HCA Holdings 2012 Annual Report Download - page 12

conditions subject to the excess readmission standard. The amount by which payments will be reduced is
determined by comparing the hospital’s performance for each condition using three years of discharge data to a
risk-adjusted national average, subject to a cap established by CMS. The reduction in payments to hospitals with
excess readmissions is capped at 1% for federal fiscal year 2013, 2% for federal fiscal year 2014, and 3% for
federal fiscal year 2015 and thereafter. Each hospital’s performance will be publicly reported by CMS.
The Health Reform Law additionally establishes a hospital value-based purchasing program to further link
payments to quality and efficiency. Beginning in federal fiscal year 2013, CMS will reduce the inpatient PPS
payment amount for all discharges by the following: 1% for 2013; 1.25% for 2014; 1.5% for 2015; 1.75% for
2016; and 2% for 2017 and subsequent years. For each federal fiscal year, the total amount collected from these
reductions will be pooled and used to fund payments to reward hospitals that meet certain quality performance
standards established by CMS. CMS will score each hospital based on achievement (relative to other hospitals)
and improvement ranges (relative to the hospital’s own past performance) for each applicable performance
standard. Because the Health Reform Law provides that the pool will be fully distributed, hospitals that meet or
exceed the quality performance standards will receive greater reimbursement under the value-based purchasing
program than they would have otherwise. Hospitals that do not achieve the necessary quality performance will
receive reduced Medicare inpatient hospital payments. For payments in federal fiscal year 2013, hospitals were
scored based on a weighted average of patient experience scores using the Hospital Consumer Assessment of
Healthcare Providers and Systems survey and 12 clinical process-of-care measures. On December 20, 2012,
CMS notified hospitals of the amount of their value-based incentive payment adjustments for federal fiscal year
2013 discharges. CMS estimates that it will distribute $850 million in federal fiscal year 2013 to hospitals under
the value-based purchasing program.
Historically, the Medicare program has set aside 5.10% of Medicare inpatient payments to pay for outlier
cases. For federal fiscal year 2012, CMS established an outlier threshold of $22,385, and for federal fiscal year
2013, CMS reduced the outlier threshold to $21,821. We do not anticipate that the decrease to the outlier
threshold for federal fiscal year 2013 will have a material impact on our results of operations.
Outpatient
CMS reimburses hospital outpatient services (and certain Medicare Part B services furnished to hospital
inpatients who have no Part A coverage) on a PPS basis. CMS uses fee schedules to pay for physical,
occupational and speech therapies, durable medical equipment, clinical diagnostic laboratory services,
nonimplantable orthotics and prosthetics, freestanding surgery center services and services provided by
independent diagnostic testing facilities.
Hospital outpatient services paid under PPS are classified into groups called ambulatory payment
classifications (“APCs”). Services for each APC are similar clinically and in terms of the resources they require.
A payment rate is established for each APC. Depending on the services provided, a hospital may be paid for
more than one APC for a patient visit. The APC payment rates are updated for each calendar year. The Health
Reform Law provides for reductions to the market basket update, including the following reductions for each of
the following calendar years: 0.1% in 2013; 0.3% in 2014; 0.2% in 2015 and 2016 and 0.75% in 2017, 2018 and
2019. For calendar year 2012 and each subsequent calendar year, the Health Reform Law provides for an annual
market basket update to be further reduced by a productivity adjustment. The amount of that reduction will be the
projected, nationwide productivity gains over the preceding 10 years. To determine the projection, HHS will use
the BLS 10-year moving average of changes in specified economy-wide productivity. The Health Reform Law
does not contain guidelines for use by HHS in projecting the productivity figure. However, CMS estimates that
the combined market basket and productivity adjustments will reduce Medicare payments under the outpatient
PPS by $26.3 billion from 2010 to 2019. For calendar year 2012, CMS increased APC payment rates by 1.9%,
which represented a market basket update of 3.0%, a negative 1.0% productivity adjustment and a 0.1%
reduction required by the Health Reform Law. For calendar year 2013, CMS has issued a final rule that increases
the APC payment rate by 1.8%, which includes the full market basket update of 2.6%, a negative 0.7%
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