New TEFRA limits slash funds for some providers
New TEFRA limits slash funds for some providers
Incentive payments almost eliminated
Beginning this month, some rehabilitation providers will have their Medicare reimbursement severely reduced under provisions of the Balanced Budget Act of 1997.
The new legislation virtually eliminates the incentive payments for rehab providers whose costs fall below their reimbursement limits under the Tax Equities and Fiscal Responsibility Act of 1982 (TEFRA), and it reduces the upper TEFRA limits to the 75th percentile of rates for all providers who are reimbursed under TEFRA.
Under TEFRA, providers are reimbursed a set amount for each discharge based on a fixed per-patient limit calculated for each rehab facility during a base year. Until now, if a hospital fell below its TEFRA rate, HCFA gave the facility half of the difference or 5% of the target rate, whichever is lower.
The Balanced Budget Act contains a new formula for calculating incentive payments that contains so many qualifiers it virtually eliminates the incentive payments.
The TEFRA system does not provide a way to adjust payment for a facility’s case mix, which has penalized facilities for taking long-term, expensive cases. Because payment adjustments have been set by Congress and have not kept up with inflation, older rehab facilities with an earlier base year receive lower payments than newer facilities.
The average cost per discharge for TEFRA is now about $15,000, based on Medicare cost reports, but some hospitals that came into the system in recent years have a target limit as high as $50,000 per discharge, while some older hospitals are dealing with target limits as low as $8,000.
The new upper TEFRA limits could be as low as $17,500 to $19,000 per discharge, based on HCFA data, according to calculations by Sam Fleming, financial analyst with Joe W. Fleming II PC, a Washington, DC-based law firm specializing in rehabilitation reimbursement issues. He made the calculations for the American Rehabilitation Association.
The changes to the reimbursement systems are included in HCFA’s rules for hospitals published in the Aug. 29 Federal Register, according to Bill Buczko, research analyst in HCFA’s office of strategic planning.
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