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CMS Issues FY 2020 IPPS Proposed Rule

A new proposed rule for Medicare’s Inpatient Prospective Payment System (IPPS) for fiscal year (FY) 2020 would increase inpatient operating payment rates by 3.2 percent and make other changes to Medicare payment and quality reporting policies.

Medicare DSH Changes

For FY 2020, CMS estimates total Medicare disproportionate share hospital (DSH) payments will be $12.7 billion, or $348 million more than FY 2019 levels. Of these payments, $8.5 billion will be uncompensated care (UC)–based payments, or $216 million more than UC payments in FY 2019.

CMS proposes a methodology for calculating Medicare DSH payments, noting that it will exclusively use Medicare cost report data for calculating each hospital’s share of UC costs (Factor 3 in the DSH calculation). CMS proposes using one year of UC cost data from Worksheet S-10 of the FY 2015 Medicare cost report to determine each hospital’s share of UC payments, instead of three years of data as the agency currently uses. In FY 2019, CMS has used two years of S-10 data and one year of low-income insured days data. CMS also seeks comment on using FY 2017 S-10 data instead of FY 2015 data.

HRRP Payment Adjustments

The 21st Century Cures Act required CMS to develop a transitional methodology for the Hospital Readmissions Reduction Program (HRRP) that allows for 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 implemented the stratified methodology in the FY 2019 program.

In the proposed rule, CMS updates the definition of “dual-eligible” to allow for a one-month lookback period in data to determine dual eligibility status for beneficiaries who die during the discharge month. The agency also proposes adoption of a subregulatory process to address nonsubstantive changes to the payment adjustment factor components in the HRRP (e.g., dual proportion, peer group assignment, and peer group median excess readmission ratio). The agency would continue to use notice-and-comment rulemaking for substantive changes.

Wage Index Changes

CMS proposes changes to the Medicare wage index calculation for certain hospitals with low wage index values. Specifically, for at least four years, beginning in FY 2020, CMS would increase wage index values for hospitals for which wage index value falls within the bottom quartile of all hospitals. To make this proposal budget neutral, CMS would decrease the wage index values of hospitals in the top quartile. CMS proposes capping the negative adjustment for high wage index hospitals at five percent in FY 2020, to avoid extreme adjustments to their wage-index values.

Promoting Interoperability Programs

CMS also proposes changes to the Medicare and Medicaid Promoting Interoperability Programs (PIPs) reporting periods and measures.

CMS proposes a continuous 90-day reporting period in calendar year (CY) 2021 for eligible hospitals in the Medicare PIP.

In addition, for the CY 2020 reporting period, CMS proposes making voluntary the measure that requires hospitals to query a prescription drug monitoring program. In last year’s final IPPS rule, CMS  finalized a policy to require reporting on this measure in CY 2020. CMS also proposes removing the measure requiring hospitals to verify an opioid treatment agreement. America’s Essential Hospitals is pleased to see CMS has acknowledged its concerns on the readiness of these measures for inclusion in the PIPs.

CMS proposes that hospitals report four self-selected electronic clinical quality measures (eCQMs) for one calendar quarter in both the PIPs and the Inpatient Quality Reporting (IQR) Program in 2020 and 2021. For the CY 2022 reporting period, CMS proposes hospitals report one calendar quarter of data for three self-selected eCQMs and a new safe use of opioids eCQM.

Quality Programs

Meanwhile, in relation to the quality programs, the proposed rule:

  • adopts two opioid-related cQMs in the IQR program, beginning with the CY 2021 reporting period;
  • removes the claims-based hospitalwide all-cause readmission measure in the IQR program, beginning with the FY 2026 payment determination, and replaces it with the hybrid (claims and electronic health record data) hospitalwide all-cause readmission measure after two years of voluntary reporting of the hybrid measure;
  • clarifies administrative policies for validation of the National Health Safety Network health care–associated infection measure data, in both the Value-based Purchasing and Hospital Acquired Conditions (HAC) Reduction programs, beginning with CY 2020 data collection, when the IQR program will no longer collect data on those measures; and
  • adopts a measure removal process in the HAC Reduction Program that aligns with removal factor policies previously adopted in other quality programs.

Additionally, beginning as early as spring 2020, CMS plans to include in confidential hospital-specific reports data stratified by patient dual-eligible status for the six readmissions measures included in the HRRP. These reports will not impact payment adjustment factors under the HRRP.

New Technology Add-on Payments

Medicare pays hospitals an add-on payment for certain high-cost cases involving the use of new technologies, up to 50 percent of the cost of these new technologies. CMS proposes increasing the reimbursement for new technology add-on cases to 65 percent. Additionally, CMS proposes modernizing the new technology add-on approval process in an attempt to spur innovation and improve access to these technologies.

CMS is accepting comments on the proposed rule until June 24.

America’s Essential Hospitals is analyzing the proposed rule for comment and will send members a detailed Action Update.

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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