HCA Holdings 2012 Annual Report Download - page 13

productivity adjustment and the negative 0.1% adjustment required by the Health Reform Law. CMS continues
to require hospitals to submit quality data relating to outpatient care to avoid receiving a 2% reduction to the
market basket update under the outpatient PPS. CMS requires hospitals to report data on 23 quality measures in
calendar year 2013 to avoid reduced payments in calendar year 2014.
Rehabilitation
CMS reimburses inpatient rehabilitation facilities (“IRFs”) on a PPS basis. Under the IRF PPS, patients are
classified into case mix groups based upon impairment, age, comorbidities (additional diseases or disorders from
which the patient suffers) and functional capability. IRFs are paid a predetermined amount per discharge that
reflects the patient’s case mix group and is adjusted for area wage levels, low-income patients, rural areas and
high-cost outliers. The Health Reform Law also provides for reductions to the market basket update, including
the following reductions for each of the following federal fiscal years: 0.1% in 2013; 0.3% in 2014; 0.2% in 2015
and 2016 and 0.75% in 2017, 2018 and 2019. For federal fiscal year 2012 and each subsequent federal fiscal
year, the Health Reform Law provides for the 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 IRF PPS by $5.7 billion from 2010 to 2019. For federal
fiscal year 2012, CMS updated the market basket by 2.2%, reflecting a 2.9% market basket increase, a negative
1.0% productivity adjustment, a 0.1% reduction required by the Health Reform Law, and a 0.4% increase
resulting from an update to the outlier threshold amount. For federal fiscal year 2013, CMS has issued a final rule
updating inpatient rehabilitation rates by 1.9%, which reflects a 2.7% market basket increase, a negative 0.7%
productivity adjustment and a 0.1% reduction required by the Health Reform Law. Beginning in federal fiscal
year 2014, IRFs will be required to report quality measures to CMS or will receive a 2.0% reduction to the
market basket update.
In order to qualify for classification as an IRF, at least 60% of a facility’s inpatients during the most recent
12-month CMS-defined review period must have required intensive rehabilitation services for one or more of
13 specified conditions. IRFs must also meet additional coverage criteria, including patient selection and care
requirements relating to pre-admission screenings, post-admission evaluations, ongoing coordination of care and
involvement of rehabilitation physicians. A facility that fails to meet the 60% threshold or other criteria to be
classified as an IRF will be paid under the acute care hospital inpatient or outpatient PPS, which generally
provide for lower payment amounts. As of December 31, 2012, we had one rehabilitation hospital and 47
hospital rehabilitation units.
Psychiatric
Inpatient hospital services furnished in psychiatric hospitals and psychiatric units of general, acute care
hospitals and critical access hospitals are reimbursed under a prospective payment system (the “IPF PPS”), a per
diem payment, with adjustments to account for certain patient and facility characteristics. The IPF PPS contains
an “outlier” policy for extraordinarily costly cases and an adjustment to a facility’s base payment if it maintains a
full-service emergency department. CMS has established the IPF PPS payment rate in a manner intended to be
budget neutral and historically has used a July 1 update cycle, with each twelve month period referred to as a
“rate year.” However, CMS transitioned the IPF PPS from a rate year to a federal fiscal year update cycle,
effective October 1, 2012. The rehabilitation, psychiatric and long-term care (“RPL”) market basket update is
used to update the IPF PPS. The Health Reform Law also provides for reductions to the market basket update,
including the following reductions for the following rate years, which will follow the federal fiscal year update
cycle: 0.1% in 2013; 0.3% in 2014; 0.2% in 2015 and 2016 and 0.75% in 2017, 2018 and 2019. For rate year
2012 and each subsequent payment year, the Health Reform Law provides for the annual market basket update to
be further reduced by a productivity adjustment. The amount of that reduction will be the projected, nationwide
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