CMS Proposed Policy and Rate Changes for LTAcHs

Yesterday, the Centers for Medicare and Medicaid Services (CMS) released its proposed rule for rates and other policy changes for FY 2011 (October 1, 2010) as applicable to Medicare inpatient stays within long-term acute care hospitals (LTAcH).  The entire rule can be found at

In their release, CMS noted that the proposed rule does not address provisions that are applicable to inpatient hospitals under the PPACA (Patient Protection and Affordable Care Act) or the Reconciliation Act.  The expectation is for CMS to provide additional guidance to providers on PPACA implications for 2010 and 2011 in the near future.  Below I have summarized the key provisions found in CMS’ proposed rule.

  • A rate update for 2011 of 2.4%
  • An offset or adjustment to the update of (negative) 2.5% to reflect an estimated increase in spending in FYs 08 and 09 due to documentation and coding that did not accurately reflect an increase in patient acuity or severity of illness (CMS stating that they essentially over-paid for a presumed higher level of care that did not occur).  CMS also notes that it is holding off on a negative 3.9% adjustment to rates; an amount required by law for a full recoupment of funds paid-out due to documentation and coding.  This amount may be phased-in for future years or taken all at once.
  • Since the net effect of the rate update and the negative adjustment for recoupment is a negative .1%, CMS proposes to increase the outlier threshold to $18,692 (last year’s was 7.5% or .5% below the target maximum of  8% of projected PPS payments)
  • The proposed rule calls for a partial freeze to any code updates for ICD-9 and ICD – 10 (set to go into effect October 1, 2013).  The freeze is intended to eliminate problems associated with coding software updates.  Any new updates that are applied would occur after October 1, 2011 to reflect only new technologies or diseases.
  • CMS is estimating that the net effect of the above rate changes is an increase in payment to LTAcHs of .8% or $41 million.

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