Health Reform WK-EDGE Payment adjustment extended for low-volume hospitals under Bipartisan Budget Act
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Monday, May 7, 2018

Payment adjustment extended for low-volume hospitals under Bipartisan Budget Act

By Jeffrey H. Brochin, J.D.

As a result of the enactment of the Bipartisan Budget Act of 2018 (BBA), CMS has extended certain temporary changes to the payment adjustment for low-volume hospitals for an additional year through fiscal year FY 2018. CMS also detailed the BBA’s extension of the Medicare-dependent hospital (MDH) program through FY 2022, and revised the definition of an MDH (Notice, 83 FR 18301, April 26, 2018).

Adjustment based on per-discharge amount. The additional payment adjustment to a low-volume hospital provided for under section 1886(d)(12) of the Social Security Act (SSA) is noted as being ‘‘in addition to any payment calculated under this section,’’ meaning, that the additional payment adjustment is based on the per discharge amount paid to the qualifying hospital under section 1886 of the Act. The low-volume hospital payment adjustment is based on total per discharge payments made under section 1886 of the Act, including capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-volume hospital payment adjustment is based in part on either the federal rate or the hospital-specific rate, whichever results in a greater operating inpatient prospective payment systems (IPPS) payment.

Affordable Care Act changes. The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) amended the SSA by modifying the definition of a low-volume hospital and the methodology for calculating the payment adjustment for low-volume hospitals, effective only for discharges occurring during FYs 2011 and 2012. (Subsequent legislation extended these modifications through FY 2017.) However, prior to the enactment of the BBA—beginning with FY 2018—the low-volume hospital qualifying criteria and payment adjustment methodology returned to the statutory requirements that were in effect prior to FY 2011. Section 50204 of the Bipartisan Budget Act of 2018, however, extended for an additional year, through FY 2018, the temporary changes in the low-volume hospital definition and methodology for determining the payment adjustment originally made by the ACA.

Implementation of the extension. Pursuant to SSA section 1886(d)(12), beginning with FY 2018, the low-volume hospital definition and payment adjustment methodology reverted back to the statutory requirements that were in effect prior to the amendments made by the ACA. However, under existing regulations, effective for FY 2018 and subsequent years, in order to qualify as a low-volume hospital, a subsection (d) hospital must be more than 25 road miles from another subsection (d) hospital and have less than 200 discharges (that is, less than 200 total discharges, including both Medicare and non-Medicare discharges) during the fiscal year.

To implement the extension of the temporary changes in the low-volume hospital payment policy for FY 2018 provided for by the BBA, in accordance with the existing regulations at §412.101(b)(2)(ii) and consistent with CMS’s implementation of the changes in FYs 2011 through 2017, CMS is updating the discharge data source used to identify qualifying low-volume hospitals and calculate the payment adjustment (percentage increase) for FY 2018.

Discharge data period. As noted previously, under §412.101(b)(2)(ii), for FYs 2011 through 2017, a hospital's Medicare discharges from the most recently available MedPAR data, as determined by CMS, are used to determine if the hospital meets the discharge criterion to receive the low-volume payment adjustment in the current year. The applicable low-volume percentage increase provided for by the provisions of the ACA and subsequent legislation is determined using a continuous linear sliding scale equation that results in a low-volume adjustment ranging from an additional 25 percent for hospitals with 200 or fewer Medicare discharges to zero percent additional payment adjustment for hospitals with 1,600 or more Medicare discharges.

For FY 2018, qualifying low-volume hospitals and their payment adjustment will be determined using Medicare discharge data from the March 2017 update of the FY 2016 MedPAR file, as these data were the most recent data available at the time of the development of the FY 2018 payment rates and factors established in the FY 2018 IPPS/LTCH PPS final rule.

Extension of the MDH program. Generally, as a result of the section 50205 of the BBA extension, a provider that was classified as an MDH prior to the September 30, 2017, expiration of the MDH program will be reinstated as an MDH effective October 1, 2017, with no need to reapply for MDH classification. Since MDH status is now extended by statute through the end of FY 2022, generally, hospitals that previously qualified for MDH status will be reinstated as an MDH retroactively to October 1, 2017.

Estimated increase in payments. Overall, IPPS hospitals are projected to experience an increase in estimated payments of $468 million as a result of the changes made by sections 50204 and 50205 of the BBA as announced by CMS.

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