On August 1, the Centers for Medicare & Medicaid Services (CMS) published its final rule for the fiscal year (FY) 2004 inpatient prospective payment system (IPPS) rates in the Federal Register. The new rates take effect on October 1, 2003. The standardized amount increased slightly from the proposed rule, yielding a 4.1% increase over the FY 2003 rates. However, significant decreases in the wage indices for the NYC and Nassau-Suffolk metropolitan statistical areas (MSAs) reduced the net increase for hospitals in those MSAs to 1.2% and 1.5%, respectively. Other issues are described below.
Wage Index Policy: CMS will issue shortly a separate proposal on the final survey instrument; therefore, the September 30, 2003, deadline for submitting occupational mix data will be extended. With respect to new definitions of the MSAs issued by the Federal Office of Management and Budget in June, CMS said it would not automatically adopt the new MSAs as labor markets for wage index purposes, but would first study the effect of changing the labor markets and would issue a proposed rule if the agency thought changes would be appropriate.
Outliers: As expected, the outlier threshold was reduced significantly from the proposed rule amount to $31,000 because CMS updated the ratio of cost to charges used to estimate cost per case. Also, CMS said it would carefully consider an alternative test that GNYHA had recommended for determining which hospitals would be subject to retrospective reconciliation of their outlier payments.
Post-acute Care Discharges: CMS expanded to 19 the number of diagnosis-related groups in which patients discharged to post-acute care would be reimbursed as transfer cases.
Counting Non-hospital Residents: The final rule codifies certain Medicare principles prohibiting the redistribution of costs borne previously by the community to the Medicare program. The rule applies those principles to the count of full-time equivalent (FTE) residents, particularly in non-hospital settings, and requires a hospital to have continuously incurred the direct costs of residents training in a particular program at a non-hospital site since the date that the residents began training at that site in order to count the residents. The provisions will apply to FTE counts for days and discharges as of Oct. 1, 2003; residents who began training on or before that date will not be subject to disallowance until their programs are completed or until three years have passed, whichever comes first.
Counting Beds and Days: On those provisions of most interest to GNYHA members—unoccupied beds, dual eligible patient days, and Medicare+Choice days—the rule stated that CMS was still reviewing comments, which the agency will address in a separate document this year.
Nursing, Allied Health: CMS clarified the activities that would be considered approved nursing and allied health educational activities eligible for separate Medicare payments. CMS will use a concept of "industry norm" to determine whether the educational activity enables individuals to be employed in a capacity in which they could not have been employed without the educational activity, and therefore, whether the particular activity should be considered for separate Medicare payments.
Clinical Base Year: GNYHA and others who submitted comments had urged CMS to clarify its policies on treatment of the so-called clinical base year to determine a resident's initial residency period. CMS said that since this issue had not been included in its proposed rule, it would not consider those comments when promulgating the final rule.