The Centers for Medicare & Medicaid Services failed again in its Dec. 1 notice to establish a rational and lawful basis for cutting inpatient prospective payment system payments by 0.2% in conjunction with its two-midnight policy, despite offering some additional details, AHA told the agency today. According to an AHA analysis, which used public Medicare Provider Analysis and Review data and made more appropriate assumptions about potential shifting of medical Medicare Severity-Diagnosis Related Group claims to the outpatient setting, CMS’s estimate of a potential 40,000 net increase in inpatient discharges “is unjustified,” wrote AHA Executive Vice President Tom Nickels. “The shifts from inpatient to outpatient essentially net each other out, necessitating no need, and providing no basis, for the 0.2% cut.” AHA urged CMS to fully reverse the 0.2% reduction, revise IPPS base payment rates accordingly and reimburse hospitals for the resulting Medicare payment shortfall for discharges beginning Oct. 1, 2013. In October 2015, a federal court rejected CMS arguments that it met all of the procedural legal requirements for rulemaking when it imposed the 0.2% cut in its IPPS final rule for fiscal year 2014, and ordered the agency to publish additional justification for the reduction and allow further opportunity for hospital comments. CMS’s Dec. 1 notice directly responds to the court order, issued in a consolidated federal case that includes a lawsuit brought by the AHA, four hospital associations and four hospital organizations.