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CMS Publishes Final Rule for FY 2020 Medicare IPPS

A new final rule for Medicare’s Inpatient Prospective Payment System (IPPS) for fiscal year (FY) 2020 increases inpatient operating payment rates by 3.1 percent and makes other changes to Medicare payment and quality reporting policies.

For FY 2020, CMS estimates total Medicare disproportionate share hospital (DSH) payments will be $12.5 billion, or $140 million more than FY 2019 levels. Of these payments, $8.35 billion will be uncompensated care (UC)–based payments, or $78 million more than UC payments in FY 2019.

Medicare DSH Changes

CMS finalizes 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 will use 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.

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 this rule, CMS finalizes an update to the definition of “dual-eligible” to allow for a one-month look-back period in data to determine dual eligibility status for beneficiaries who die during the discharge month. The agency also finalizes 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 will continue to use notice-and-comment rulemaking for substantive changes.

Wage Index Changes

CMS finalizes 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 will increase wage index values for hospitals for which wage index value falls within the bottom quartile of all hospitals.

In response to public comments, CMS is modifying the budget neutrality adjustment for the policy. CMS will apply a budget neutrality adjustment to the standardized amount that is applied across all IPPS hospitals, rather than decrease the wage index values of hospitals in the top quartile, as proposed. CMS will cap the negative adjustment at 5 percent in FY 2020 to avoid extreme adjustments to hospitals’ wage-index values.

Promoting Interoperability Programs

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

CMS finalizes 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 is making voluntary the measure that requires hospitals to query a prescription drug monitoring (PDMP) program and removing the established numerator and denominator for this measure, instead requiring a “yes/no” response. In last year’s final IPPS rule, CMS finalized a policy to require reporting on the PDMP measure in CY 2020. CMS also is removing the measure requiring hospitals to verify an opioid treatment agreement. America’s Essential Hospitals is pleased to see CMS has acknowledged the association’s concerns on the readiness of these measures for inclusion in the PIPs.

CMS will require 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 will require that 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 final rule:

  • adopts one opioid-related eCQM, Safe Use of Opioids — Concurrent Prescribing eCQM, in the IQR program, beginning with the CY 2021 reporting period (CMS did not finalize the proposed addition of the Hospital Harm — Opioid-Related Adverse Events CQM);
  • 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.

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 is finalizing a proposal to increase the reimbursement for new technology add-on cases to 65 percent and is increasing the add-on payment to 75 percent for certain antimicrobials. Further, CMS is modernizing the new technology add-on approval process in an attempt to spur innovation and improve access to these technologies.

CMS also will continue to engage with stakeholders as it develops future policies regarding the accounting for social risk factors and reporting of disparity data, including the use of 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.

America’s Essential Hospitals is analyzing the final rule 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

Maryellen Guinan is a principal policy analyst at America's Essential Hospitals.

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