On April 14, 2017, the Centers for Medicare & Medicaid Services (CMS) released the FY 2018 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) Prospective Payment System (PPS) Proposed Rule, and Request for Information (Proposed Rule). The Proposed Rule outlines proposed updates to Medicare payment rates under the Inpatient Prospective Payment System (IPPS) and policies for hospital admissions. The goals of the Proposed Rule include relieving regulatory burdens on providers, supporting the doctor-patient relationship, and promoting transparency, flexibility, and innovation in the delivery of care.

CMS is also soliciting ideas for regulatory, policy, practice and procedural changes to better achieve transparency, flexibility, program simplification and innovation through a Request for Information (RFI).  The RFI is seeking clear, concise proposals to encourage the development of a new Medicare delivery system to reduce existing burdens for clinicians, providers and patients, while increasing effectiveness and decreasing costs. Proposals must include data and specific examples, and if applicable, should address CMS’ authority to implement such proposals. CMS does not plan to respond to RFI comments, but will consider them in developing future regulatory proposals or guidance.

The IPPS was established under § 1886(d) of the Social Security Act and utilizes a national base payment rate for inpatient hospital stays, adjusted for factors such as patient conditions and the cost of hospital labor depending on geographic area. CMS is required to issue annual updates for IPPS hospital payment rates. The Proposed Rule would affect hospital and LTCH payments for discharges occurring on or after October 1, 2017.

Key proposed changes include:

•   Payment Rates under IPPS

CMS projects an increase in IPPS operating payments by a total of 2.9 percent through an aggregate 1.7% increase to IPPS operating payments and an additional 1.2% increase due to proposed changes to uncompensated care payments. These increases are larger than in recent prior years. All increases in IPPS operating payments are subject to existing adjustments, including performance-based penalties. Proposed IPPS payment rate increases include continued incentives for successful participants in the Hospital Inpatient Quality Reporting (IQR) Program who are meaningful electronic health record (EHR) users. CMS also plans to continue penalties for excess readmissions, for hospitals in the worst performing quartile under the Hospital Acquired Condition Reduction Program, and both upward and downward adjustments under the Hospital Value-Based Purchasing Program.

•   Medicare Uncompensated Care Payments

On an annual basis, CMS distributes payments to disproportionate share hospitals based upon their relative share of uncompensated medical services. For FY 2018, CMS proposes to distribute about $7.0 billion in uncompensated care benefits. This reflects an increase of approximately $1.0 billion from FY 2017 and is the result of an effort by CMS to incorporate data from its National Health Expenditure Accounts into estimate the percentage change in the rate of insurance. CMS proposes incorporating uncompensated care cost data from Medicare cost report Worksheet S-10 in its methodology for distributing disproportionate share funds.

•   Hospital-Acquired Conditions (HAC) Reduction Program

The HAC Reduction Program contains incentives to reduce the incidence of HACs by providing payment adjustments to hospitals that rank in the worst-performing quartile. The Proposed Rule specifies the specific time period used to calculate hospital performance for the FY 2020 HAC Reduction Program and updates the Extraordinary Circumstances Exception policy. In addition, CMS requests comments on:

  • additional measures for potential future adoption;
  • accounting for social risk factors; and
  • accounting for disability and medical complexity in the CDC NHSN measures.

•   Hospital Readmissions Reduction Program (HRRP)

The HRRP requires that the hospital base operating diagnosis-related group (DRG) payment be reduced to account for excess hospital readmissions associated with certain conditions. In accordance with the 21st Century Cures Act, CMS is proposing changes to the DRG payment adjustment factor. The Proposed Rule would assess penalties based on hospital performance relative to other hospitals with a similar proportion of patients dual eligible for Medicare/full-benefit Medicaid. CMS is also proposing to specify the applicable time period and the methodology for the calculation of aggregate payments for excess readmissions for FY 2018 and to update the program’s Extraordinary Circumstance Exception policy. In addition, the Proposed Rule contains:

  • Methodologies for calculating the proportion of dual-eligible patients and for assigning hospitals to peer groups;
  • A payment adjustment formula calculation methodology.

