Based on updated payment rates and other payment adjustments to the Medicare hospital inpatient prospective payment system (IPPS), CMS predicts that the total Medicare spending on inpatient hospital services, including capital, will increase by about $2.4 billion in fiscal year (FY) 2018. In an advance release of a Final rule, CMS announced that the payment rate increase and other changes to IPPS payment policies will increase IPPS operating payments by approximately 1.3 percent. Overall payments to LTCHs, however, will decrease by $110 million in FY 2018, CMS reported. According to a fact sheet issued on August 2, 2017, CMS announced that the Final rule relieves regulatory burdens for providers; supports the patient-doctor relationship in health care; and promotes transparency, flexibility, and innovation in the delivery of care. The Final rule will publish in the Federal Register on August 14, 2017.
IPPS updated payment rates. Acute care hospitals paid under IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users will see an increase in operating payment rates of approximately 1.2 percent. This increases reflects the projected hospital market basket update of 2.7 percent adjusted by a negative 0.6 percentage point required for productivity. Other adjustments include a negative 0.6 percent adjustment to remove the one-time adjustment of 0.6 percent made in FY 2017 for the FYs 2014–2016 effect of the adjustment to offset the estimated costs of the two midnight policy, a positive 0.4588 percentage point adjustment required by the 21st Century Cures Act (P.L. 114-255), and a negative 0.75 percentage point adjustment required by the Patient Protection and Affordable Care Act (P.L. 111-148).
Payments for uncompensated care. CMS is increasing the amount of uncompensated care payments made to disproportionate share hospitals in FY 2017 by $800 million to approximately $6.8 billion for FY 2018. The Final rule also clarifies discounts given to uninsured patients who meet the hospital’s charity care policy. As proposed, CMS will incorporate data from its National Health Expenditure Accounts into its estimate the percent change in the rate of uninsurance, which is used in calculating the total amount of uncompensated care payments available to be distributed. In FY 2018, CMS will begin incorporating uncompensated care cost data from Worksheet S-10 of the Medicare cost report in the methodology for distributing these funds. CMS will use Worksheet S-10 data from FY 2014 cost reports in combination with Medicare and Medicaid low income days data from the two preceding cost reporting periods to determine the distribution of uncompensated care payments. CMS has provided clarification about discounts given to uninsured patients who meet the hospital’s charity care policy and indicated that it will work with stakeholders to address concerns through provider education and refinement of instructions for Worksheet S-10. To ensure accurate Worksheet S-10 data are available for potential use in calculating FY 2019 uncompensated care payment amounts, hospitals have an opportunity to resubmit certain Worksheet S-10 data to their Medicare Administrative Contractors (MACs) by September 30, 2017.
LTCH PPS Changes. For FY 2018, the LTCH PPS standard federal payment rate is increased by 1 percent. CMS projects that LTCH PPS payments will decrease by approximately 2.4 percent, or $110 million in FY 2018, which it attributes in large part to the continued phase in of the dual payment rate system. Under the dual payment rate system that begin in 2016, LTCH cases that immediately follow an acute care hospital stay that included three days or more in an intensive care unit, or LTCH cases for which the LTCH stay includes mechanical ventilation services for at least 96 hours are paid under the LTCH PPS. LTCH discharges not meeting these criteria are paid an amount based on Medicare’s acute care hospital payment rates under the inpatient PPS or 100 percent of the cost of the case, whichever is lower. The Final rule finalizes a one-year regulatory moratorium on the payment reduction threshold for patient admissions in long-term care and provisions that reduce clinical quality measure reporting requirements for hospitals that have implemented electronic health records.
Other changes. Other changes in the Final rule include:
- Hospital-Acquired Conditions (HAC) Reduction Program. The FY 2018 Final rule makes changes to two existing HAC program policies: (1) specifying the dates of the data period used to calculate hospital performance for the FY 2020 HAC Reduction Program; and (2) updating the extraordinary circumstance exception policy.
- Hospital Readmissions Reduction Program (HRRP). CMS has implemented changes to the payment adjustment factor in accordance with provisions of the 21st Century Cures Act (P.L. 114-255). CMS will 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. CMS will define the proportion of full benefit dual-eligible beneficiaries as the proportion of dual-eligible patients among all Medicare fee-for-service and Medicare Advantage stays during the 3-year period that corresponds to the performance period; stratify hospitals into five peer groupings; and adopt a change to the payment adjustment formula calculation methodology. CMS has identified the applicable time period and the methodology for the calculation of aggregate payments for excess readmissions for FY 2018 and updating the program’s Extraordinary Circumstance Exception policy.
- Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs). CMS has established reporting periods and the number of clinical quality measures for eligible hospitals and CAHs reporting electronically for calendar years (CYs) 2017 and 2018 as well as for participants attesting to CMS or their state Medicaid agency from the full year to a minimum of any continuous 90-day period during the calendar year. CMS also has finalized exceptions to the Medicare payment adjustments for hospitals, CAHs, ambulatory surgical centers.
- Hospital Inpatient Quality Reporting (IQR) Program. CMS refined two previously adopted measures: (1) replacing, but delaying publication for one year, the pain management questions in the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey to focus on the hospital’s communications with patients about the patients’ pain during the hospital stay beginning with surveys administered in January 2018; and (2) updating the risk adjustment methodology used in the Stroke 30-Day Mortality measure to include the use of stroke severity. It also adopted the Hospital-Wide All-Cause Unplanned Readmission Hybrid Measure as a voluntary measure for the CY 2018 reporting period that uses both claims and electronic health record data for measure calculation.
- CAH 96-hour certification. CMS will direct Quality Improvement Organizations (QIOs), MACs, the Supplemental Medical Review Contractor (SMRC), and Recovery Audit Contractors (RACs) to make the CAH 96-hour certification requirement a low priority for medical record reviews conducted on or after October 1, 2017. Absent concerns of fraud, CAHs should not expect to receive medical record requests related to the 96-hour certification requirement from these contractors.
- Amendment of provider-based regulations. CMS has modified the provider-based regulations as they relate to Indian Health Service and Tribal facilities and has revised certain hospital within hospital requirements regulations governing payment when hospitals are co-located.
- Addition payment adjustments. Other additional payment adjustments will include continued penalties for excess readmissions, a continued 1 percent penalty for hospitals in the worst performing quartile under the Hospital Acquired Condition Reduction Program, and continued upward and downward adjustments under the Hospital Value-Based Purchasing Program.
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