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New Medicare Payment Reductions And Penalties Draw Criticism

Close up of American money
Many hospitals will face reduced payments from Medicare and Medicaid according to the new proposed rules and penalties. Wikimedia Commons (CC BY-SA 2.

The Centers for Medicare & Medicaid Services (CMS) proposed rules for acute hospitals and long-term care facilities for fiscal year 2014, which may result in reduced payments for hospitals that serve large amounts of low-income patients and those that fail to meet patient safety standards of the Affordable Care Act (ACA).

As the chief organization that administers Medicare and Medicaid benefits to an estimated 100 million people and 3800 hospitals nationwide, the CMS effectively sets the tone for the entire American healthcare system.

The CMS proposed a 0.8 percent, $27 million increase in hospital payments overall compared to the current fiscal year, and a 1.1 percent or $62 million increase to long term care hospitals. The rates account for inflation and adjust for overpayments in previous years.

Many hospitals, however, may face decreases in payments. Adjustments in the proposed rule would result in a 0.9 percent decrease to assistance for disproportionate share hospitals (DSH). The assistance is designed to offset additional costs of the 3,109 hospitals across the nation for serving a disproportionately high share of low-income and uninsured patients. 

“The DSH reductions remain a looming threat to hospitals that care for our most vulnerable patients," said Dr. Bruce Siegel, President and Chief Executive Officer of the National Association of Public Hospitals and Health Systems. "Congress and the administration must repeal or reduce these damaging cuts and work toward a policy that achieves savings and recognizes the actual level of uncompensated care nationally."

The proposed rule also broadened incentives and penalties as part of patient safety program, one of the hallmarks of the ACA, which will be launched in fiscal year 2015.

Hospitals will be penalized for readmitting patients with certain conditions within 30 days of leaving the hospital, under the assumption that hospitals should provide high quality care on the first admission in order to reduce readmissions. The new rules expanded patient conditions to include chronic obstructive pulmonary disorder (COPD), as well as hip or knee replacements. Additionally, the maximum penalty for readmissions will be raised from 1 to 2 percent of total hospital payments.

Another 1 percent penalty on total payment will be levied on the worst quartile of hospitals, which perform the poorest in hospital-acquired conditions, such as injuries from falls, bed sores, and infections due to urinary catheter use.

Furthermore, hospitals that fail to participate in the Hospital Inpaitent Quality Reporting Program will be penalized a 2 percent decrease on the proposed increase. Introduced with the ACA, this program evaluates 57 quality measures, including surgery patient experience, pneumonia related to healthcare associated infections, and heart failure. Currently, less than 15 percent of hospitals participate.

The CMS will accept comments on the proposal until late June and payment schedule will be finalized in August.

The entirety of the 1,400 page proposed rule can be read here.

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