In a March 7 notice, CMS announced changes to the payment adjustment for low-volume hospitals and the Medicare-dependent hospital (MDH) program under the hospital inpatient prospective payment systems for fiscal year 2013.  These changes were made in accordance with sections 605 and 606 of the American Taxpayer Relief Act of 2012 (ATRA)—the law Congress passed in January to avert the so-called “fiscal cliff.”

When Congress enacted ATRA, it extended changes to these programs put in place by the Affordable Care Act.  Section 605 of ATRA extends changes to the payment adjustment for low-volume hospitals for an additional year, through FY 2013.  In turn, Section 606 of ATRA extends the MDH program through fiscal year 2013.

For the applicable low-volume percentage increase to be applied to payments for discharges beginning on or after October 1, 2012 (the beginning of FY 2013), a hospital must make its request for low-volume hospital status in writing to its fiscal intermediary or Medicare Administrative Contractor by March 22, 2013; some hospitals that qualified for the low-volume payment adjustment in FY 2012 may continue to receive a low-volume payment adjustment in FY 2013 without reapplying.  

Generally, a provider that was previously classified as an MDH will be reinstated as an MDH effective October 1, 2012, with no need to reapply for MDH classification.   There are two exceptions, however.  If a former MDH requested cancellation of its rural classification, or if it was classified as a sole community hospital on or after October 1, 2012, it would need to reapply for MDH status—which would be effective prospectively only.  Hospitals falling within the exceptions stand to lose several months of MDH status, and the more favorable reimbursement associated with it, simply because they acted to limit the negative reimbursement impact from what appeared to be the end of the MDH program.  This would appear to frustrate the retroactive nature of the MDH extension granted by Congress in the ATRA.

CMS projects that low-volume hospitals will experience an increase in payments of approximately $326 million compared to previous FY 2013 estimates.  CMS also estimates that MDH facilities will experience an overall increase in payments of approximately $183 million during this same period.

You can view CMS’s notice here.

Reporter, Ramsey Prather, Atlanta, GA, +1 404 472 4624, rprather@kslaw.com.