Medicare Proposes Increase In Payment Rates For Hospital Inpatient Care

On

May 12, 2003, CMS proposed a rule for FY 2004, beginning October 1, 2003, that

will include a 3.5 percent increase in payment rates to hospitals for inpatient

services furnished to Medicare beneficiaries.†

This increase is the projected FY 2004 increase for the full estimated

"hospital market basket"--the costs of goods and services used by

acute care hospitals.† CMS will pay

approximately $100.2 billion to roughly 4,800 acute care hospitals for FY

2004. † This is an increase of $5.7

      billion from FY 2003 payment rates.† The

      increase is due to payment rate and other policy changes ($2.1 billion)

      as well as expected increases in inpatient services ($3.6 billion). The

      proposed rule would also relax the requisite criteria for hospitals to receive

      add-on payments for new technologies by reducing the high-cost threshold for

      add-on payments for new technologies.†

      This lower threshold would apply to applications for new technology

      add-on payments for FY 2005. In addition, the proposed rule would expand the

      post-acute transfer policy to an additional 19 DRGs.† The policy currently applies to 10 DRGs, and treats discharges

      involving the designated DRGs as transfers from an acute-care hospital to a

      post-acute setting.† Under this policy,

      the transferring hospital is paid a per diem rate which is not to exceed the

      full payment of the DRG.† The outlier

      threshold will also be increased under the proposed rule.† It would increase from $33,560 in FY 2003 to

      $50,645 for FY 2004.† This would limit

      outlier payments to 5.1 percent of total payments under inpatient PPS.† CMS estimated that for the first three

      months of FY 2003, the outlier spending percentage was 5.5 percent and was 7.9

      percent of total payments for FY 2002.†

      CMS is planning to revise the rules governing outlier payments in a

      separate rulemaking procedure that should be finalized during the comment

      period for the proposed inpatient PPS rule.†

      The final outlier payment rule may significantly lower the outlier

      threshold in the inpatient PPS final rule.†

      The proposed inpatient PPS rule will be published in the Federal

      Register on May 21, 2003, and the comment period for the rule ends July 8,

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