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Inpatient Psychiatric Prospective Payment Final Rule Issued

The Centers for Medicare & Medicaid Services (CMS) issued the final rule related to payment updates for inpatient psychiatric facilities (IPF) for Rate Year (RY) 2012 on May 5, 2011. The final rule includes a 15-month update period beginning July 1, 2011, to transition the RYs to coincide with the federal fiscal year, similar to inpatient acute and rehabilitation hospital updates. The change in RYs allows CMS to consolidate Medicare update publications and align with ICD-9-CM updates effective October 1 of each year.

The market basket update of 3.2 percent is reduced by a 0.25 percentage decrease mandated by provision of the Patient Protection and Affordable Care Act (PPACA) and a 0.9995 budget neutrality to establish a federal per diem base rate of $685.01 and electroconvulsive therapy (ECT) per treatment rate of $294.91. This equates to a 2.9 percent increase from the 2011 federal base rate of $665.71 and ECT rate of $286.60. The outlier threshold amount is updated to $7,340 to ensure the estimated outlier payments are approximately 2 percent of total estimated IPF payments. The labor portion of the base rate decreased from 75.4 percent in 2011 to 70.137 percent in 2012, which benefits IPFs in areas with a wage index of less than 1.

Changes were not made to the facility, variable per diem, age, MS-DRG and comorbidity adjustment factors for 2012. As CMS noted throughout the rule, it has delayed making refinements to the IPF prospective payment system (PPS) until it has adequate data. CMS now believes it has adequate data—approximately five years into IPF PPS—to begin an analysis to better understand the IPF industry. The agency will be able to present their analysis in the 2013 rulemaking to determine whether IPF PPS refinements are appropriate, allowing the possibility of major changes in the FY2013 rules.

In addition, quality measures are being developed for reporting by IPFs for each RY beginning in 2014, in accordance with PPACA. For those IPFs not reporting quality data, the annual update to the base rate will be reduced by 2 percent. The Medicare Payment Advisory Commission (MEDPAC) also will evaluate facility margins and likely make recommendations regarding appropriate IPF updates for the first time, and CMS is interested in obtaining feedback on these future refinements.

Lastly, CMS incorporated a regulation allowing a temporary update to an IPF’s full-time equivalent cap for displaced medical residents for cost reporting periods beginning on or after July 1, 2011. A copy of the final rule is available for download on the CMS website.

If you have additional questions or would like more information on these matters, please contact your BKD advisor.

This post was written by:

Sherry has more than 20 years of industry experience. She provides consulting services on Medicare and Medicaid cost report preparation and third-party reimbursement, and she assists a variety of organizations in the preparation and settlement of Medicare and Medicaid cost reports, analyses, appeals and compliance.

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Recent Comment

  • Karen Vance says:
    This would be under §484.18 of the Conditions of Participation describing regulations for the Plan of Care. Below is the Standard that addresses your issue: "§484.18(b) - Agency professional staff promptly alert the physician to any changes that suggest a need to alter the plan of care." From the State Operations Manual (guidance for state surveyors) "The
    February 24, 2011 on Webinars

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