This article was first published at Corporate Compliance Insights on September 5, 2014.

“The darkest places in hell are reserved for those who maintain their neutrality in times of moral crisis.”  — Dante Alighieri

The end of summer brings with it change across the United States.  Children and many young adults prepare themselves for the new school year, professional baseball players set their sights on what has come to be known as the Fall Classic, and foliage undergoes the first stages of fall’s impending metamorphosis. For America’s health care professionals, August has also become synonymous with the release of the final rule from the Centers of Medicare & Medicaid Services (“CMS”), which covers the Medicare Program’s Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals (“IPPS”), and sets the rules of the game for those in the field, at least for another year.

Including such updates to the hospital IPPS for operating and capital-related costs as CMS continues to implement the Affordable Care Act, changes relating to graduate medical education (“GME”) and indirect medical education (“IME”) payments, revisions to the Hospital Value-Based Purchasing (“VBP”) Program, the Hospital Readmissions Reduction Program (“HRRP”), and the Hospital-Acquired Condition (“HAC”) Reduction Program, technical corrections to the provider administrative appeals and judicial review process, expanded use of Medicare Advantage (“MA”) risk adjustment data, not to mention the alignment of reporting and submission timelines for quality measures within the Medicare E.H.R. Incentive Program and IQR Program, this is one millenary regulation not to be missed. For those who may shy away from such Federal Register epics, the following is a brief overview of two critical topics.

Hospital Readmissions Reduction Program

Previously, the Hospital RRP penalized medical facilities by reducing a hospital’s base operating diagnosis-related group (“DRG”) payment for certain excess readmissions, including acute myocardial infarction, heart failure, and pneumonia.  Beginning in Fiscal Year (“FY”) 2015, readmissions measures relating to chronic obstructive pulmonary disease and total hip arthroscopy and total knee arthroscopy will also be integrated, and in FY 2017 the Hospital RRP will further include coronary artery bypass graft surgery.  Even with the inclusion of new measures, the Hospital RRP cannot exceed a three percent reduction. In FY 2015, CMS will calculate aggregate payments for excess readmissions by using the following formula:

• Aggregate payments for excess readmissions = [sum of base operating DRG payments for AMI x (Excess Readmissions Ratio for AMI-1)] + [sum of base operating DRG payments for HF x (Excess Readmissions Ratio for HF-1)] + [sum of base operating DRG payments for PN x (Excess Readmissions Ratio for PN-1)] + [sum of base operating DRG payments for COPD) x (Excess Readmissions Ratio for COPD-1)] + [sum of base operating DRG payments for THA/TKA x (Excess Readmissions Ratio for THA/TKA-1)].

• Aggregate payments for all discharges = sum of base operating DRG payments for all discharges.

• Ratio = 1-(Aggregate payments for excess readmissions/Aggregate payments for all discharges).

• Proposed Readmissions Adjustment Factor for FY 2015 is the higher of the ratio or 0.9700.

Hospital Value-Based Purchasing Program

Nearing its third year, the Hospital VBP Program is expected to reduce hospital reimbursements by 1.5% in October, creating a bonus pool for those providers who successfully navigate through clinical measures, patient satisfaction, and efficiency in their quest for that Holy Grail of Health Care known as the Total Performance Score (“TPS”).  With a FY 2015 overall reduction estimated at $1.4 billion, hospitals have ample incentive to improve patient outcomes, safety and the overall experience of care.  Starting in FY 2015, the TPS under the Hospital VBP will be calculated as follows:  (1) Process of Care = 20%; (2) Patient Experience of Care = 30%; (3) Patient Outcomes = 30%; and (4) Efficiency = 20%.

The Hospital VBP Program will also include the Medicare Spending per Beneficiary (“MSPB”) measure designed to evaluate a hospital’s efficiency by assessing the cost to Medicare of services performed by hospitals and other health care providers during an MSPB episode (which includes all Part A and Part B claims starting from the three-day window before an inpatient admission through 30 days after discharge). Starting in FY 2017 the Hospital VPB Program will include methicillin-resistant Staphylococcus aureus (“MRSA”), Clostridium difficile (C. Difficile or “CDI”), and the PC-01 measure (for hospitals providing maternity services only), which includes elective delivery prior to 39 completed weeks gestation, into the TPS. Future program years may include a care transition measure (“CTM”) for the Hospital Consumer Assessment of Healthcare Providers and Systems (“HCAHPS”) Survey.  CTM may provide an effective way to ensure proper patient recoveries while reducing readmissions and possible mortality, while also ensuring adherence to medication.

CMS also evaluated whether certain Hospital VBP measures had “topped-out,” a decision CMS reaches by focusing on (a) the national measure data showing statistically indistinguishable performance levels at the 75^th and 90^th percentiles and (b) national measure data showing a truncated coefficient of variation less than 0.10.  In FY 2015, one pneumonia (“PN”) measure and multiple surgical care improvement project (“SCIP”) measures will be “topped-out,” based upon this analysis.  IN FY 2017, the list of “topped-out” measures will include acute myocardial infarction (“AMI”), heart failure (“HF”), SCIP and stroke (“STK”), among others.

To be sure, the 597, triple-columned pages of final regulations contain dozens of new measures as well as critical clarifications for existing ones.  From reporting to electronic health records to Medicare disproportionate share payments, to name just a few, hospitals must now review and understand the 2015 regulations as a necessary prerequisite merely to survive in this current climate of American health care.  Although the new regulations do not include a final exam at the end of the semester, those who are familiar with the IPPS will be on alert next Spring when CMS releases the proposed regulations for 2016, followed again next August with the final regulations.  From the point of view of government regulators, Medicare is the gift that keeps on giving.