HCA Holdings 2012 Annual Report Download - page 34

standards set by HHS 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. CMS published the value-based incentive payment adjustment factor for
each hospital for federal fiscal year 2013 discharges on December 20, 2012.
Second, beginning in federal fiscal year 2013, inpatient payments will be reduced if a hospital experiences
“excess readmissions” within the 30-day period from the date of discharge for heart attack, heart failure,
pneumonia or other conditions that may be designated by CMS. Hospitals with what CMS defines as “excess
readmissions” for these conditions will receive reduced payments for all inpatient discharges, not just discharges
relating to the conditions subject to the excess readmission standard. The amount by which payments will be
reduced if a hospital experiences excess readmissions is determined by comparison of the hospital’s readmission
performance to risk-adjusted national average and is subject to a cap established by CMS. Each hospital’s
performance will be publicly reported by CMS.
Third, reimbursement will be reduced based on a facility’s HAC rates. A HAC is a condition that is acquired
by a patient while admitted as an inpatient in a hospital, such as a surgical site infection. Beginning in federal
fiscal year 2015, the 25% of hospitals with the worst national risk-adjusted HAC rates in the previous year will
receive a 1% reduction in their total inpatient operating Medicare payments. In addition, the Health Reform Law
prohibits the use of federal funds under the Medicaid program to reimburse providers for medical services
provided to treat HACs. CMS has issued a final rule implementing this prohibition for services with dates
beginning July 1, 2012. The final rule authorizes states to add additional provider-preventable conditions to the
list of HACs for which Medicaid reimbursement will not be allowed.
Outpatient Market Basket and Productivity Adjustment. Hospital outpatient services paid under PPS are
classified into APCs. The APC payment rates are updated each calendar year based on the market basket. The
first two market basket changes outlined above — the general reduction and the productivity adjustment — apply
to outpatient services as well as inpatient services, although these are applied on a calendar year basis. The
percentage changes specified in the Health Reform Law summarized above as the general reduction for
inpatients — e.g., 0.2% in 2015 — are the same for outpatients.
Medicare and Medicaid DSH Payments. The Medicare DSH program provides for additional payments to
hospitals that treat a disproportionate share of low-income patients. Under the Health Reform Law, beginning in
federal fiscal year 2014, Medicare DSH payments will be reduced to 25% of the amount they otherwise would
have been absent the law. The remaining 75% of the amount that would otherwise be paid under Medicare DSH
will be effectively pooled, and this pool will be reduced further each year by a formula that reflects reductions in
the national level of uninsured who are under 65 years of age. In other words, the greater the level of coverage
for the uninsured nationally, the more the Medicare DSH payment pool will be reduced. Each hospital will then
be paid, out of the reduced DSH payment pool, an amount allocated based upon its level of uncompensated care.
It is difficult to predict the full impact of the Medicare DSH reductions, and CBO and CMS estimates differ
by $38 billion. The Health Reform Law does not mandate what data source HHS must use to determine the
reduction, if any, in the uninsured population nationally. In addition, the Health Reform Law does not contain a
definition of “uncompensated care.” As a result, it is unclear how a hospital’s share of the Medicare DSH
payment pool will be calculated. CMS could use the definition of “uncompensated care” used in connection with
hospital cost reports. However, in July 2009, CMS proposed material revisions to the definition of
“uncompensated care” used for cost report purposes. Those revisions would exclude certain significant costs that
had historically been covered, such as unreimbursed costs of Medicaid services. CMS has not issued a final rule,
and the Health Reform Law does not require HHS to use this definition, even if finalized, for DSH purposes.
How CMS ultimately defines “uncompensated care” for purposes of these DSH funding provisions could have a
material effect on a hospital’s Medicare DSH reimbursements. In addition to Medicare DSH funding, hospitals
that provide care to a disproportionately high number of low-income patients may receive Medicaid DSH
payments. The federal government distributes federal Medicaid DSH funds to each state based on a statutory
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