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CMS Issues FY 2018 IPPS Final Rule

On Aug. 2, the Centers for Medicare & Medicaid Services (CMS) issued the Medicare Inpatient Prospective Payment System (IPPS) final rule for fiscal year (FY) 2018. The final rule updates Medicare inpatient payment rates to acute care hospitals by 1.21 percent, provides flexibility in reporting of electronic clinical quality measures, and changes the payment adjustment methodology for the Hospital Readmissions Reduction Program (HRRP) for FY 2019, consistent with the 21st Century Cures Act.

Medicare DSH Changes

In the rule, CMS finalized changes to the Medicare disproportionate share hospital (DSH) payment methodology, noting that it will begin using a new data source for calculating the national level of uninsurance. Uninsurance levels are used to determine the total amount of Medicare DSH uncompensated care (UC) payments.

For FY 2018, CMS estimates total Medicare DSH UC payments will be $6.77 billion, or nearly $800 million more than last fiscal year. Including the empirically justified DSH payments, CMS estimates that total Medicare DSH payments will be $10.65 billion in FY 2018.

CMS is finalizing its proposal to begin incorporating UC data from worksheet S-10 of the Medicare cost report to determine each hospital’s share of UC payments. Specifically, CMS will use FY 2014 S-10 data and FYs 2012 and 2013 low-income insured days data for calculating each hospital’s share of UC. CMS notes in the rule that it will allow hospitals to submit revised worksheets S-10 for FYs 2014 and 2015 to their Medicare administrative contractors by Sept. 30, 2017.

HRRP Payment Adjustments

The 21st Century Cures Act, enacted in December 2016, requires CMS to develop a transitional methodology for the HRRP that allows for separate comparison of hospitals based on a facility’s proportion of dual eligible patients, which is used as a proxy for socioeconomic status.

CMS finalized its proposal to stratify hospitals into five peer groups, or quintiles, based on a hospital’s proportion of dual-eligible beneficiaries. As finalized, a hospital’s proportion of full-benefit, dual-eligible beneficiaries will be calculated as the proportion of dual-eligible patients among all Medicare fee-for-service and Medicare Advantage stays.

EHRs and Quality Reporting Programs

In addition to changes in the HRRP, CMS finalized revisions to the other hospital quality reporting programs, including removal of the Patient Safety for Selected Indicators (PSI 90) measure from the Value-Based Purchasing Program beginning with the FY 2019 program year.

CMS also finalized refinements to the Inpatient Quality Reporting (IQR) Program, including an update to the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey measure to replace the three existing questions about pain management with three new questions that address communication about pain during the hospital stay, beginning with surveys administered in January 2018. Public display of performance data on these refined questions will be delayed for one year.

The agency responded to comments received for the Hospital Acquired Condition (HAC) Reduction Program about how to account for social risk factors in the HAC Reduction Program. However, CMS continues to not risk adjustment for these factors in the HAC Reduction program.

CMS also will shorten the reporting period for the Medicare and Medicaid Electronic Health Record (EHR) Incentive programs to 90 days for calendar year (CY) 2018.

CQM Reporting Changes

CMS reduced the reporting requirements for the electronic reporting of clinical quality measures (CQMs) in both the IQR program and the EHR Incentive Program — a welcome change America’s Essential Hospitals recommended in its comments to CMS.

Specifically, CMS will require hospitals to electronically report only four self-selected CQMs for one calendar year (CY) quarter in each of CYs 2017 and 2018, instead of two CY quarters in 2017 and three CY quarters in 2018, as originally proposed.

America’s Essential Hospitals is analyzing the final rule and will send members a detailed Action Update soon. Contact Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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