On April 30, the Centers for Medicare & Medicaid Services (CMS) published a 1500-page draft regulation detailing how it proposed paying hospitals for the inpatient care they provide to their Medicare patients in FY 2016 and invited comment on its proposal from stakeholders and interested parties.

On June 12, the National Association of Urban Hospitals provided its written comments in a letter to CMS. This week NAUH presents those comments in this space:

  • Monday: Medicare DSH
  • Tuesday: Hospital inpatient rates
  • Yesterday: the hospital readmissions reduction program
  • Today: short hospital stays and outliers

Short Hospital Stays

NAUH appreciates the recent actions both CMS and Congress have taken to protect hospitals from punitive actions by Recovery Audit Contractors. We also appreciate that CMS’s actions were taken in part in response to the views providers submitted last year after CMS solicited comments and suggestions in the proposed FY 2015 inpatient prospective payment system regulation. We recognize that this has been a controversial area and appreciate the agency’s willingness to audit hospitals’ performance and educate them while it works to develop a satisfactory policy for reimbursing hospitals for such care.

A revised policy governing Medicare reimbursement for short hospital stays, the proposed FY 2016 suggests, will be included in the proposed FY 2016 hospital outpatient prospective payment system rule, to be published in draft form in the near future, and will presumably reflect the considerable input offered by providers, MedPAC, and others. For this reason, NAUH wishes to take this opportunity to reiterate our perspective on the basic concepts we believe a short hospital stay policy should embrace.

NAUH LogoIn NAUH’s view, a Medicare hospital stay begins with a physician’s initial diagnosis that a patient needs to be admitted to the hospital as an inpatient and is expected to remain at least two midnights or more. Then, when the patient’s stay is ultimately shorter, NAUH believes that stay should be classified as a short stay for Medicare payment purposes. A short stay should be reimbursed by Medicare based on Medicare transfer reimbursement policy – that is, for this day, Medicare should pay the hospital twice the per diem rate for the applicable DRG’s average length of stay. This perspective is based on the generally accepted view that the greatest investment of resources for patient care occurs during the very beginning of a patient’s stay in the hospital and that even in a short stay, a hospital is expending comparable resources on patient care during that first day or two as it does when a patient stays longer. This is the basis for current Medicare transfer payment policy and NAUH believes it should be the basis for Medicare short hospital stay payment policy as well. Further, hospitals that serve large numbers of low-income patients and have medical education programs should not be put at a disadvantage when patients just have short stays, so NAUH believes they should receive Medicare DSH and medical education payments for these short stays as well.

NAUH urges CMS to consider this perspective in developing its short stay policy. It also urges CMS to protect hospitals from arbitrary rulings by RAC auditors; to limit how far back RAC auditors can go in evaluating past hospital efforts; to ensure that RAC audits are completed in a timely manner and that appeals are addressed swiftly; and to ensure that future short stay policy, first and foremost, reflects the best interests of the patients hospitals serve and does not impose needless penalties on the hospitals that serve them.


The proposed rule calls for reducing the Medicare outlier threshold from the current $24,626 to $24,485 in FY 2016. While NAUH appreciates the proposal to reduce the outlier threshold, we believe it should be reduced even further because Medicare’s spending for outlier cases this year is on target to fall below five percent – the minimum level established by Congress. For this reason, NAUH suggests that CMS consider recalculating the proposed threshold with a target of 5.5 percent of inpatient spending to ensure that the final total does not fall short and instead falls within the statutory range of five to six percent in FY 2016.