CMS' 2017 IPPS proposed rule: 10 points to know

CMS has released its fiscal year 2017 Medicare Inpatient Prospective Payment System proposed rule, which does away with the two-midnight rule's inpatient pay cuts.

The 1,579-page rule also includes proposed rates for long-term care hospitals. Overall, the proposed rule would apply to about 3,330 acute care hospitals and 430 long-term care hospitals for discharges occurring on or after Oct. 1.

Here are 10 key points from CMS' proposed IPPS rule for FY 2017.

1. CMS recommended acute care hospitals that report quality data and that are also meaningful users of EHRs receive a 0.85 percent increase in Medicare operating rates.

2. Hospitals that do not submit quality data would lose a quarter of the market basket update (2.8 percent), and hospitals that are not meaningful users of EHRs will be subject to a three-fourths reduction of the market basket update in FY 2017.

3. CMS arrived at its proposed rate of 0.85 percent (again, which only would apply to hospitals that report quality data and attest to meaningful use) through the following updates: a positive 2.8 percent market basket update, a negative 0.5 percentage point update for a productivity adjustment, a negative 0.75 percentage point update for cuts under the Affordable Care Act, a negative 1.5 percentage point documentation and coding adjustment as part of the American Taxpayer Relief Act of 2012 and an increase of approximately 0.8 percentage points to remove the adjustment to offset the estimated costs of the two-midnight rule.

4. Under the two-midnight rule, which was introduced in the 2014 IPPS rule, CMS expected a decline in the number of long observation stays and an increase in the number of inpatient admissions. CMS proposed offsetting the cost through a 0.2 percent reduction in inpatient payments. The payment reduction was strongly opposed by hospitals and sparked lawsuits challenging the payment cut.

In its FY 2017 rule, CMS proposed permanently removing this adjustment for FY 2017 and also its effects in FYs 2014 through 2016. "We still believe the assumptions underlying the 0.2 percent reduction to the rates put in place beginning in FY 2014 were reasonable at the time we made them in 2013," wrote CMS in the proposed rule. "Nevertheless, taking all the foregoing factors into account, in the context of this case, we believe it would be appropriate to use our authority … to prospectively remove, beginning in FY 2017, the 0.2 percent reduction…"

5. CMS projects total Medicare spending on inpatient hospital services will increase by about $539 million in fiscal 2017.

Medicare disproportionate share hospital payments
6. As part of the ACA, Medicare disproportionate share hospital payments will be reduced by 75 percent, or $49.9 billion, by 2019. The proposed rule would cut overall DSH payments by $400 million in FY 2017, compared with FY 2016.

Hospital Inpatient Quality Reporting Program
7. In the proposed rule, CMS recommended adding four new claims-based measures (three clinical episode-based payment measures and one communication & coordination of care measure) for the FY 2019 Inpatient Quality Reporting Program and subsequent years. CMS also proposed to remove 15 measures for the FY 2019 payment determination and subsequent years.

Hospital Value-Based Purchasing Program
8. CMS suggested changes to the Hospital Value-Based Purchasing Program, which was established under the ACA. CMS proposed adding two condition-specific payment measures (one for acute myocardial infarction and one for heart failure) beginning with the FY 2021 program year and a 30-day mortality measure following coronary artery bypass graft surgery beginning with the FY 2022 program year.

Hospital Acquired Conditions Reduction Program
9. CMS proposed several changes to existing Hospital Acquired Conditions Reduction Program policies in the FY 2017 proposed rule, including changing the program scoring methodology from current decile-based scoring to a continuous scoring methodology.

Comment period
10. CMS is accepting comments on the proposed rule until June 26. The agency will respond to all comments in the final rule, which is expected to be issued by Aug. 1.

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