Minnesota Hospital Association

Policy & Advocacy

rules, regulations and comments

The Minnesota Hospital Association continually monitors state and federal rules and regulations to keep members informed and advocates on behalf of members regarding the impact of regulations on the state’s hospitals and health systems. MHA submits comment letters to share recommendations and feedback with the appropriate government organizations and health care stakeholders. Examples of rules and regulations that MHA addresses include those implementing federal or state health care reform efforts, changing payment methodologies, establishing community benefit or other standards for tax-exempt organizations, or modifying government oversight of health care activities.

June 26, 2013

CMS' proposed rules for 2014 IPPS for acute and long-term care hospitals

June 25, 2013

Marilyn Tavenner, Administrator
Centers for Medicare & Medicaid Services
Hubert H. Humphrey Building
200 Independence Avenue, S.W., Room 445-G
Washington, DC 20201

Submitted electronically through www.regulations.gov.

RE: CMS-1599-P, Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Fiscal Year 2014 Rates; Quality Reporting Requirements for Specific Providers; Hospital Conditions of Participation; Medicare Program; Proposed Rule (Vol. 78, No. 91)

Dear Ms. Tavenner:

On behalf of our 144 member hospitals and their health systems, the Minnesota Hospital Association (MHA) offers the following comments and suggestions regarding the Centers for Medicare & Medicaid Services’ (CMS) proposed rules for 2014 Inpatient Prospective Payment Systems for Acute and Long-Term Care Hospitals (Proposed Rule).

At the outset, MHA expresses our support of the recommendations and detailed comments submitted by the American Hospital Association (AHA). Instead of duplicating AHA’s analysis and suggestions, MHA’s comments will focus on the issues, experiences and concerns of Minnesota’s hospitals and health systems.

Changes to DSH Payment Methodology
The Affordable Care Act (ACA) requires that hospitals initially receive 25 percent of the Medicare disproportionate share hospital (DSH) funds they would have received under the current formula in FY2014, with reductions in the remaining funds as the percentage of uninsured individuals declines. The ACA requires CMS to distribute the remaining 75 percent of the FY2014 DSH funds based on each DSH hospital’s proportional share of total uncompensated care provided.

In the Proposed Rule, CMS states that it plans to use Congressional Budget Office estimates to determine the change in the percentage of uninsured instead of data on charity care and bad debt reported through worksheet S-10 of the hospital cost report worksheet. While MHA understands and respects the practical reasons for the approach in the Proposed Rule in the short term, we join with the AHA in encouraging the agency to take the necessary steps to allow for the hospital cost report data to be used if those data are a more accurate reflection of DHS hospitals’ actual uncompensated care cost.

Likewise, MHA echoes AHA’s concerns regarding the Proposed Rule’s plan to distribute DSH payments on an interim basis rather than as part of hospitals’ per-discharge payment. AHA noted that Medicare Advantage plans calculate their payment amounts based on hospitals’ Medicare per-discharge Medicare rates, so if the DSH amounts are not included on a per-discharge basis, DSH hospitals might suffer unintended losses through lower Medicare Advantage payments. Because Minnesota has a large portion of our Medicare population enrolled in Medicare Advantage plans, this unintended hardship for DSH hospitals would be particularly problematic.

Minnesota also has several Sole Community Hospitals (SCHs). Periodic distribution of DSH payments would effectively impose payment cuts on some SCHs because the DSH payments would not be accounted for in determining whether SCHs are paid the federal rate or their hospital-specific rate.

Accordingly, MHA urges CMS to revise its approach and implement the DSH payments through adjustments to DSH hospitals’ per-discharge payments.

Finally with respect to DSH payments, MHA opposes the Proposed Rule’s attempt to reverse its policy regarding counting Medicare Advantage patient days in the Medicare fraction used in the DSH calculation. Our comments below are intended to echo and amplify the objections to this policy change expressed by AHA and by MHA’s member, Allina Health, in their separately submitted comments. MHA refers CMS to AHA’s and Allina Health’s comment letters for more comprehensive discussions supporting our view that the proposed policy reversal should be rejected.

In light of the court’s decision in Allina Health Services v. Sebelius, 904 F. Supp. 2d 75 (D.D.C. 2012), the Proposed Rule would change the method for counting patient days of Medicare Advantage Plan enrollees. As stated by Allina Health, “[t]he proposed policy should not be adopted because it is not compelled by the plain language of the Medicare Act, it is inconsistent with the intent of Congress, and it is unreasonably inconsistent with the agency’s prior practice and policy in interpreting ‘entitlement to benefits.’”

