CMS Proposal Would Decrease FY 2015 Hospital Payments $241 Million

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Nathaniel Weixel  

April 30 — A proposed rule (RIN 0938-AS11) issued by the Centers for Medicare & Medicaid Services April 30 would increase payments to inpatient hospitals by 1.3 percent for fiscal year 2015.

However, aggregate payments (operating and capital) are expected to drop $241 million, the agency said.

The proposal would also increase payments to long-term care hospitals (LTCHs) by 0.8 percent, or $44 million.

Comments on the proposal are due June 30, the CMS said (docket CMS-1607-P). The proposed rule will be published in the May 15 Federal Register.

The proposed payment change would apply for inpatient stays in 3,400 general acute care hospitals paid under the inpatient prospective payment system (IPPS) that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful users of electronic health records (EHRs), the CMS said.

According to an agency press release, the rule's most significant changes are payment provisions intended to improve the quality of hospital care that reduce payment for readmissions and hospital-acquired conditions (HACs).

The rule also describes how hospitals can comply with the Affordable Care Act's requirements to disclose charges for their services online or in response to a request, supporting price transparency for patients and the public, the CMS said.

Payment Details

The 1.3 percent update comprises a 2.7 percent marketbasket increase, a 0.8 percent cut for documentation and coding adjustments, a 0.4 percentage point decrease for a productivity adjustment, and a 0.2 percentage point reduction required by the ACA.

Overall, hospitals would experience a 1.3 percent increase in payments primarily due to the effects of the hospital update and documentation and coding adjustment on the national standardized amount, the proposal said.

However, the agency said it expects that the rate increase, together with reductions under the Hospital Readmissions Reduction Program, the Hospital-Acquired Condition Reduction Program, Medicare disproportionate share hospital changes, the expiration “of certain statutory provisions that provided special temporary increases in payments to hospitals” and other proposed changes to IPPS payment policies, would actually decrease IPPS operating payments by 0.8 percent.

Taking the 0.8 percent decrease into account, the CMS said that total Medicare spending on inpatient hospital services will decrease by about $241 million in FY 2015.

Documentation and Coding Adjustments

In the proposal, the CMS said it will apply a temporary payment reduction of 0.8 percent for documentation and coding adjustments. Coding offsets are based on the assumption that hospital payments have increased solely due to changes in coding or classification of patients and not because patients are actually getting sicker.

The American Taxpayer Relief Act of 2012 (Pub. L. No. 112-240), also known as the “fiscal cliff” legislation, authorized the CMS to recover $11 billion in overpayments from 2014 through 2017. The health and human services secretary has authority with respect to the timing of the recoveries.

For FY 2015, CMS proposed to continue the approach begun in FY 2014 by making another 0.8 percent cut to continue the recovery process. A positive adjustment will be made to remove these one-time recoupment adjustments once the recovery is complete, the agency said.

Price Transparency

According to the CMS, the ACA contains a provision that requires each hospital to establish and make public a list of its standard charges for items and services.

“Our guidelines for implementing the provision are that hospitals either make public a list of their standard charges or their policies for allowing the public to view a list of those charges in response to an inquiry,” the CMS said. “We encourage hospitals to undertake efforts to engage in consumer friendly communication of their charges to help patients understand what their potential financial liability might be for services they obtain at the hospital, and to enable patients to compare charges for similar services across hospitals.”

EHR Incentives, Quality Reporting

The proposal also makes changes to the EHR incentive program and the IQR program.

Beginning with FY 2015, the CMS said hospitals that don't successfully participate in the Hospital IQR Program and don't submit the required quality data will be subject to a one-fourth reduction of the marketbasket update. Previously, those hospitals had their annual payment update reduced by 2 percent. Since the implementation of that financial penalty, the CMS said hospital participation has increased to well over 99 percent of IPPS Medicare-participating hospitals.

Also, according to the CMS, the law requires that the update for any hospital that isn't a meaningful EHR user will be reduced by one-quarter of the marketbasket update in FY 2015, one-half of the marketbasket update in FY 2016 and three-fourths of the marketbasket update in FY 2017 and later years, the CMS said.

The CMS also proposed to align for 2015 and 2016 the reporting and submission timelines for clinical quality measures for the Medicare EHR Incentive Program with the reporting and submission timelines of the Hospital IQR Program.

To match data collection periods between the EHR Incentive Program and the Hospital IQR Program, hospitals would voluntarily submit electronically a full year's worth of patient level data for the Hospital IQR Program, as well as three-quarters of a year's worth of data for the EHR Incentive Program, the CMS said.

To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Ward Pimley at

More information on the payment provisions in the proposal is at, and on the quality provisions in the proposal at


Request Health Care on Bloomberg Law