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New Medicare Inpatient Rates, Policies Proposed for Fiscal 2016

April 21, 2015


The Centers for Medicare & Medicaid Services (CMS) has proposed to increase payments for Medicare inpatient hospital services by $120 million in Fiscal Year 2016 and continue its efforts to link payment to the level of quality and value hospitals provide.


These are among the effects of the new inpatient payment rules and policies proposed by CMS for Fiscal Year 2016, which begins October 1, 2015. The proposed rule would apply to approximately 3,400 acute care hospitals and approximately 435 long-term care hospitals. Comments on the proposal will be accepted until June 16, 2015, with a final rule to be issued by August 1.


Highlights of the proposed rule:


  1. Hospitals that report quality performance information successfully and are meaningful users of electronic health records will see a 1.1% increase in DRG payment rates in FY 2016.

  2. Hospitals that do not successfully participate in the quality reporting program will be subject to a one-fourth reduction of the market basket update, while those that are not meaningful EHR users will be reduced by one half.

  3. Payment adjustments will continue as part of several health-reform provisions linking payment to quality. These include continued penalties for preventable readmissions, a continued -1.0% penalty for hospitals in the lowest 25% on hospital acquired condition reductions, and continued bonuses and penalties for hospital-value based purchasing.

  4. The proposed payment rates include a reduction to recoup coding overpayments related to the transition from DRGs to MS-DRGs that began in Fiscal Year 2008.

  5. Payments for long-term care hospitals would decrease by 4.6%, or about $250 million, as CMS continues to make changes in the LTCH prospective payment system.



Click here for CMS fact sheet.

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