The proposed policy is inconsistent with statutory language and congressional intent. The DSH payment under section 1886(d)(5)(F) of the Social Security Act (“the Act”) is a percentage add-on to the base payment rate per discharge “with respect to [inpatient hospital services] for which payment may be made under this part,” referring specifically to Part A, not Part C. Thus, the DSH payment add-on is intended and limited to compensating qualifying hospitals for their higher costs associated with caring for inpatients whose care is paid for under Part A.

Moreover, the proposed policy is inconsistent with CMS’s longstanding treatment of Medicare managed care days in Medicare part A payment calculations. Services provided to Medicare managed care enrollees have not been counted in the cost report tallies of “Medicare” patient discharges, days or charges used to apportion routine, ancillary, capital or medical education costs to Medicare for reimbursement purposes.

Medical Necessity Reviews of Inpatient Hospital Stays
MHA members understand and respect the public’s interest in ensuring that Medicare providers are paid accurately for the life-saving services they deliver to beneficiaries. Nevertheless, our members have become increasingly concerned about Medicare Recovery Audit Contractors’ (RACs) ambiguities and varying interpretations of certain inpatient hospital stays. Accordingly, our members appreciate CMS’s effort to provide greater clarification around protocols for receiving payment of inpatient hospital services under Medicare Part A.

The approach suggested in the Proposed Rule would instruct RACs to presume that an inpatient admission is reasonable and medically necessary if the beneficiary required services that spanned across two midnights. This approach would resolve the confusion for many cases that have inappropriately generated RAC audits, payment denials and appeals. However, MHA believes that the approach should be replaced with more defined instructions for RACs and/or further clarified to avoid unintended consequences, further confusion and unnecessary administrative burden and costs for hospitals, RACs and CMS.

Generally speaking, MHA believes that RACs second-guess an admitting physician’s judgment in an after-the-fact, critical fashion rather than determining whether the physician had a good faith basis from the information known at the time to decide to admit the patient. In response to RACs’ heightened scrutiny, hospitals around the country increased the use of “observation status” instead of inpatient admissions to avoid the harsh financial penalties and administrative burdens associated with RAC audits. Now, CMS is concerned about the use of extended observation stays for patients. Instead of providing RACs with more instruction regarding the level of scrutiny and medical record evidence they should use, CMS has attempted to create an artificial time-based presumption that will improve the symptoms without addressing the underlying causes of the problem.

To be clear, however, the issue CMS is attempting to remedy is one created by the agency itself and its auditors. Accordingly, MHA strenuously objects to the Proposed Rule’s cut to hospital payments to offset the projected financial impact of CMS’s new two-midnight rule. This is analogous to a student seeking help from a school principal to stop a lunch-money-grabbing bully and being told that the principal’s intervention is going to cost half of the student’s daily lunch money! MHA urges CMS to eliminate the proposed 0.2 percent cut to inpatient hospital rates before finalizing the 2014 IPPS Rule.

In addition, MHA encourages CMS to adopt the suggestions offered by the American Hospital Association in its letter on this matter:

  1. Limit RAC review to only the information in the medical record that was known to the physician at the time of the decision to admit, and preclude RACs from considering information that became known after the decision to admit the patient.
  2. Instruct RACs to focus audits on all of the factors that CMS recognizes as relevant to the admission decision, instead of the current practice of focusing only on factors like a patient’s length of stay and outcome.
  3. Penalize RACs when they incorrectly deny an inpatient stay to provide a balance against the overwhelming financial incentives for RACs to conclude that beneficiaries should not have been admitted.

If, however, CMS is committed to creating some kind of time-based presumption, MHA offers two suggested improvements to the proposed two-midnight rule.

First, MHA suggests that CMS recognize the variety of circumstances and dynamics within the hospital environment and expand the criteria for triggering the clock for the two-midnight rule. Specifically, MHA believes that the applicable timeframe for analysis should begin as soon as a physician orders a patient to be admitted or observed, a patient receives treatment in an emergency department, or a patient is placed in a bed for observation.

Second, CMS should recognize that a patient might be properly admitted, but nevertheless leaves the hospital against medical advice before the two midnight rule is satisfied.

HAC Reduction Program
The ACA requires CMS to impose a 1-percent cut in Medicare MS-DRG payments for hospitals in the top quartile of risk-adjusted national hospital-acquired condition (HAC) rates. MHA has concerns about the agency’s approach to these cuts given the duplication with the Value Based Purchasing (VBP) program, the lack of significant differentiation between hospitals based on the proposed measures, and the need for more robust risk adjustment to account for teaching and large hospitals’ patients’ higher acuity levels.

