Medicare's Proposed FY 2010 Inpatient and Long-Term Care Hospital Prospective Payment System Rule
On May 1, 2009, CMS published its proposed changes to the hospital inpatient prospective payment system ("IPPS") and long-term care hospital prospective payment system ("LTCH PPS") rates for FY 2010 (CMS-1406-P). A pre-publication copy is available for review at the Office of the Federal Register, and the official version should be published in the Federal Register on May 22, 2009. CMS will accept comments until June 30, 2009. If adopted, the changes described below will generally become effective on or after October 1, 2009.

Some of the key highlights include:

• Overall Adjustments: CMS will update IPPS rates by 2.1% for inflation, but concurrently adjust payments downward by -1.9%, to adjust for what it perceives to be non-severity-related changes in coding and documentation practices since implementation of the MS-DRGs. CMS notes that additional IPPS reductions of up -6.6% could be needed in FY 2011 and 2012. CMS also proposes to adjust the capital Federal rate by -3.4% in FY 2010 and subsequent years, to account for changes in documentation and coding practices.
  
  
• Small Hospital Adjustments: CMS proposes to apply a -2.5% adjustment for coding and documentation changes to the hospital-specific rates for Sole Community Hospitals ("SCHs") and Medicare Dependent Hospitals ("MDHs"), despite the acknowledged lack of "explicit authority" to do so in the governing statutes. CMS explains that this adjustment is higher than that for regular IPPS hospitals, because hospital-specific rates have not been previously adjusted to reflect coding and documentation changes.
  
  
• Medical Supplies/Implantable Devices Reporting: By June 2009, CMS expects to issuing guidance splitting the current Medicare cost report cost center for Medical Supplies Charged to Patients into one line item for Medical Supplies and another for Implantable Devices, and indicates that it may create distinct CCRs for use in calculating FY 2013 IPPS relative weights and CY 2013 OPPS relative weights.
  
  
• Occupational Mix Adjustment: CMS proposes applying the occupational mix adjustment to 100% of the FY 2010 wage index, and solicits comments on applying a penalty to hospitals that fail to submit or report unusable occupational mix data.
  
  
• Observation Patients: For purposes of both the indirect graduate medical education ("IME") and disproportionate share hospital ("DSH") payment methodologies, CMS proposes to exclude observation patient days and beds from the counts, even if the patient is subsequently admitted.
  
  
• Labor and Delivery Patient Days: In a reversal of its prior policies, CMS proposes to begin including labor and delivery patient days in the DSH count, regardless of whether or not the patient ever occupies a routine inpatient bed, so long as the patient is admitted as an inpatient to an IPPS-covered area of the hospital.
  
  
• Medicaid Fraction of DSH Calculation: CMS proposes allowing hospitals to report Medicaid days in the numerator for the Medicaid fraction of the DSH calculation based on the method of measurement received from the state Medicaid agency, which can be based on any of the following: date of admission, date of discharge, or dates of service.
  
  
• Clarification of Definition of New Medical Residency Training Program: CMS clarifies that it does not consider a program to be "new," for purposes of adjusting the base year direct graduate medical education ("GME") and IME caps, if the program previously existed at another hospital and later moved to the hospital claiming it as newly accredited.
  
  
• New Teaching Hospitals' Participation in GME Affiliation Groups: CMS clarifies that a new teaching hospital can submit its Medicare GME affiliation agreement after July 1, where it begins training for the first time after that date.

For further information, please contact Sandy Pitler (pitler@bbllaw.com).