CMS Issues FY 2014 Hospital Inpatient PPS Final Rule

On August 2, the Centers for Medicare & Medicaid Services (CMS) issued a final rule updating fiscal year (FY) 2014 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital Prospective Payment System (LTCH PPS).

Over the next four years, CMS is required by law to recover $11 billion to fully recoup documentation and coding overpayments for prior years. For FY 2014, CMS will apply a negative 0.8 percent recoupment adjustment as the first step in this recovery process.CMS expects to make additional adjustments in FY 2015, 2016, and 2017 in order to recover the full $11 billion.


Major Provisions

The final rule will apply to approximately 3,400 acute care hospitals and approximately 440 long-term care hospitals, and will affect discharges occurring on or after October 1, 2013. Major provisions of the rule include:

  • Hip and knee surgery and chronic obstructive pulmonary disease have been added to the list of conditions used to determine the payment reduction for the Readmission Reduction Program.
  • The number and types of planned readmissions that no longer count against a hospital’s readmission rate have been increased.
  • Measures for the Hospital Inpatient Quality Reporting, Inpatient Psychiatric Facility Quality Reporting, Long-Term Care Hospital Quality Reporting, and PPS-Exempt Cancer Hospital Quality Reporting programs have been revised. As part of a new Hospital-Acquired Condition Reduction Program, hospitals in the lowest quartile for medical errors or serious infections contracted while in the hospital will be paid 99 percent of what they otherwise would have been paid under the IPPS, beginning in FY 2015. This rule finalizes the criteria to rank hospitals with a high rate of hospital-acquired conditions.


Modification, Clarification on Inpatient Hospital Admissions

The final rule modifies and clarifies CMS’s longstanding policy on how Medicare contractors review inpatient hospital admissions for payment purposes. In addition to services designated as inpatient-only, surgical procedures, diagnostic tests, and other treatments are generally appropriate for inpatient hospital admission and payment when the patient is expected to require a stay that crosses at least two midnights and the patient is admitted based upon that expectation.

In addition, the rule finalizes provisions from a separate March 13, 2013 proposed rule that allows payment to hospitals for additional inpatient services under Medicare Part B for hospital inpatient admissions denied as not medically necessary under Part A. The timely filing deadline for these Part B claims is one year from the date of service.


View the FY 2014 IPPS final rule on the Federal Register website.

Read AHIMA’s comments on the proposed rule, dated June 25.


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