•   Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs for Eligible Hospitals, Critical Access Hospitals (CAHs), and Eligible Professionals (EPs)

In 2009, the American Recovery and Reinvestment Act established incentive payments to eligible professionals, hospitals, critical access hospitals, and Medicare Advantage Organizations. Known as the Meaningful Use program, this incentive-based program aimed to promote the meaningful use of health information technology (HIT) and qualified electronic health records as part of a broader effort to accelerate the use of HIT and qualified EHRs. The EHR Incentive Programs are intended to encourage eligible professionals, eligible hospitals, and critical access hospitals to adopt, implement, upgrade, and demonstrate meaningful use of certified EHR technology.

The Proposed Rule defines the reporting periods and clinical quality measures (CQMs) applicable to eligible hospitals, CAHs, and EPs participating in the EHR Incentive Program. In addition, the Proposed Rule would amend the Meaningful Use program by:

  • Adding an exception to the Medicare payment adjustments for EPs, hospitals, and CAHs so long as they can demonstrate (through an application process) that their certified EHR technology has been decertified by the Office of the National Coordinator for Health Information Technology’s (ONC) Health IT Certification Program, making it impossible to comply with the Meaningful Use requirements.
  • Implementing a policy under which no payment adjustments will be made for EPs who furnish “substantially all” of their services in an ambulatory surgical center (ASC). For ASC-based EPs who supply “substantially all” of their covered professional services in an ASC, CMS will exempt them from the 2017 and 2018 payment adjustments. CMS is seeking public comments to define “substantially all”, asking commenters to choose from one of two possible definitions: an EP “who furnishes 75 percent or more” or “90 percent of more” of his or her covered professional services.

•   Hospital Inpatient Quality Reporting (IQR) Program

To receive the full annual percentage increase to payment rates, the Hospital Inpatient Quality Reporting (IQR) Program requires hospitals to report on designated quality measures. The IQR Program focuses on measures to support improved quality and efficiency of care for Medicare beneficiaries. Proposed changes to the IQR Program include:

  • Updating the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey measure for the Contract Year (CY) 2018 reporting period to replace pain management questions with questions that address communication about pain during the hospital stay.
  • Updating the HCAHPS stroke mortality measure to include stroke severity codes, beginning with the CY 2021 reporting period.
  • Adopting the Hospital-Wide All-Cause Unplanned Readmission Hybrid Measure as a voluntary measure for the CY 2018 reporting period. This would require hospitals to submit core clinical data elements for the CY 2020 reporting period and transitions the measure to a required measure for the CY 2021 reporting period.
  • Modifying the electronic CQM reporting requirements and require hospitals to choose and submit six of the available eCQMs in the IQR Program measure, along with supporting data sets. CMS proposes requiring two calendar quarters of data for the CY 2017 reporting period, which can be any two calendar quarters chosen by the hospital. For the CY 2018 reporting period, CMS proposes to require data for the first three calendar quarters.
  • The Proposed Rule also includes changes to the educational review process, the exclusion criteria for the hospital and case selection process for eCQM validation, and the Extraordinary Circumstances Extension/Exemption (ECE) policy.

In addition to the proposed changes, CMS seeks public comment on IQR Program topics, including:

  • Social risk factors in the IQR Program.
  • Confidential and/or public reporting of clinical quality data stratified by patients’ dual-eligible status.
  • Measures being considered for future inclusion in the IQR Program, including nurse staffing; End-of-Life process and outcomes measures for cancer patients; Quality of Informed Consent Documents for Hospital-Performed, Elective Procedures measure; and several new eCQMs.

•   Hospital Value-Based Purchasing (VBP) Program

The VBP Program rewards acute care hospitals meeting certain performance standards by providing incentive payments based on the quality of patient care, adherence to clinical practices, and the advancement of overall patient experience. The Proposed Rule seeks to update the VBP Program by:

  • Removing the “PSI 90: Patient Safety for Selected Indicators” measure beginning with the FY 2019 program year due to issues accessing data for this measure caused by the transition to ICD-10;
  • Adopting a new measure for “Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Pneumonia,” starting with the FY 2022 program year, that will directly link payment to quality by aligning comparable patient populations within this proposed measure and the “MORT-30-PN” measure;
  • Adopting a modified version of the “Patient Safety and Adverse Events (Composite)” measure, which was previously adopted, as of the FY 2023 program year; and
  • Revising the “Efficiency and Cost Reduction” measure domain weighting by implementing a methodology under which the MSPB measure comprises 50% of a hospital’s domain score, with other condition-specific payment measures (weighed equally) comprising the other 50% of a hospital’s domain score, as of FY 2021 program year.

