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Proposed Medicare Payment and Policy Changes for Inpatient Psychiatric Facilities

Proposed Medicare Payment and Policy Changes for Inpatient Psychiatric Facilities
For Immediate Release
Thursday, May 1, 2014

Proposed Medicare Payment and Policy Changes for Inpatient Psychiatric Facilities

OVERVIEW:  On May 1, 2014 the Centers for Medicare & Medicaid Services (CMS) issued the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS) proposed rule for fiscal year (FY) 2015.  

The IPF PPS applies to inpatient psychiatric facilities across the United States, including both freestanding psychiatric hospitals and psychiatric units of acute care hospitals or critical access hospitals. The updated rates would generally be effective for discharges occurring on or after October 1, 2014.  In this proposed rule, estimated payments to IPFs are projected to increase by 2.1 percent compared to FY 2014.

The proposed rule also updates the Inpatient Psychiatric Facility Quality Reporting Program (IPFQR), which requires participating facilities to report on quality measures or incur a reduction in their annual payment update.    This rule would expand the measure sets in future fiscal years and discusses CMS’s plans to better collect data to help target future measures.  

BACKGROUND ON IPF PPS.  Medicare pays an estimated $4.6 billion per year to 1,626 IPFs for the per diem routine, ancillary, and capital costs associated with furnishing covered inpatient psychiatric services.  The IPF PPS base rate is adjusted to account for patient and facility characteristics that contribute to higher costs per day including age, diagnosis-related group assignment, comorbidities, length of stay, geographic wage area, rural location, teaching status, costs of living adjustment factors for IPFs in certain localities, and presence of a full-service emergency department.  The IPF PPS methodology includes a payment adjustment for interrupted stays, additional payments for outlier cases, and a per treatment adjustment for electroconvulsive therapy (ECT) treatments.  

BACKGROUND ON IPFQR.  The IPFQR Program is a voluntary pay-for-reporting program established by the Affordable Care Act (ACA) and added to the Social Security Act.  The program currently requires participating facilities to report on six quality measures or incur a two percentage point reduction in their annual payment update.  In August 2013, two additional measures were added to the program for FY 2016 reporting and beyond.  

On April 17, CMS announced for the first time that quality measures from inpatient psychiatric facilities will be publicly reported on Hospital Compare, a consumer-oriented website that provides information on the quality of care hospitals are providing to their patients.  Hospital Compare will feature data from inpatient psychiatric facilities on patient care for the period of October 1, 2012 through March 31, 2013.  Public reporting will allow consumers to directly compare facilities based on data collected.   


The following routine annual updates are included in the proposed rule:

Federal Per Diem Base Rate Update:  The total payment rate update is 2.0 percent.  This is comprised of a rehabilitation, psychiatric, and long-term care market basket increase of 2.7 percent, an ACA required reduction of 0.3 percentage point, and an ACA required productivity adjustment reduction of 0.4 percentage point.  

Discussion of Stand-alone IPF Market Basket for FY 2016:  CMS is not proposing a new policy for FY 2015 but intends to propose an IPF-specific market basket for FY 2016.

Wage Index:  The wage index budget neutrality factor is 1.0003.  CMS determined this by using the core-based statistical area wage index values (the FY 2014 pre-floor, pre-reclassified hospital wage index) and the labor-related share applied to the most current hospital wage data in a budget neutral manner.

Federal Per Diem Base Rate:  CMS is proposing an increase from the current base rate of $713.19 to a FY 2015 rate of $727.67.

Outlier Fixed-Dollar Loss Threshold Update:  CMS proposes to update the FY 2014 fixed-dollar loss threshold amount of $10,245 to an FY 2015 rate of $10,125, in order to maintain a 2.0 percent outlier percentage.

ECT Payment Update:  CMS is proposing an increase from the current rate of $307.04 to a FY 2015 ECT rate of $313.27.

Cost of Living Adjustment (COLA):  CMS is proposing to adopt the IPPS/LTCH PPS new methodology (established in the FY 2013 IPPS/LTCH PPS final rule) for updating the COLA factors for IPFs in Alaska and Hawaii.  

ICD-10-CM/PCS Conversion  
CMS proposes the conversion of ICD-9-CM to ICD-10-CM for the 17 IPF PPS comorbidity categories, for which the IPF PPS provides a comorbidity adjustment, in advance of the new implementation date for  ICD-10. Under the Protecting Access to Medicare Act of 2014 (P.L. 113-93), the Secretary may not, prior to October 1, 2015, adopt ICD-10 code sets as standard code sets under HIPAA, so CMS must wait for an announcement from the Secretary as to when ICD-10 will be implemented.

CMS also proposes to remove site-unspecified codes in instances when a more specific code is available or when the clinician should be able to identify a more specific diagnosis based on clinical assessment.

CMS specifically proposes the elimination of 153 ICD-10-CM codes for nonspecific conditions.  The areas are:

  • Oncology – 93 ICD-10-CM site-unspecified codes.
  • Gangrene – 6 ICD-10-CM site-unspecified codes.
  • Severe Musculoskeletal and Connective Tissue – 54 ICD-10-CM codes.

Impact Analysis
The estimated payments to IPFs in FY 2015 are projected to increase by 2.1 percent overall compared with the estimated payments in FY 2014.  This amount includes the effect of the 2.7 percent market basket update adjusted by the ACA required 0.3 percentage point reduction and the productivity adjustment of -0.4 percentage point, and a 0.1 percent overall estimated increase in the IPF outlier payments from the update to the outlier fixed-dollar loss threshold amount.

IPF payments are estimated to increase 2.1 percent in urban areas and 1.9 percent in rural areas compared with estimated FY 2014 payments.  CMS estimates that IPF expenditures from FY 2014 to FY 2015 would increase by approximately $100 million.

As part of the FY 2016 and FY 2017 payment determinations, CMS proposes to increase the IPFQR measure set to 14 measures, and commits to providing additional information necessary to help ensure program integrity.

Measurement Proposals for FY 2016 Payment Determination

Two Structural Measures

  • Patient Experience of Care – requires attestation as to whether the facility conducts some type of patient experience survey.
  • Use of an Electronic Health Record – requires attestation as to which one out of a group of statements best characterizes the facility’s EHR use.

Measurement Proposals for FY 2017 Payment Determination

Two Tobacco Use Measures

  • Screening & Cessation Intervention – assesses if patients 18 and older have been a) questioned about tobacco use and b) for those patients identified as tobacco users, offered and provided tobacco cessation intervention treatment and medications.   

One Influenza Immunization Measure – assesses the percentage of inpatients that are screened and vaccinated for influenza during the October through March period.

One Healthcare Worker Immunization Measure – assesses the percentage of healthcare personnel who receive influenza vaccination during the October through March period.  CMS would allow the calculation of a single measure that could be used across components in cases where hospitals report on this measure for multiple components.  

Other Changes

CMS is proposing the collection of aggregate population and sampling data, along with information concerning the distribution of patient population by age, diagnosis, and payer.  This information will assist CMS in assessing these measures and will help the agency better target future measures.

CMS will accept comments on the proposed rule until June 30, 2014. The proposed IPF PPS rule can be downloaded from the Federal Register at:

It will publish in the May 6, 2014 Federal Register.