Health Law Daily IPPS, LTCH final rule protects wage index of rural hospitals
Monday, August 5, 2019

IPPS, LTCH final rule protects wage index of rural hospitals

By Patricia K. Ruiz, J.D.

In this final rule, CMS updates IPPS and LTCH PPS payment rates and finalizes support for low wage index hospitals.

In its 2020 inpatient prospective payment system (IPPS) final rule, CMS improved the accuracy of Medicare payments to low wage index hospitals, allowing the hospitals to increase pay for workers and ensuring high-quality and affordable health care for patients. In addition to updating the IPPS, the final rule, which publishes in the Federal Register on August 16, 2019, also made changes to the long-term care hospital (LTCH) prospective payment system (PPS) and finalized technology policies to support innovation.

Changes to rural hospital wage index. Reponses to the 2019 proposed rule (83 FR 20164, May 7, 2018) reflected concerns that under the current wage index system, disparities between high and low wage index hospitals are perpetuated and exacerbated (see IPPS, LTCH proposal supports new technology, raises rural hospital payments, May 3, 2019). To address these issues, CMSfinalized a proposal to increase the wage index for hospitals with a wage index value below the 25th percentile. For at least four years beginning in fiscal year (FY) 2020, CMS will increase these hospitals’ wage indexes by half of the difference between the otherwise applicable wage index for that hospital and the 25th percentile wage index value over all hospitals. This will allow time for employee compensation increases to be reflected in the wage index calculation. In response to comments, CMS will make a budget neutrality adjustment to the standardized amount applied across all IPPS hospitals. CMS will also transition a 5-percent cap for FY2020 on any decrease from a hospital’s 2019 wage index.

Additionally, some hospitals have used urban to rural hospital reclassifications to inappropriately influence the rural floor wage index value, resulting in wage index disparities. CMS will address the unanticipated effects of these reclassifications by removing urban to rural hospital reclassifications from the rural floor wage index value starting in FY 2020.

Updated IPPS payment rates. CMS increased by 3.1 percent operating payment rates for general acute care hospitals successfully participating in the Hospital Inpatient Quality Reporting (IQR) Program and meaningful use of electronic health records (EHRs), reflecting a projected market basket update of 3.0 percent, reduced by a 0.4 percentage point productivity adjustment and reflecting a 0.5 percentage point increase required by legislation. CMS expects the rate changes to increase IPPS operating payments by about $3.4 billion and expects payments for new technologies to increase by 70 percent or $0.2 billion. Considering changes in uncompensated care payments, low-volume hospital payments, and capital payments, CMS projects IPPS spending to increase by about $3.8 billion or 3.0 percent in FY 2020. Individual hospitals may incur other payment adjustments, such as penalties for excess readmissions, penalties for performance under the Hospital Acquired Condition Reduction Program, and adjustments under the Hospital Value-Based Purchasing Program.

Updated LTCH PPS payment rates. Beginning FY 2016, only certain discharges received the standard federal payment amount under the LTCH PPS, with the remaining discharges receiving a relatively lower site neutral payment rate. FY 2019 marked the final year of a transition period for this policy. Thus, LTCH site neutral payment rate cases will be paid exclusively on the site neutral payment rate for discharges in cost reporting periods beginning FY 2020. Reflecting the continued implementation of the revised LTCH PPS, CMS projects LTCH PPS payments to increase by approximately 1.0 percent or $43 million. CMS expects payments for FY 2020 discharges paid using the LTCH PPS standard federal payment rate to increase by 2.7 percent after the annual update for FY 2020 of 2.5 percent. For cases continuing to transition to the site neutral payment rate, CMS expects a decrease of about 5.9 percent. The final rule also provides for a cure period before applying a payment adjustment for LTCHs that do not meet the statutorily required threshold of discharges meeting the patient criteria. Additionally, CMS finalized the adoption of two new quality measures under the LTCH Quality Reporting Program.

Technology add-on. The final rule implements a new technology add-on payment pathway for medical devices as part of the Breakthrough Devices Program receiving FDA marketing authorizations. If a medical device program has received marketing authorization from the FDA, CMS will consider the product new and not substantially similar to an existing technology for purposes of the add-on payment. The add-on payment will be 65 percent, or 75 percent for certain antimicrobials. The change will begin with applications received for new technology add-on payments for FY 2020. CMS also revised and clarified policies for the criterion used to evaluate these applications.

MainStory: TopStory ReimbursementNews IPPSNews CMSNews FDCActNews HITNews LTCHNews MDeviceNews PartANews PartBNews QualityNews

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