CMS Proposes Policy And Payment Rate Changes For Inpatient Stays In Acute Care And Long-Term Care Hospitals In Fy 2010

The Centers for Medicare & Medicaid Services (CMS) today (May 1, 2009) proposed the fiscal year (FY) 2010 policies and payment rates for inpatient services furnished to people with Medicare by both acute care hospitals and long-term care hospitals.  Interested persons have until June 30 to submit comments to CMS.  CMS plans to finalize the rule by August 1, 2009.

The proposed rule placed on display at the Federal Register today and available for review at would apply to approximately 3,500 acute care hospitals paid under the Inpatient Prospective Payment System (IPPS), and 400 long-term care hospitals paid under the Long-Term Care Hospital Prospective Payment System (LTCH PPS), beginning with discharges occurring on or after October 1, 2009.  The proposed payment rates are based on the most recently available data and are subject to revision in the final rule to reflect more current data.

In today’s announcement, CMS proposes:

  • To update acute care hospital rates by 2.1 percent for inflation less an adjustment of 1.9 percentage points to remove the effect of increases in aggregate payments due to changes in hospital coding practices that do not reflect increases in patient’s severity of illness.
  • To update long-term care hospital rates by 2.4 percent for inflation less an adjustment of 1.8 percentage points to account for changes in documentation and coding practices that do not reflect increases in patient’s severity of illness. 

Beginning October 1, 2008, Medicare adopted a new classification system for general acute and long term care hospitals to better recognize severity of illness and the cost of treating Medicare patients.  According to the announcement, hospitals changed their documentation and coding of patient diagnoses under the new system in a manner that CMS states leads to an increase in aggregate payments without corresponding growth in actual patient severity. CMS says the proposed documentation and coding adjustments help ensure that estimated aggregate payments to these hospitals under the new classification systems would not increase solely as a result of the changes to the classification system and hospital coding practices.

The Medicare Actuary found based on analysis of 2008 data that additional coding that did not reflect actual changes in the severity of patients’ illnesses increased total payments under IPPS by 2.5 percent in FY 2008 and will further increase total payments in FY 2009.  Based on current estimates, the Medicare Actuary estimates that total adjustments of approximately 8.5 percent would have to be made to the acute care hospital rates to address changes in hospitals’ coding practices, including the increase in FY 2008 payments and the estimated increase in FY 2009 payments.  CMS is proposing a prospective adjustment of 1.9 percentage points for FY 2010, which means additional adjustments of approximately 6.6 percentage points, will be needed in FY 2011 and FY 2012.  CMS is requesting public comment on whether to apply a different documentation and coding adjustment than the one being proposed for FY 2010.

Under current Medicare law, hospitals that successfully report the 2010 quality measures included in the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program will get the full update.  Hospitals that do not participate in the quality reporting program will get the update less two percentage points. Ninety-seven percent of participating hospitals received the full update last year. The proposed rule adds four new measures for which hospitals must submit data under the RHQDAPU program to receive the full market basket update.  Two of these measures are additions to the existing Surgical Care Improvement Project (SCIP) measure set, and CMS believes that the other two measures will promote hospital participation in nursing-sensitive care and stroke care registries.

CMS is also proposing changes to regulations affecting payment adjustments to teaching hospitals (hospitals that offer graduate medical education programs), and disproportionate share hospitals (hospitals that provide care to a disproportionate share of low income patients), and to clarify the regulations implementing the Emergency Medical Treatment and Labor Act (EMTALA).  In addition, the proposed rule describes five applications for new technology add-on payments and CMS’ preliminary findings about those technologies.

For More Information

We hope that this information is useful to you. If you need assistance responding to concerns about the matters discussed in this publication or other health care concerns, wish to obtain information about arranging for training or presentations by Ms. Stamer, wish to suggest a topic for a future program or update, or wish to request other information or materials, please contact Ms. Stamer via telephone at (214) 270-2402 or via e-mail to

You can review other recent updates and other publications by Ms. Stamer and other helpful health care resources and additional information about Ms. Stamer and her experience, see Stamer Health Industry Experience. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail- by creating or updating your profile at here or by registering to participate in the Solutions Law Press Health Care Update blog at Health Care Update Blog. For important information concerning this communication click here.    If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject to

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