Health Reform WK-EDGE IPPS, LTCH proposal supports new technology, raises rural hospital payments
Tuesday, May 14, 2019

IPPS, LTCH proposal supports new technology, raises rural hospital payments

By Patricia K. Ruiz, J.D.

The FY 2020 IPPS proposed rule increases access to new technology and gives rural hospitals a leg up.

In its fiscal year (FY) 2020 inpatient prospective payment system (IPPS) proposed rule, CMS touted changes that would increase access for Medicare beneficiaries to new technology qualifying for the FDA’s expedited marketing authorization programs, as well as updates to wage index calculations that would benefit rural hospitals previously disadvantaged by low wage indexes. CMS also proposed updates to payment rates under the IPPS and under the long-term care hospital prospective payment system (LTCH PPS).

New technology add-on payment. CMS proposed an alternative new technology add-on payment pathway to allow Medicare beneficiaries access to transformative new drugs and devices that meet the FDA’s expedited program criteria—drugs that are intended to treat serious or life-threatening diseases or conditions for which there are unmet medical needs. Before this pathway, marketing authorization of a medical device subject to an expedited program could lead to situations where the evidence base for demonstrating substantial clinical improvement under CMS’s new technology add-on policy has not been developed when the FDA grants market authorization. Under the proposal, if a new medical device subject to an FDA expedited program receives FDA marketing authorization, CMS would consider the product new, rather than substantially similar to an existing technology. Thus, the device would only need to meet the cost criterion to receive an add-on payment. As part of the new pathway, the technology add-on payment would increase beginning FY 2020 from 50 to 65 percent.

CMS also posed potential revisions to the substantial clinical improvement criterion used to evaluate applications for the new technology add-on payment under IPPS, as well as the transitional pass-through payment for innovative devices under the outpatient prospective payment system (OPPS). CMS is seeking comments on the type of additional detail and guidance that would be useful in understanding how CMS evaluates new technology applications for add-on payments. Responses will inform future rulemaking.

Rural health. In responses to an invitation for comments in last year’s IPPS proposed rule, CMS proposed changes to the wage index calculation to increase the wage index for certain low wage index hospitals, as well as changes to the calculation of statutory rural floor wage index values. Beginning FY 2020, for hospitals with a wage index below the 25th percentile, CMS will increase the wage indexes by half the difference between the otherwise applicable wage index value for the hospital and the 25th percentile wage index value across all hospitals. To keep spending steady, CMS will also decrease the wage index for hospitals above the 75th percentile. Additionally, CMS proposed to remove urban to rural hospital reclassifications from the calculation of the rural floor wage index value. To mitigate payment decreases, CMS proposed capping any decrease in a hospital’s wage index at 5 percent, meaning that a hospital’s final wage index for FY 2020 would not be less than 95 percent of its FY 2019 wage index.

Payment rates. For general acute care hospitals paid under IPPS that are successfully participating in the Hospital Inpatient Quality Reporting (IQR) Program and that are meaningful electronic health record (EHR) users, CMS proposed increasing operating payment rates to 3.2 percent, reflecting a projected hospital market basket update of 3.2 percent reduced by a 0.5 percentage point productivity adjustment but adding a 0.5 percentage point adjustment required by legislation. Payments for uncompensated care, new technology, low-volume hospitals, and capital will increase by 0.2 percent. Thus, CMS estimates a total increase in IPPS payments of 3.7 percent.

CMS also proposed changes to Medicare uncompensated care payments, the Hospital-Acquired Conditions (HAC) Reduction Program, the Hospital Readmissions Reduction Program (HRRP), the IQR Program, the Hospital Value-Based Purchasing (VBP) Program, the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program, and the Medicare and Medicaid Promoting Interoperability Programs.

LTCH PPS payment rate changes. For FY 2020, CMS expects LTCH PPS payments to increase by about 0.9 percent, reflecting the implementation of the revised LTCH PPS, which began in FY 2016. Payments for discharges paid using the standard LTCH payment rate are expected to increase by 2.3 percent. Payments for cases continuing to transition to the site neutral payment rates are expected to decrease by about 4.9 percent. For FY 2020, CMS also proposed to adopt two new quality measures under the LTCH Quality Reporting Program.

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