CMS Describes New System For Paying Psychiatric Facilities
Inpatient psychiatric facilities would receive an average 3.2 percent increase in their Medicare payment rates for discharges occurring on or after July 1, 2006, under a proposed rule issued by the Centers for Medicare and Medicaid Services (CMS).
The payment increase would affect approximately 1,800 inpatient psychiatric facilities, including freestanding psychiatric hospitals, certified psychiatric units in general acute care hospitals, and critical access hospitals that are paid under the inpatient psychiatric facility Prospective Payment System (PPS).
The PPS for inpatient psychiatric hospitals was mandated by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 and made effective January 1, 2005, ending a 20-year exemption from prospective payment (Psychiatric News, December 3, 2004).
Payments for inpatient psychiatric facilities under the PPS are based on a single federal per diem rate that includes both inpatient operating and capital-related costs. The proposed per diem rate for Rate Year (RY) 2007 is $594.66, up from $575.95 in RY 2006, according to the CMS.
This base rate is adjusted for four patient characteristics: age, diagnosis-related group (DRG) assignment, the presence of certain other diseases or conditions (comorbidities), and the patient's length of stay. The base rate is also adjusted to reflect the following facility characteristics: the presence or lack of a qualifying emergency department, teaching status, rural location, and each facility's wage index.
In this first update to the system, CMS is proposing a number of refinements to the payment policies affecting inpatient psychiatric facilities. Among the most critical is a proposed redefinition of labor markets.
Irvin (Sam) Muszynski, J.D., director of APA's Office of Healthcare Systems and Financing, explained that one effect of this is that many rural hospitals would be reclassified into urban areas and thereby lose their favorable 17 percent facility adjustment established to support the financial stability of rural facilities.
“We think this is a problem and will recommend that it be fixed so these hospitals will not be negatively affected,” Muszynski said.
A second feature is a proposal to make uniform the time requirements for certification and recertification of patients. Under the CMS proposal, certification would be required for all hospitals and units at the time of admission—or as soon thereafter as is reasonable—and the first recertification would be required as of the 12th day.
“We are opposing this and will recommend that recertification be at the 18th day, as currently required,” Muszynski said.
Other issues addressed in the proposed payment update include the following:
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A proposal to adopt a new method of determining inflation in the costs of goods and services provided in inpatient psychiatric facilities reflecting inflation in three types of hospitals that are currently excluded from the inpatient PPS for acute care hospitals: inpatient rehabilitation facilities, inpatient psychiatric facilities, and long-term-care hospitals.
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A proposal to increase the fixed dollar-loss threshold amount for outlier payments from $5,700 to $6,200 to keep overall outlier payments at 2 percent of total payments as per diem rates increase. This threshold is the amount by which the hospital's costs for treating a case must exceed the Medicare payment amount for that case before Medicare will make an additional payment to the facility.
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A proposal to increase payment for electroconvulsive therapy (ECT) based on the latest hospital median cost data for ECT.
The proposed rule was released January 13 and published in the January 23 Federal Register.
At press time, APA's Department of Government Relations was preparing comments about the proposed rule that will address, among other issues, the following: interrupted stays, ICD-9-CM coding issues, physician recertification, and same-day transfers (when a patient is admitted to an inpatient psychiatric facility and is later transferred to another type of facility on the same day). ▪
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Published online: 7 April 2006
Published in print: April 7, 2006
Notes
One feature of the proposed rule is a redefinition of labor markets whereby rural hospitals would be reclassified into urban areas, causing them to lose a 17 percent favorable adjustment in payment.
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