- Yesterday, CMS released its proposed rule to update the 2017 Medicare payment rates under the Inpatient Prospective Payment System (PPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System.
- The agency took the industry by surprise by dropping the estimated $220 million payment cut related to CMS' beleagured "two-midnight rule."
- Under the two-midnight rule, hospital stays spanning less than two evenings are considered outpatient visits and paid accordingly. Those lasting two nights or longer are compensated as inpatient care.
The part of controversy surrounding the rule was the reduction of inpatient services compensation by 0.2%. CMS implemented the 0.2% inpatient payment cut in 2014, and has defended the cut until yesterday, arguing it’s necessary to offset an expected increase in inpatient cases related to the two-midnight policy.
By law, CMS is required to update payment rates for IPPS hospitals annually, and to account for changes in the costs of goods and services used by these hospitals in treating Medicare patients, as well as for other factors.
Last September, the court sided with the American Hospital Association in a lawsuit challenging the rate reduction and ordered CMS to justify its actions. "CMS believes the assumptions underlying the 0.2% adjustment were reasonable at the time they were made," the agency stated. "However, in light of recent review and the unique circumstances surrounding this adjustment...CMS is proposing to permanently remove this adjustment."
The agency has proposed an increase of about 0.8% for inpatient payment rates to offset the estimated costs of the two-midnight rule and its effect in the last three years. CMS projects that total Medicare spending on inpatient hospital services will increase by around $539 million in the next fiscal year.