•   PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

The Proposed Rule contains four new measures that access end-of-life care for the PCHQR Program, which collects and publishes data on an announced set of quality measures. CMS proposes to remove three previously-adopted cancer-specific, chart-abstracted process measures, and revise the PCHQR Extraordinary Circumstances Exceptions (ECE) Policy.

•   Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

The Proposed Rule would make changes to the IPFQR Program, which is a quality reporting program established by the Affordable Care Act.  Revisions would include:

  • Beginning with FY 2020 payment determination, and continuing for subsequent years, CMS would add the measure “Medication Continuation following Inpatient Psychiatric Discharge,” to be calculated from claims data.
  • Updates to the extraordinary circumstances exception (ECE) Policy.
  • A change to how the annual data submission period is specified in order to align the end of this period with the deadline for submitting a Notice of Participation (NOP) or withdrawing from the PCHQR Program.
  • Proposed factors by which CMS would evaluate measures to be removed from or retained in the IPFQR Program.

•   Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) Changes

The Proposed Rule would update the LTCH PPS standard Federal payment rate by 1 percent, in accordance with the Medicare Access and CHIP Reauthorization Act of 2015. This payment rate applies to patients that meet certain clinical criteria under the dual rate LTCH PPS payment system. CMS anticipates that LTCH PPS payments would decrease by approximately 3.75%, or $173 million in FY 2018, due primarily to the continued phase-in of the dual payment rate system. In addition, CMS is proposing a regulatory moratorium on the implementation of the 25% threshold policy for FY 2018, which would allow it to evaluate whether the policy is still needed. The Proposed Rule also would revise the short-stay outlier payment adjustment and implement additional provisions of the 21st Century Cures Act that impact LTCH payment rates.

•   Long Term Care Hospital Quality Reporting Program (LTCH QRP)

The Proposed Rule reduces the LTCH PPS standard Federal payment rate for FY2018 for a LTCH that does not submit LTCH QRP data. CMS also proposes revisions to current quality measures, including for example:

  • Replacing the current pressure ulcer measure with an updated version
  • Adopting two new companion measures related to ventilator weaning
  • Removing two currently adopted measures relating to pressure ulcers and unplanned readmissions

Under the Proposed Rule, CMS would begin publicly reporting six new measures on the LTCH Compare website by fall 2018, and one new measure by fall 2020. In order to satisfy the requirement that standardized patient assessment date be reported by LTCHs beginning with the FY2019 LTCH QRP, CMS is proposing to use the data submitted on the existing pressure ulcer measure. For the following program year, FY2020, CMS proposes that LTCHs report the following specified patient assessment categories required by law:

  • functional status;
  • cognitive function;
  • special services, treatments and interventions;
  • medical conditions and co-morbidities; and
  • impairments.

CMS is also proposing changes relating to applicability of current procedural requirements, such as the reporting schedule, to the reporting of standardized patient assessment data.

•   Changes to Termination Notices

The Social Security Act permits HHS to terminate a Medicare or Medicaid participation agreement with a provider that is not in substantial compliance with provider agreement requirements. Under current regulations, rural health centers (RHCs), Federally qualified health centers (FQHCs), ASCs, and organ procurement organizations (OPOs) must provide notice to the public of voluntary and involuntary termination of participation in Medicare and Medicaid in one or more local newspapers. In the Proposed Rule, CMS observes that “newspapers have become outdated over time as the public and beneficiaries increasingly turn to the Internet and other electronic forums for information.” As a result, CMS is proposing to eliminate the requirement that public notice of terminations for the entities cited above be provided exclusively in newspapers, and instead proposes to give providers/suppliers more flexibility so that “the maximum number of community individuals and beneficiaries” can be informed via an appropriate manner (which could still include notice via a local newspaper).

•   Other Proposed Changes

CMS proposes additional changes in the following areas:

  • Notice Regarding Changes to Instructions for the Review of the Critical Access Hospital (CAH) 96-Hour Certification Requirement
  • Proposed Changes for Indian Health Service (IHS) or Tribal Facilities and Hospital-within-Hospitals (HwHs)
  • Proposed Revisions to the Application and Re-Application Procedures for National Accrediting Organizations (AOs)
  • Rural Community Hospital Demonstration