Hospital Reimbursements and the ACA

One goal of the Affordable Care Act (ACA) is to reduce costs by forcing hospitals to provide quality care more efficiently. The following provisions from the ACA directly impact the reimbursements that hospitals receive for providing care to patients:

• 2008 – “Never Events”
• 2011 – Market Basket Adjustment
• 2012 – High 30-Day Readmission Rates for AMI, heart failure, pneumonia.
• 2012 – Value Based Purchasing
• 2014 – Disproportionate Share payments cut.
• 2015 – Hospital Acquired Infections – top quartile.

Never Events – As of 2008 the Centers for Medicare and Medicaid Services (CMS) no longer reimbursed a hospital for procedures which resulted in a “never event.”  A “never event” is an error that should never occur in a health care setting, such as surgery on the wrong patient or the wrong body part.

Market Basket Adjustment: The ACA reduces market basket updates for inpatient and outpatient hospital services, as well as for Inpatient Psychiatric Facilities (IPF’s), Inpatient Rehabilitation Facilities (IRF’s) and Long Term Care Hospitals (LTCH’s).  Market basket reductions are estimated to save an estimated $112 billion over 10 years. These reductions are retroactive to January 1, 2010, and extend for a period of 10 years, and beyond.

30-Day Hospital Readmission Rates: Medicare will reduce payments to hospitals for potentially preventable readmissions for select conditions. Hospital readmission rates for these conditions will be published on the Center for Medicare/Medicaid Services’ Hospital Compare Web site.

Hospital Value-based Purchasing program: Medicare will reward hospitals that provide higher quality or better patient outcomes.  Under the Program, CMS will make value-based incentive payments to acute care hospitals, based either on how well the hospitals perform on certain quality measures or how much the hospitals’ performance improves on certain quality measures from their performance during a baseline period. The higher a hospital’s performance or improvement during the performance period for a fiscal year, the higher the hospital’s value-based incentive payment for the fiscal year would be.

Disproportionate Share Payment (DSH):  Under the ACA, Medicaid DSH payments will be reduced by $14.1 billion from FY 2014 through 2019, and Medicare DSH payments would be reduced by $22.1 billion from FY 2014 to 2019. In July 2013, CMS lproposed reducing Medicare DSH spending by $1 billion in FY 2014, as part of its inpatient prospective payment system regulation for FY 2014. The agency has also proposed a methodology for reducing federal Medicaid DSH allotments to states by the ACA-mandated levels of $500 million in FY 2014 and $600 million in FY 2015.  (Source:  http://www.ahanews.com/ahanews/jsp/display.jsp?dcrpath=AHANEWS/AHANewsArticle/data/AHA_News_051713_dsh)

Hospital Acquired Infections:  In 2015, hospitals will face an additional 1% reduction in Medicare reimbursement payments if they fall into the top 25% of national risk-adjusted Hospital Acquired Conditions rates for all hospitals in the previous year.