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CMS Issues FY 2019 IPPS Final Rule

The Centers for Medicare & Medicaid Services (CMS) on Aug. 2 issued the Medicare Inpatient Prospective Payment System (IPPS) final rule for fiscal year (FY) 2019.

The final rule increases Medicare inpatient payment rates to acute care hospitals by 1.85 percent and substantially revises requirements related to the use of electronic health records (EHRs). The rule also 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

For FY 2019, CMS estimates total Medicare disproportionate share hospital (DSH) payments will be $12.36 billion. About $8.27 billion of these payments will be based on uncompensated care (UC) — $1.5 billion more than UC-based payments in FY 2018.

CMS finalizes proposed methodology to calculate Medicare DSH payments, noting that the agency will continue the transition to using Medicare cost report data for calculating each hospital’s share of UC costs (Factor 3). In FY 2019, CMS will use two years of UC cost data from worksheet S-10 of the Medicare cost report, along with one year of low-income insured days data, to determine each hospital’s share of UC payments. In FY 2018, CMS used one year of S-10 data and two years of low-income insured days data.

CMS has posted a DSH supplemental data file, which includes a list of each hospital’s Factor 3. Hospitals have until Aug. 31 to review their posted Factor 3 and submit feedback to CMS on accuracy. The agency will audit S-10 data starting this fall, as well as continue to revise the S-10 instructions and provide stakeholder education.

HRRP Payment Adjustments

The 21st Century Cures Act required CMS to develop a transitional methodology for the Hospital Readmissions Reduction Program (HRRP). The methodology must allow for a separate comparison of hospitals based on a facility’s proportion of patients dually eligible for Medicare and Medicaid, which is a proxy for socioeconomic status.

In the FY 2018 IPPS final rule, CMS finalized a payment adjustment methodology in which hospital performance is assessed relative to the performance of hospitals within the same peer group. Hospitals are stratified into five peer groups, or quintiles, based on proportion of dual-eligible stays. CMS will implement the stratified methodology in the FY 2019 program.

In the final rule, CMS also defines dual-eligible patients, proportion of dual-eligibles, and the applicable period for dual eligibility. Measures under the HRRP will remain the same.

Electronic Health Record Provisions

This new final rule also finalizes major changes to the Medicare and Medicaid Promoting Interoperability (PI) Programs (previously the EHR Incentive Programs).

In addition to implementing three new measures and removing six measures from the PI Programs, CMS finalizes a new scoring methodology. This scoring methodology is based on a weighted-average score for each measure, with a maximum total score of 100. Hospitals will meet program requirements, and avoid a payment penalty, by scoring more than 50 points.

CMS also finalizes a policy requiring hospitals to use 2015 version of certified EHR technology in calendar year (CY) 2019. CMS will allow hospitals to use a 90-day reporting period in CYs 2019 and 2020 to enable the transition to new measures and a new scoring methodology.

As originally proposed, CMS finalizes a policy that hospitals report four self-selected clinical quality measures (CQMs) for one calendar quarter in both the PI Program and the Inpatient Quality Reporting (IQR) Program in 2019.

Meaningful Measures Initiative

The final rule incorporates the Meaningful Measures Initiative, launched by CMS last year to identify high-priority areas for quality measurement and improvement. This new approach to quality measures is not intended to replace an existing program, but rather to increase measure alignment across CMS programs and reduce provider reporting burden.

Quality Programs

Regarding quality programs, the final rule:

  • gradually removes 39 measures from the IQR program, beginning with the CY 2018 reporting period (notably, CMS will remove the six health careassociated infection patient safety measures in CY 2020, one year later than proposed);
  • de-duplicates four measures in the Value-Based Purchasing (VBP) Program and does not finalize the removal of the safety domain (based on the above stated delay in removal of patient safety measures) or revise weighting of the VBP Program domains; and
  • retains measures in the Hospital-Acquired Condition (HAC) Reduction Program and adopts new scoring methodology, which will equally weight all measures used to calculate a hospital’s HAC program score.


CMS finalizes a proposal that hospitals annually post their standard charges online. Hospitals currently are required to publicly release their charge information, but this new policy requires that the data are available online.

CMS sought comment on specific questions related to price transparency and the sharing of cost and charge data with patients. The agency indicated it will consider the feedback received for future rulemaking.

America’s Essential Hospitals is analyzing the final rule and will send members a detailed Action Update shortly. Contact Senior 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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