the DRG payment will reflect the cost of the new technology. CSL Behring submitted an application for a new technology add-on payment for Kcentra, a replacement therapy for fresh frozen plasma (FFP) for patients with an acquired factor deficiency due to warfarin treatment who are experiencing a severe bleed. This product contains a variety of coagulation factors and antithrombotic proteins C and S. FDA approval is expected sometime this quarter.

CMS is concerned that Kcentra may be substantially similar to FFP and/or Vitamin K therapy. If so, Kcentra would not meet the "newness" criterion to qualify for a new technology add-on. To be considered as new technology, three criteria are evaluated: (1) whether the product uses the same or a similar mechanism of action, (2) whether the product is assigned to the same or a different DRG and (3) whether the new use of the technology involves the treatment of the same or a similar disease and the same or similar patient population. CMS believes that Kcentra is substantially similar to FFP on each of these criteria but invites public comment on this issue.

CSL Behring maintains that Kcentra represents a substantial clinical improvement in the treatment of patients with acute severe bleeding who require immediate reversal of their Vitamin K antagonist therapy and cites clinical studies to support this position. They also cite a number of clinical advantages of Kcentra including reduced chance of infection, ability to store at room temperature so that it can be rapidly available in emergency situations and the fact that its higher concentration can help avoid transfusion overload. It also notes that Kcentra is the standard of care in the guidelines issued by the American College of Chest Physicians and points out that AABB has stated that plasma should not be used to reverse warfarin in bleeding patients when specific factor concentrates are available.

CMS invites comments on whether Kcentra meets the substantial clinical improvement criterion. However, even if Kcentra is approved for new technology add-on payments, CMS indicates that such payments would not be available for any case in which the hospital receives an add-on payment for blood clotting factor administered to a beneficiary with hemophilia. A complete discussion of this issue can be found on pages 27538-27540 of the proposed rule.

Proposals to Improve Quality Of Care

Hospital-Acquired Condition Reduction Program
The Affordable Care Act required CMS to improve patient safety by imposing financial penalties on hospitals that perform poorly with regard to hospital-acquired conditions (HACs). HACs are conditions that patients did not have when they were admitted to the hospital, but that developed during the hospital stay. The proposed rule outlines a general framework for the HAC Reduction Program for FY 2015 implementation.

Under this program, hospitals that rank in the lowest-performing quartile for HACs would be paid 99 percent of what they would otherwise be paid under the IPPS beginning in FY 2015. To determine which hospitals fall into this quartile, CMS is proposing quality measures and a scoring methodology as well as a process for hospitals to review and correct their data.

For FY 2015, the first year of the program, CMS is proposing to measure HACs using measures that are either calculated using claims or are part of the Inpatient Quality Reporting program and would consist of two domains of measure sets:

  • The proposed Domain 1 measures would include six patient safety indicator (PSI) measures developed by the Agency for Health Care Research and Quality (AHRQ). These measures are: pressure ulcer rate; volume of foreign object left in the body; iatrogenic pneumothorax rate; postoperative physiologic and metabolic derangement rate; postoperative pulmonary embolism or deep vein thrombosis rate, and accidental puncture and laceration rate. An alternative to Domain 1 is also being proposed, which would consist of a composite PSI measure set.
  • The proposed Domain 2 measures would include two healthcare-associated infection measures developed by the Centers for Disease Control and Prevention's (CDC) National Health Safety Network: central line-associated blood stream infection and catheter-associated urinary tract infection.

Hospital Readmissions Reduction Program
The Hospital Readmissions Reduction program began on October 1, 2012. The maximum reduction under this program, which was one percent of payment amounts in FY 2013, will increase to two percent of payment amounts in FY 2014, as specified under the Affordable Care Act.

CMS currently assesses hospitals' readmission penalties using three readmissions measures endorsed by the National Qualify Forum (NQF): heart attack, heart failure, and pneumonia. For FY 2014, CMS proposes a revised methodology to take into account planned readmissions for these three existing readmissions measures. CMS also proposes to add two new readmission measures, which would be used to calculate readmission penalties for FY 2015: readmissions for hip/knee arthroplasty and chronic obstructive pulmonary disease.

Proposed Changes to the Hospital IQR Program and the EHR Incentive Program
Hospitals that do not participate successfully in the Hospital Inpatient Quality Reporting (IQR) program have their annual payment updates reduced by 2.0 percent. Since the implementation of this financial penalty, hospital participation has increased to well over 99 percent of Medicare-participating hospitals that are reimbursed under the IPPS.

The Hospital IQR Program measure set has grown from a starter set of 10 quality measures in 2004 to the set of 57 quality measures listed in this proposed rule. These measures include chart-abstracted measures, such as heart attack, heart failure, pneumonia, and surgical care improvement measures; claims-based measures such as mortality and readmissions; healthcare-associated infections measures; a surgical complications measure; survey-based measures, such as patient experience of care; immunization measures, and structural measures that assess features of hospitals, such as hospital volume, how the hospital deploys staff, or provider qualifications, to assess their capacity to improve quality of care.

Measures reported under the IQR Program are published on the Hospital Compare website, and may later be adopted for use in the Hospital Value-Based Purchasing (VBP) Program, mandated by the Affordable Care Act, which affects payment rates to hospitals beginning in FY 2013.

PPS-Exempt Cancer Hospital Quality-Reporting Program
The proposed rule proposes new quality measures for the PPS-Exempt Cancer Hospital Quality-Reporting Program, authorized by the Affordable Care Act. A total of 11 PPS-Exempt Cancer Hospitals would be covered in this program. In this rule, CMS proposes to add one new measure of surgical site infection for the FY 2015 program, and 13 new measures covering surgical processes of care, patient experience of care, and oncology for the FY 2016 program. The discussion of this program is located on pages 27710-27711 of the proposed rule.

Value Based Purchasing (VBP) Program
While voluntary reporting of quality measures by hospitals began in 2002, the Affordable Care Act shifted the program from paying for reporting to paying for performance and value. Starting October 1, 2012, Medicare payments to all hospitals were reduced by one percent to create a funding pool for incentive payments to hospitals based on performance on selected measures – process measures related to heart attack, heart failure, pneumonia and certain surgical procedures and patient experience related to communications with providers and conditions of the hospital. For FY 2014, CMS is increasing the applicable percent reduction to fund the Value-Based Purchasing Program's incentive payment pool, to 1.25 percent. CMS estimates that the total amount available for performance-based incentive payments for FY 2014 would be approximately $1.1 billion.

More information about the Hospital VBP program is available on the CMS website.

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