What's New


OVERVIEW: On July 31, 2009, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that revises policies and payment rates for general acute care hospitals that are paid for inpatient services under the Inpatient Prospective Payment System (IPPS), effective for discharges in fiscal year 2010 – that is, on or after October 1, 2009. In addition to promoting accurate payment for inpatient services to Medicare beneficiaries, the final rule strengthens the relationship between payment and quality of service, by expanding the quality measures that hospitals must report in order to receive the full market basket update in fiscal year 2011. Under the Medicare law, hospitals that choose not to participate in the voluntary reporting program or do not participate successfully will receive an inflation update equal to the hospital market basket less two percentage points The final rule sets the market basket at 2.1 percent, and, therefore, hospitals that do not successfully report the quality measures will receive updates of 0.1 percent.

The final rule does not change the list of hospital-acquired conditions (HACs) in FY 2010, but describes CMS’s plans to evaluate the impact of the existing policy on hospital practices and patient care.

This Fact Sheet discusses only the quality provisions of the IPPS FY 2010 final rule; separate fact sheets also issued today provide more detail on the payment and policy changes.

BACKGROUND: The Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) and HACs initiatives represent significant steps toward implementing value-based purchasing (VBP) in Medicare. VBP is intended to transform Medicare from a passive payer for services to a prudent purchaser of services, paying not just for quantity of services but for quality as well.

The RHQDAPU initiative grew out of the Hospital Quality Initiative developed by CMS in consultation with hospital groups. Participation in the program is voluntary, but after initial levels of participation proved disappointing, Congress added a financial incentive to the program in the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003. Under the MMA, hospitals that chose not to participate or failed to meet the criteria for successful reporting in a given year received the annual payment update reduced by 0.4 percentage points. The Deficit Reduction Act of 2005 increased this reduction to 2.0 percentage points. Since the implementation of the financial incentive, hospital participation has increased to 99 percent and, of participating hospitals, 97 percent receive the full annual payment update in FY 2009.

In the meantime, the RHQDAPU measure set has grown from a starter set of 10 quality measures in 2004 to the current set of 43 quality measures. The 43 measures include 25 chart-abstracted measures (heart attack, heart failure, pneumonia, surgical care improvement), 16 claims-based measures (mortality and readmissions measures for heart attack, heart failure, pneumonia; AHRQ Patient Safety Indicators and Inpatient Quality Indicators; nursing sensitive care), 1 survey-based measure (patient satisfaction), and 1 structural measure (participation in a cardiac surgery registry).


Additions: The IPPS FY 2010 final rule adds four new measures and program requirements to the current measures for which hospitals must submit data under the RHQDAPU program to receive the full market basket update in FY 2011. This includes two new chart-abstracted measures for surgical care improvement and two structural measures. The new Surgical Care Improvement Project (SCIP) measures are additions to the existing SCIP measure set for which data elements are already being collected and submitted to CMS. Therefore, the additional chart abstraction burden for hospitals will be minimal. CMS believes that the two structural measures will promote hospital participation in nursing-sensitive care and stroke care registries that collect quality data.

The additions to the quality measures are summarized in the following table:

Surgical Care Improvement Project (SCIP) Measures
SCIP Infection (INF) 9Urinary Catheter Removed on Postoperative Day 1 (POD1) or Postoperative Day 2 (POD2)
SCIP INF 10Surgery Patients with Perioperative Temperature Management
Structural Measures
Participation in a Systematic Clinical Database Registry: Nursing Sensitive Care
Participation in a Systematic Clinical Database Registry: Stroke Care

Retirement of Measure: The final rule notes that CMS retired the Acute Myocardial Infarction (AMI)-6 – Beta-blocker at arrival measure. CMS took this action based on the evolving evidence for care of AMI patients and changes in the American College of Cardiology/American Heart Association (ACC/AHA) practice guidelines. The new guidelines recommend that early beta-blockers should be avoided in certain patient populations due to increased mortality risk. Retirement of this measure is based on evidence that revision of the measure would be impractical and might cause unintended consequences, including harm to certain AMI patients.

Program Requirements: CMS currently provides hospitals that will not be receiving the full market basket update an opportunity to submit a RHQDAPU reconsideration request to CMS. The final rule now requires hospitals that are denied the full market basket update for FY 2010 because they fail to meet the RHQDAPU validation requirements to submit a copy of all the paper medical records that they submitted to the CMS contractor each quarter for purposes of the validation, along with a copy of the reconsideration request form. CMS believes this new process will streamline the reconsideration process and reduce the number of subsequent hospital appeals to the Provider Reimbursement Review Board (PRRB).

The final rule also provides hospitals that receive a new CMS Certification Number (CCN) more time - 180 calendar days from the date identified as the ‘‘open date’’ on CMS’s Online System Certification and Reporting (OSCAR) system - to submit a RHQDAPU participation form. This change will make it possible for CMS to verify accurately whether these hospitals intend to participate in the RHQDAPU program, while ensuring that they have a sufficient amount of time to implement the operational requirements. Hospitals will still be required to report data starting with the calendar quarter following the date that they submit their RHQDAPU participation form.

Finally, CMS has modified the validation requirement starting with FY 2012 to improve the reliability and quality of the process. CMS will randomly select 800 hospitals on an annual basis, and will validate 12 medical records on a quarterly basis throughout the year from each selected hospital. CMS will increase the quarterly sample size from the current 5 records to 12 records to achieve a more reliable validation estimate of the RHQDAPU data reported by the hospital. CMS will also develop targeting criteria to supplement the random sample beginning in FY 2011 to make sure that hospitals do not receive quality payments that have failed validation in the past or have not been included in the sample several years in a row.

HOSPITAL-ACQUIRED CONDITIONS UPDATE: The final rule does not change the list of hospital-acquired conditions (HACs) in FY 2010. During the coming fiscal year, CMS is planning to conduct a joint evaluation of the program’s impact, working with sister agencies within the Department of Health and Human Services - the Centers for Disease Control and Prevention (CDC), the Agency for Healthcare Research and Quality (AHRQ), and the Office of Public Health and Science (OPHS). The evaluation will provide valuable information about the program’s impact with regard to preventing HACs.

Under the HAC payment provision, Medicare has selected ten categories of conditions that are reasonably preventable through adherence to evidence-based guidelines, and that, when present as a secondary diagnosis at discharge, result in the case being assigned to a higher paying MS-DRG. Beginning for discharges on or after October 1, 2008, CMS no longer pays at the higher MS-DRG if the only secondary diagnoses on a claim are on the HAC list and were not reported as present at admission.

The HAC payment provision was mandated by the Deficit Reduction Act of 2005 to provide hospitals a payment incentive to encourage the prevention of these conditions. CMS designated eight categories of conditions as HACs during the IPPS rulemaking for FY 2008 and expanded the list of HACs in FY 2009. Although CMS has not yet evaluated the impact of this policy, CMS has received anecdotal reports that hospitals across the country are increasing their efforts to prevent HACs from occurring.

The final rule was placed on display at the Federal Register today, and can be found under Special Filings at: www.archives.gov/federal-register/public-inspection/index.html.

It will appear in the August 27, 2009, Federal Register.

For more information, please see: www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp.

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