Medicare Payment and Reimbursement

12 details to know about the IPPS final rule

August 6, 2019 2:05 pm
  • CMS will pay for a wage increase for rural hospitals with cuts to all hospitals, instead of just those with the highest wages.
  • Medicare will increase overall IPPS rates 3.1% for providers that meet quality requirements.
  • Hospitals can meet EHR reporting requirements by using any 90-day period of data.

A shift in Medicare’s area wage index (AWI) to benefit rural hospitals was among the major provisions in a recently finalized inpatient payment rule.

The Centers for Medicare & Medicaid Services (CMS) issued an FY20 final rule for Medicare’s Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System, affecting about 3,300 acute care hospitals and 390 LTCHs.

Here are 12 key points about the rule:

1. The rule increases by 3.1% the IPPS operating payment rates for general acute care hospitals that meet requirements of the Hospital Inpatient Quality Reporting (IQR) program and criteria for electronic health record (EHR) meaningful use.

2. The rule increases IPPS operating payments by about $3.4 billion. Total Medicare spending on inpatient hospital services, including capital, will increase by about $3.8 billion, or 3%, in FY20.

3. CMS finalized its proposed AWI increase for hospitals with a wage index value below the 25th percentile. For four years, their indexes will be increased by half the difference between the otherwise applicable wage index value for that hospital and the 25th-percentile wage index value across all hospitals.

In response to concerns raised by national hospital groups, CMS scrapped its plan to fund the shift to rural hospitals with a cut to the highest AWI hospitals. Instead, it will cut payments across all IPPS hospitals.

4. Another change ended CMS’s requirement for higher wage index values for urban hospitals than for rural hospitals in the same state, known as the rural floor.

CMS limited any hospital’s annual wage index decrease to 5% for FY20.

5. CMS created an alternative pathway for new-technology add-on payments for any medical device that receives FDA marketing authorization and is part of the Breakthrough Devices Program.

Such products are viewed as new and not substantially similar to an existing technology for purposes of the payment and are not subject to the substantial clinical improvement criterion. Starting in FY21, those devices will need to meet cost criterion to receive the add-on payment.

CMS increased the add-on payment, beginning in FY20, from 50% to 65% and to 75% for certain antimicrobials.

For FY20, nine technologies will qualify for the new-technology add-on payments, including chimeric antigen receptor (CAR) T‑cell therapies.  

The rule will increase payments for new technologies by 70%, or $200 million.

6. CMS will pay about $8.4 billion in uncompensated care (UC) payments, which is about $78 million more than in FY19.

Despite hospital concerns about the reliability of data from Worksheet S-10 of the Medicare cost report, CMS will use the FY15 data to distribute UC funds.

7. For the Hospital-Acquired Conditions Reduction program, which cuts 1% of Medicare payment at the worst-performing hospitals, CMS tweaked the administrative processes for validating data submitted by hospitals to the Centers for Disease Control and Prevention.

8. For the Hospital Readmissions Reduction Program, which cuts payments to hospitals with excessive readmissions, CMS implemented requirements of the 21st Century Cures Act to assess payment cuts based on performance relative to other hospitals with a similar proportion of patients who are dually eligible for Medicare and Medicaid.

9. Within the hospital IQR program, which cuts payments for hospitals that fail to meet quality requirements, CMS updated the measure set, including replacement of the “Claims-Based Hospital-Wide All-Cause Readmission” measure with the “Hybrid Hospital-Wide All-Cause Readmission Measure with Claims” and the “Electronic Health Record Data” measure starting with the 2023-24 annual reporting period.

Although CMS adopted the Safe Use of Opioids — Concurrent Prescribing electronic clinical quality measure within IQR starting in 2021, it dropped a proposed Hospital Harm — Opioid-Related Adverse Events measure.

10. The Medicare and Medicaid EHR Incentive Programs (now known as the Promoting Interoperability Programs) will allow hospitals to report data for any continuous 90-day period in CY21.

CMS will continue to make optional the CY20 EHR reporting of the Query of PDMP measure and convert the measure from a numerator/denominator to a yes/no attestation beginning with the CY19 EHR reporting period.

CMS removed the Verify Opioid Treatment Agreement measure for CY20 based on hospital concerns that it posed “significant implementation challenges.”

11. LTCH payments in FY20 will end a transition under a years-long dual-rate LTCH PPS payment system. For site-neutral payment-rate cases, those payments will default to the site-neutral payment rate instead of a higher blended rate.

The federal payment rate is expected to increase by 2.7% after accounting for the 2.5% FY20 annual update, increased outlier payments and “other factors,” according to a fact sheet.

12. For the LTCH Quality Reporting Program (QRP), which can cut payments to LTCHs by 2 percentage points, CMS adopted two new quality measures. CMS also modified the previously adopted Discharge to Community measure to exclude nursing home residents. It also moved the implementation date of future versions of the LTCH CARE Data Set from April to October. The agency adopted data collection and public display periods for various measures and ended the practice of publicizing compliant LTCHs on the LTCH QRP website.


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