HCA Holdings 2012 Annual Report Download - page 33

Payments for Hospitals and Ambulatory Surgery Centers
Inpatient Market Basket and Productivity Adjustment. Under the Medicare program, hospitals receive
reimbursement under a PPS for general, acute care hospital inpatient services. CMS establishes fixed PPS
payment amounts per inpatient discharge based on the patient’s assigned MS-DRG. These MS-DRG rates are
updated each federal fiscal year, which begins October 1, using a market basket index that takes into account
inflation experienced by hospitals and other entities outside the health care industry in purchasing goods and
services.
The Health Reform Law provides for three types of annual reductions in the market basket. The first is a
general reduction of a specified percentage each federal fiscal year starting in 2010 and extending through 2019.
These reductions are as follows: federal fiscal year 2010, 0.25% for discharges occurring on or after April 1,
2010; 2011 (0.25%); 2012 (0.1%); 2013 (0.1%); 2014 (0.3%); 2015 (0.2%); 2016 (0.2%); 2017 (0.75%); 2018
(0.75%); and 2019 (0.75%).
The second type of reduction to the market basket is a “productivity adjustment” that was implemented by
HHS beginning in federal fiscal year 2012. The amount of that reduction is the projected nationwide productivity
gains over the preceding 10 years. To determine the projection, HHS uses the BLS 10-year moving average of
changes in specified economy-wide productivity (the BLS data is typically a few years old). The Health Reform
Law does not contain guidelines for HHS to use in projecting the productivity figure. For federal fiscal year
2013, CMS has announced a negative 0.7% productivity adjustment to the market basket. CMS estimates that the
combined market basket and productivity adjustments will reduce Medicare payments under the inpatient PPS by
$112.6 billion from 2010 to 2019.
The third type of reduction is in connection with the value-based purchasing program discussed in more
detail below. 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 hospitals that satisfy certain quality metrics. While some or all of these reductions
may be recovered if a hospital satisfies these quality metrics, the recovery amounts may be delayed.
If the aggregate of the three market basket reductions described above is more than the annual market basket
adjustments made to account for inflation, there will be a reduction in the MS-DRG rates paid to hospitals. For
example, for the federal fiscal year 2011 hospital inpatient PPS, the market basket increase to account for
inflation was 2.6% and the aggregate reduction due to the Health Reform Law and the documentation and coding
adjustment was 3.15%. Thus, the rates paid to a hospital for inpatient services in federal fiscal year 2011 were
0.55% less than rates paid for the same services in the prior year.
Quality-Based Payment Adjustments and Reductions for Inpatient Services. The Health Reform Law
establishes or expands three provisions to promote value-based purchasing and to link payments to quality and
efficiency. First, in federal fiscal year 2013, HHS is directed to implement a value-based purchasing program for
inpatient hospital services. This program will reward hospitals that meet certain quality performance standards
established by HHS. The Health Reform Law provides HHS considerable discretion over the value-based
purchasing program. On April 29, 2011, CMS issued a final rule establishing the value-based purchasing
program for hospital inpatient services. Under this final rule, CMS states that it estimates it will distribute $850
million in federal fiscal year 2013 to hospitals based on their overall performance on a set of quality measures
that have been linked to improved clinical processes of care and patient satisfaction. For payments in federal
fiscal year 2013, hospitals will be 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. 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 measure. Because the Health Reform
Law provides that the pool will be fully distributed, hospitals that meet or exceed the quality performance
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