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CMS Releases FY 2014 IPPS Final Rule, Finalizes Implementation of Medicare DSH Cuts

The Centers for Medicare & Medicaid Services (CMS) issued Aug. 2 the inpatient prospective payment system (IPPS) final rule for fiscal year (FY) 2014.

The final rule implements the Affordable Care Act’s (ACA’s) changes to Medicare disproportionate share hospital (DSH) payments.Specifically, CMS finalized the amount of Medicare DSH payments for FY 2014 without regard to the ACA to be $12.77 billion, rather than $12.34 billion. Based on updated Congressional Budget Office estimates of expected insurance coverage rates, this change will make $9.03 billion available for uncompensated care payments, rather than the $8.22 billion in the IPPS proposed rule.

CMS also finalized its proposal to use Medicaid and low-income Medicare inpatient days as a proxy for hospital uncompensated care to determine the portion of Medicare DSH payments hospitals will receive based on uncompensated care.

Furthermore, CMS finalized its proposal to create a time-based presumption of medical necessity for physician-ordered hospital inpatient admissions that span two midnights. CMS expects this change to increase payments to hospitals by $220 million, which the agency will offset with a 0.2 percent reduction to the standardized payment amount for all hospitals.

A special update with a more detailed analysis of the final rule will be sent to members of America’s Essential Hospitals this week. If you have questions or concerns, please contact Xiaoyi Huang, assistant vice president for policy, at xhuang@essentialhospitals.org or 202-585-0127.

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