Psych PPS rule finally surfaces

Healthcare Financial Management, Jan, 2004

The long-awaited rule describing the CMS proposed Medicare psychiatric prospective payment system (PPS) was published in the November 28, 2003, Federal Register. The proposed PPS would replace the existing cost-based payment system over a three-year transition period during which there would be a blend of the federal per diem rate and hospital-specific amounts based on payment rates set forth in the Tax Equity and Fiscal Responsibility Act of 1982.

The initial standard per diem payment amount would be $530, which is intended to reflect the average daily cost of inpatient psychiatric care, including capital-related costs. Adjustments would be made for area wage levels, budget neutrality, and patient and facility characteristics to account for variation in patient resource use.

Other provisions include:

* Use of psychiatric ICD-9-CM diagnosis coding information

* Outlier payments for high-cost eases

* An interrupted stay policy to account for cases in which a patient is discharged from an inpatient psychiatric facility, but returns to the facility within five days

The PPS was mandated by Section 124 of the Balanced Budget Refinement Act of 1999 and will affect about 2000 facilities, including freestanding psychiatric hospitals and certified psychiatric units in general acute care hospitals. CMS will accept comments until January 27, 2004.

CMS has noted that a large number of comments may result in the final rule being delayed beyond the proposed April 1, 2004, effective date and an increase to the length of the transition period.