IPPS spending projected to increase $3B, LTCH PPS to decrease $173B


April 17, 2017

The fiscal year (FY) 2018 Proposed rule for inpatient prospective payment system (IPPS) and long-term care hospital prospective payment system (LTCH PPS) provides a "strong focus on patient-centered care" and improving outcomes, as well as updating payment rules and policies. The proposed updates, provided in an advance release, also promote transparency, flexibility, and innovation in the delivery of health. CMS is seeking ideas through a Request for Information (RFI) on regulatory, policy, practice, and procedural changes that will better achieve its goal of making the health care system more effective, simple, and accessible, while maintaining program integrity and preventing fraud. The Proposed rule will publish in the Federal Register on April 28, 2017. CMS will accept comments on the Proposed rule and RFI until June 13, 2017.

Request for information. CMS explained that it plans to start a national conversation to improve the health care delivery system. To begin the process, it is releasing an RFI to obtain feedback on how to make Medicare less bureaucratic and better achieve program simplification, transparency, flexibility, and innovation. Its goal is to obtain information on how it could reduce burdens for clinicians, providers, and patients, while increasing quality of care and reducing costs. Examples of recommendations include payment system redesign, streamlining reporting, documentation requirements, and operational flexibility. Other examples are data sharing that would enhance patient care, support the doctor-patient relationship in care delivery, and facilitate patient-centered care within inpatient stays at general acute care and long-term care hospitals.

Proposed IPPS payment rate changes. CMS projects that the rate increase, along with changes in payment policies, would increase IPPS operating payments by approximately 1.7 percent. Uncompensated care payments (payments to disproportionate share hospitals (DSH)) would increase IPPS operating payments by an additional 1.2 percent, for a total increase in IPPS operating payments of 2.9 percent. The proposed operating payment rate for IPPS hospitals that successfully participate in the Hospital Inpatient Quality Reporting Program (HIQRP) and are meaningful electronic health record (EHR) users is approximately 1.6 percent. The projected hospital market basket update of 2.9 percent would be adjusted by a -0.4 percentage point required for productivity, along with additional adjustments required to offset the estimated costs of the Two-Midnight policy.

DSH rates. The Proposed rule would distribute roughly $7 billion in uncompensated care payments in FY 2018, which is an increase of approximately $1 billion from the FY 2017 amount. CMS proposed to incorporate data from its National Health Expenditure Accounts into the estimate of the percent change in the rate of uninsurance used in calculating the total amount of uncompensated care payments available to be distributed. For FY 2018, CMS proposed to begin incorporating uncompensated care cost data from Worksheet S-10 of the Medicare cost report in the methodology for distributing these funds. It would use data from FY 2014 cost reports in combination with insured low-income days from the two preceding cost reporting periods to determine the distribution of uncompensated care payments.

Hospital-acquired conditions (HAC) payment reduction. Section 1886(p) of the Social Security Act, as added by Sec. 3008 of the Patient Protection and Affordable Care Act (P.L. 111-148), established the Hospital-Acquired Condition Reduction Program (HACRP). CMS proposed five changes to existing HAC reduction policies: (1) specifying the dates of the time period used to calculate hospital performance for the FY 2020 HACRP; (2) requesting comments on additional measures for potential future adoption;(3) requesting comments on social risk factors; (4) requesting comments on accounting for disability and medical complexity in the Centers for Disease Control and Prevention National Healthcare Safety Network (CDC NHSN) measures in Domain 2; and (5) updating the HACRP’s Extraordinary Circumstances Exception policy.

Hospital Readmissions Reduction Program (HRRP). HRRP was established bySec. 1886(q) of the Social Security Act, as added by Sec. 3025 of the ACA and amended by Sec. 10309 of the ACA and Sec. 15002 of the 21st Century Cures Act (Cures Act) (P.L. 114-190). Under the program, payments for discharges from an "applicable hospital" under Sec. 1886(d) will be reduced to account for certain excess readmissions. The Proposed rule would assess penalties based on a hospital’s performance relative to other hospitals with a similar proportion of patients who are dually eligible for Medicare and full-benefit Medicaid, as required by the Cures Act. Specifically, CMS is proposing methodologies to calculate the proportion of dual eligibles, assigning hospitals to peer groups, a payment adjustment formula, and aggregate payments for excess readmissions.

Hospital quality of care changes. For FYs 2017 and 2018,CMS has proposed changes for reporting clinical quality measures (CQMs) for eligible hospitals and critical access hospitals (CAHs) participating in the EHR incentive program related to the reporting period and the number of CQMs that need to be reported, as well as a number of changes to the reporting of electronic CQMs. CMS has proposed changes to the Hospital value-based purchasing (VBP) program, including the removal of one measure, the adoption of two measures, and the revision of the efficiency and cost reduction domain weighting, beginning with the FY 2021 program year, to reflect the implementation of condition-specific measures in the VBP program.

In addition, CMS has proposed four new measures that assess end-of-life care, the removal of three established measure from the PPS-exempt cancer hospital quality reporting, and revisions to the extraordinary circumstances exceptions. CMS also proposed changes to the inpatient psychiatric facility quality reporting program, including adding a measure in FY 2020 related to medication continuation after discharge, which would be calculated from claims data, and updating the extraordinary circumstances exception to align with other programs’ provisions.

LTCH PPS. CMS projects that LTCH PPS payments would decrease by approximately 3.75 percent, or $173 million in FY 2018, which is due to the continued phase in of the LTCH PPS dual payment rate system. CMS also proposed a moratorium on the 25 percent threshold policy, as well as a revision to the short-term outlier payment adjustment and implementing various provisions of the Cures Act.

CMS has proposed the replacement of the current pressure ulcer measure with an updated version, adopting two new companion measures, and the removal of two current measures. In addition, CMS is proposing to publicly report the measures on the LTC Compare website for FY 2018. For FY 2020, CMS is proposing to have LTCHs begin reporting standardized patient assessment data.

Other changes. CMS also has proposed to (1) make the 96-hour requirement for CAH patients to be discharged or transferred a low priority for Medicare contractors to reduce burdens on providers unless there is concern of fraud or abuse; (2) change provider-based status regulations and hospital within hospitals requirements as they relate to Indian health services or tribal facilities; (3) eliminate the publication of notices of termination in newspapers for federally qualified health plans, ambulatory surgical centers, rural health clinics, and organ procurement organizations, (4) change application and reapplication processes for accreditation organizations, and (5) the extension of the rural community hospital demonstration for an additional five years.as required by the Cures Act.

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