MHA has long supported and enthusiastically championed Medicare payment reforms that create incentives for providers to deliver high-quality, low-cost care. To that end, MHA generally supports initiatives, like this HAC payment program, that differentiate payment amounts based on providers’ performance on quality measures, as well as programs like VBP that vary payments based on quality and efficiency measures.

However, as the payment system moves from volume-based incentives to quality and efficiency based incentives, it is important to create measures and design payment reforms in a manner that accurately and fairly distinguishes providers based on their performance rather than other factors, such as patient acuity or outcomes that are beyond providers’ ability to impact. At this point, MHA believes that the approach to HAC payment penalties is not sufficiently designed to avoid payment differentiations based on factors outside of hospitals’ control and could result in misaligned incentives.

Most troubling to our members is the potential for conflicting incentives between the proposed HAC program and VBP. As currently designed, it is possible for a hospital to score well enough to avoid penalties or earn rewards in one program while simultaneously incurring penalties for poor performance in the other program . . . using the same measures! This potential inconsistency seems indefensible.

Moreover, MHA generally supports using quality measures for reporting and payment purposes only after they have been vetted through a consensus-based approach, such as the one employed by the National Quality Forum. Unfortunately, the proposed HAC program relies on measures that are troubling and contentious among hospitals and medical experts.

Our concerns are comprehensively explained in AHA’s comment letter, so we will not duplicate them here, but rather express our support for AHA’s analysis and positions. In particular, MHA encourages CMS to delay implementation of the HAC program until these concerns are addressed and resolved. A one-year delay would provide CMS and the hospital community with an opportunity to develop a better program without running afoul of the FY2015 deadline imposed by the ACA.

Hospital Value-Based Purchasing (VBP) Program
MHA supported the VBP provisions in the ACA as a policy direction to move Medicare payments from a volume-based methodology to one that is premised on value as measured by providers’ quality of care and efficiency of care. Although MHA has concerns about the current structure and approach CMS has taken to the VBP program, we remain hopeful that continuous improvements to VBP will bring it closer to achieving its potential.

Important elements of VBP that MHA continues to await are efficiency measures. We are pleased that the Proposed Rule continues the agency’s stated interest in rolling out efficiency measures as early as possible and, therefore, we support the Proposed Rule’s intention to include the first efficiency measure in VBP in FY2015.

As MHA has stated before, our members are concerned that CMS’s proposed efficiency measure, Medicare Spending per Beneficiary (MSPB), is too limited to serve as the sole measure of efficiency going forward. MSPB, as currently designed, measures efficiency of inpatient care delivery but completely ignores the efficiency resulting from care delivery that obviates the need for inpatient care in the first place. Accordingly, MHA encourages CMS to consider a more comprehensive measure, such as Annual Medicare Spending per Beneficiary (Parts A and B) for hospital referral regions, to differentiate payments among hospitals based on their ability to work with providers in the community to manage total cost of care for Medicare beneficiaries.

Another improvement to the VBP design is to increase the weight given to hospitals’ efficiency scores in calculating their total score. The proposed VBP program limits the weight given to efficiency of care delivery to no more than 25 percent by FY2016. In order to generate sufficient incentive for providers to deliver more efficient care and to begin to address the financial incentives leaning against efficiency, MHA believes that the weight given to the efficiency domain should be greater, but not exceeding 50 percent. In addition to increasing the incentive for providers to deliver care more efficiently, increasing this domain’s weight will bring the VBP incentives into closer alignment with the new Physician Value Modifier.

MHA supports the Proposed Rule’s intention to remove three measures from the VBP Program in FY2016 because hospitals’ performance has topped out or the measures are no longer supported by the National Quality Forum (NQF): AMI-8a (primary PCI within 90 minutes of hospital arrival), PN-3b (blood cultures performed in the emergency department prior to initial antibiotic received in hospital), and HF-1 (discharge instructions).

For similar reasons, MHA supports the plan to add the NQF-endorsed IMM-2 (Influenza Vaccination for inpatients six months and older) measure to the VBP Program.

On the other hand, MHA does not support the Proposed Rule’s suggested inclusion of CAUTI, SSI, MRSA bacteremia and C. Diff measures at this time. These proposed measures have not had sufficient study, have not had defined baseline or performance periods, or are new to public reporting. Accordingly, MHA encourages CMS to delay implementation of these new measures in VBP unless and until these concerns are alleviated.

Going forward, MHA suggests that CMS consider phasing out the VBP’s use of improvement scores for calculating hospitals’ payment amounts. MHA supported the use of improvement scores in VBP’s initial years because we believed it is important to offer an incentive for historically poor-performing hospitals to improve and to perceive that the VBP structure would reward them for doing so. However, after several years of VBP implementation, it seems as though the program should begin to shift to achievement-based scores exclusively so that Medicare moves away from continuing to offer rewards for merely catching up after years of sub-par care delivery.

