Health Care Reform Law Reduces Market Basket Rates for Acute Care and Long-Term Care Hospitals

June 23, 2010

On March 23, 2010, President Obama signed The Patient Protection and Affordable Care Act ("PPACA") into law. In order to implement certain portions of PPACA, the Centers for Medicare and Medicaid Services ("CMS") recently released a proposed rule that supple-ments rules previously published by CMS regarding the Fiscal Year ("FY") 2010 and FY 2011 hospital inpatient prospective payment systems and the long-term care prospective payment system (the "Proposed Regulations"). These Proposed Regulations reduce the market basket rates for FY 2010 and FY 2011. 

CMS uses market basket rates to annually adjust Medicare payments in order to account for inflation, with the goal of uniform payment to health care providers over time for the same services even as input prices change. However, the Proposed Regulations lower certain market basket rates after their initial calculation.

Specifically, the regulations mandate post-calculation reduction of the market basket rates for acute care hospitals by .25% for both FY 2010 and FY 2011. The original FY 2010 market basket rate for acute care hospitals was 2.10%. The Proposed Regulations reduce this rate to 1.85%. They also lower the proposed FY 2011 market basket rate from 2.40% to 2.15%. 

For long-term care hospitals, the Proposed Regulations reduce market basket rates by .25% in FY 2010 and by .50% in FY 2011. The FY 2010 market basket rate for long-term care hospitals was initially 2.50%, but the Proposed Regulations lower the rate to 2.25%. They cut the proposed FY 2011 rate from 2.40% to 1.90%.

Changes in FY 2010 rates retroactively went into effect for all discharges on April 1, 2010. FY 2011 rates take effect on October 1, 2010. 

For more information on market basket rates or any other aspect of the PPACA, please contact Bill Mabry, Kristen Holt or any other attorney in Frost Brown Todd's Health Law Practice Group.