Medicare Compliance & Reimbursement

Freestanding governmental psychiatric hospitals may get the largest pay increase

Inpatient psychiatric facilities may soon receive a significant Medicare payment rate increase for discharges on or after July 1, 2006--if the Centers for Medicare & Medicaid Services passes a new rule.

The rate increase--part of a three-year transition from cost-based reimbursements to a new IPF prospective payment system--would affect 1,800 IPFs, including freestanding psychiatric hospitals and certified psychiatric units in general acute care and critical access hospitals. CMS bases the federal per-diem rate on inpatient operating- and capital-related costs; the rate would increase from $575.95 to $594.66 for rate year 2007 under the new rule, CMS announced Jan. 13. For RY 2006, CMS would base IPF payment rates on a 50-50 blend of the original cost-based methodology and the new PPS.

Freestanding governmental psychiatric hospitals would see the largest share of the proposed rate increase, as well as the following payment policy changes:

• Instead of using the acute care market basket to determine cost inflation for goods and services provided in IPFs, a new market basket would reflect inflation in inpatient rehabilitation facilities, IPFs and long-term care hospitals.

• The fixed dollar loss threshold for outlier payments would increase from $5,700 to $6,200 to keep outlier payments at 2 percent of total payments.

• The electroconvulsive therapy payment rate would increase based on the latest hospital cost data for ECT.

• CMS would base wage index adjustments on geographic area definitions adopted from the Office of Management and Budget.

CMS' proposed payment changes would improve quality of care for Medicare beneficiaries with severe psychiatric disorders, the agency asserts. "In many cases, psychiatric care can make it possible for these beneficiaries to return to their homes or to less restrictive settings," says CMS administrator Mark McClellan.

CMS is accepting comments on the proposed rule until March 14 at www.cms.hhs.gov/eRulemaking.