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Medicare will increase its payment rates for inpatient hospital care by 2.75% starting Oct. 1, the Centers for Medicare and Medicaid Services (CMS) announced July 31. The increase for fiscal year 2002 will affect about 4,800 acute care hospitals that are paid under Medicare’s inpatient prospective payment system. The new rate, which reflects the law’s requirements for updating Medicare payment rates, was published in a final rule in the Aug. 1 Federal Register. Medicare law pegs the annual updates for acute care hospitals for fiscal year 2002 to the estimated increase in the hospital market basket — the inflation rate for goods and services used by acute care hospitals — minus 0.55 percentage points. For fiscal year 2002, the hospital market basket is projected to increase by 3.3%. The update is 2.75%. The final rule does not address provisions in the proposed rule dealing with expediting the incorporation of new medical services and technologies in the inpatient prospective payment system coding and payment methodology. CMS will address this issue in a separate final rule to be published later this summer.