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CMS Issues FY 2018 IPPS Proposed Rule

A new proposed rule for Medicare’s Inpatient Prospective Payment System (IPPS) for fiscal year (FY) 2018 would increase inpatient operating payment rates by 1.6 percent.

HRRP Payment Adjustments

In the proposed rule, the Centers for Medicare & Medicaid Services (CMS) describes how it intends to implement changes to payment adjustments in the Hospital Readmissions Reduction Program (HRRP) based on socioeconomic factors, a step America’s Essential Hospitals applauded in a media statement.

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 a proxy for socioeconomic status. In the proposed rule, CMS seeks comment on various proposals and alternatives for how to group hospitals and calculate the readmissions adjustment factor using this new methodology. These changes will take effect for payments in FY 2019.

Medicare DSH Changes

In addition, CMS proposes 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 $6.96 billion, or nearly $1 billion more than last year. Including the empirically justified DSH payments, CMS estimates that total Medicare DSH payments will be $10.96 billion in FY 2018.

CMS also proposes to begin using UC data from worksheet S-10 of the Medicare cost report to determine each hospital’s share of UC payments.

EHRs and Quality Programs

Meanwhile, in relation to electronic health records (EHRs) and quality programs, the proposed rule:

  • seeks comment on whether to account for social risk factors in the quality reporting programs;
  • refines two measures in the Inpatient Quality Reporting (IQR) program and proposes to add a voluntary hybrid hospitalwide readmission measure;
  • adds two measures removes one measure, and modifies the domain scoring policies in the value-based purchasing (VBP) program; and
  • shortens the reporting period for the Medicare and Medicaid EHR Incentive programs to 90 days for calendar year (CY) 2018.

CQM Reporting Changes

Finally, CMS proposes changes to the electronic reporting of clinical quality measures (CQMs) in both the IQR program and the EHR Incentive Program.

Specifically, CMS proposes to require hospitals to electronically report only six CQMs for CY 2017 for two CY quarters, instead of eight CQMs for a full calendar year as finalized in last year’s rule. In CY 2018, CMS proposes that hospitals select six CQM to report electronically for the first three CY quarters.

America’s Essential Hospitals is analyzing the proposed rule for comment and will send members a detailed Action Update shortly. CMS is accepting comments on the proposed rule until June 13.

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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