August 3, 2001

CMS Publishes Final FY 2002 Inpatient PPS Rule

The Center for Medicare and Medicaid Services (CMS) Aug. 1 published in the Federal Register [66 FR 39827] the final rule for changes to the Inpatient Prospective Payment System (PPS) for FY 2002. The rule is effective Oct. 1.

The final rule contains several changes to the direct GME and IME regulations, including:

• Hospitals with a per resident amount less than 85 percent of the locality adjusted national per resident amount will have their per resident amount increased to 85 percent; and
• If the relevant criteria are met, hospitals may receive a temporary adjustment to their FTE cap to reflect residents added because of another's hospital's closure. The cap also can be adjusted if a residency program is closed provided that the hospital that closed its program agrees to temporarily reduce its FTE cap.

The final rule contains the annual update to the Medicare Inpatient PPS. Beginning with discharges on or after October 1, 2001, hospitals will experience a 2.75 percent payment increase. This increase is 0.20 percent higher than proposed increase in the May 4 proposed rule because of an increase in the hospital market basket (a measure of hospital inflation). Under current law, the PPS update is set at market basket minus 0.55 percent. The new market basket estimate is 3.3 percent.

CMS chose not to include a payment methodology for new technology, which was part of the May 4, 2001, proposed rule. In order to address the large number of comments received on this issue CMS will publish a separate rule later this summer. CMS plans to establish a payment methodology for new technology by Oct. 1; however, no payments will be made under the new methodology during fiscal year 2002.

A final rule establishing a prospective payment system for rehabilitation hospitals and rehabilitation units within hospitals is scheduled for publication in the Federal Register on Aug. 7.

Information: Jeffrey Patyk, AAMC Division of Health Care Affairs, 202-828-0498.