CMS issues rules and regulations for payment increases and interest charges.

The Centers for Medicare & Medicaid Services (CMS) recently issued the following regulations and rules:

* Beginning October 1, hospitals serving Medicare beneficiaries who require intensive inpatient rehabilitation will receive a 3.1% increase in their payment rates for FY 2005. Aggregate payments to these facilities in FY 2005 are projected to be $5.7 billion, a 5.6% increase from a projected $5.4 billion in FY 2004. CMS estimates that there will be about 483,000 Medicare admissions to Medicare-certified inpatient rehabilitation facilities across the country in FY 2005. Adjustments to the payment rates include a 19% adjustment for rural facilities to offset the higher costs they incur because they have fewer cases, longer lengths of stay, and higher average costs per case.

CMS issued revised regulations earlier this year expanding the criteria to be classified as an inpatient rehabilitation facility. First, it replaced the term polyarthritis with three clinically meaningful types of arthritis. Second, it added a new qualifying condition associated with complex joint replacement cases. It also allowed a facility to count patients who have a secondary medical condition that meets one of the qualifying diagnoses toward the percentage threshold.

* Urban hospitals will receive an average 5.7% increase in fiscal year 2005 payments for Medicare inpatient services, while rural hospitals will see their inpatient payments increase 6.2%. The final rule provides a full market basket update (cost of goods and services) for hospitals that submit reports on the quality of their services, reduces the impact of low labor costs on payments, and provides additional payments for hospitals in remote areas and for new medical technologies. Responding to concerns raised by hospitals and their supporters in Congress, CMS backed away from a proposal to limit admissions to long-term care units from the host hospitals in which they are located, adopting a more flexible 4-year phase-in of restraints on "hospital-in-hospital" admissions.

* Skilled nursing facilities will receive a full 2.8% market basket increase in fiscal year 2005 Medicare payments, agreeing with providers to retain temporary add-on payments of 6.7% until the findings of a study due in January on revising the payment classification system can be reviewed.

* Also effective October 1, Medicare will modify the way it calculates overpayments and underpayments to providers and suppliers by eliminating interest charges on discrepancies of less than 30 days, which previously had been assessed interest for the full 30-day period.