Hospital Readmissions Reduction Program (HRRP)
MHA is pleased that the Proposed Rule begins to address some of the most glaring flaws in the Hospital Readmissions Reduction Program (HRRP or Readmissions Program). The current program penalizes hospitals with “excess” or “higher than expected” readmission rates without accounting for or excluding planned readmissions, readmissions for causes wholly unrelated to the original admission, or other unpreventable or unavoidable readmissions. Thankfully, the Proposed Rule recommends excluding planned readmissions from the calculation of whether a hospital’s readmission rates are higher than expected.

While MHA appreciates this step in the right direction, we continue to urge CMS to modify the Readmissions Program to exclude other readmissions that are wholly unrelated to the original admission, as well as those that are unavoidable or beyond a hospital’s ability to prevent.

Graduate Medical Education (GME)
According to the Proposed Rule, CMS would include labor and delivery inpatient days in the Medicare utilization ratio. However, labor and delivery services are not typically covered by Medicare, and Medicare pays for less than half of one percent of births in the United States.

It is also important to emphasize that GME payments fail to cover hospitals’ costs of training future caregivers and, at the same time, the country faces a predicted shortfall of physicians as the population ages and demand increases with expanded coverage through the ACA. These issues are particularly acute in Minnesota. Our teaching hospitals bear a significant financial burden that is not recovered through GME payments. Statistical and demographic trends point to dire physician shortages due to our aging population increasing dramatically and our ongoing efforts to expand coverage through Medicaid, a Basic Health Plan, and state-based initiatives.

Accordingly, MHA opposes the Proposed Rule’s approach of further diluting the Medicare utilization ratio by including labor and delivery inpatient days.

Another portion of the Proposed Rule pertaining to GME is troubling to MHA. Minnesota has 79 critical access hospitals (CAHs). These hospitals understand that training physicians is critical for building the interest in and skills needed for rural physicians. By providing rotation opportunities for residents, CAHs can provide the experience these physicians need to deliver high-quality care and, at the same time, offer an opportunity for physicians to experience care delivery in rural communities.

Currently, CMS recognizes the important role CAHs can and do play in GME. It allows a PPS teaching hospital to count the time that its residents spend in their rotation at a CAH for calculating Indirect Medical Education (IME) or Graduate Medical Education (GME) under certain circumstances. Or, if the CAH incurs the costs of the residents’ training, the CAH can be reimbursed 101 percent of its costs.

In the Proposed Rule, CMS indicated that it is considering reversing course by no longer allowing PPS hospitals to count the time that residents spend in a rotation at a CAH hospital even though the PPS hospital bears the costs associated with those residents. Such a policy change is neither supported nor required by any statutory changes or direction, as AHA explains in its comment letter, but it could have a significant impact on the ability to train and recruit physicians for rural health care.

Again, because Minnesota has the third largest number of CAHs in the country and because many of our members already struggle to recruit physicians to practice in their communities, the proposed change in course would likely have disproportionate impact on Minnesota's residency programs and would harm both the CAHs and PPS hospitals that coordinate residents’ GME experiences.

E-Measures of Clinical Quality
MHA is concerned that the integrity of publicly reported data on Hospital Compare will be jeopardized if the Proposed Rule is implemented. In particular, MHA is worried that Hospital Compare will not include data from those hospitals that choose to meet their Inpatient Quality Reporting (IQR) program requirements by having their data pulled directly from their electronic health record (EHR).

MHA appreciates the CMS’s legitimate concern about this data extraction method and the fact that it does not result in accurate representations of hospitals’ performance. However, MHA does not believe that not displaying data from hospitals using this data submission method is the wisest approach to addressing this concern. Doing so will make it more difficult for the public to rely on Hospital Compare for information about hospitals.

At least until direct extraction from EHRs produces more reliable results, MHA supports AHA’s suggestion that CMS allow the electronic submission of data collected in accordance with the specifications used for hand abstraction of the measures, and for any hospital choosing to submit data in this manner, allow successful reporting to count for both the IQR program and for Meaningful Use measure submission.

With respect to other issues and details of the Proposed Rule, MHA supports the concerns and suggestions contained in AHA’s comment letter.

Thank you again for the opportunity to comment. If you have any questions, please feel free to contact me or Joe Schindler, vice president of finance, at (651) 659-1415.


Matthew L. Anderson, J.D.
Vice President, Regulatory/Strategic Affairs

Minnesota Hospital Association