CMS' final IPPS rule for 2017: 9 points to know

CMS has issued its inpatient prospective payment systems final rule for fiscal year 2017, which does away with the two-midnight rule's inpatient pay cuts.

The 2,434-page rule also includes rate changes for long-term care hospitals. Overall, the rule will apply to about 3,330 acute care hospitals and 430 long-term care hospitals. The final rule will be published in the Federal Register Aug. 22, and take effect Oct. 1.

Here are nine key points from CMS' final IPPS rule for 2017. 

1. Under the final rule, acute care hospitals that report quality data and that are meaningful users of EHRs will receive a 0.95 percent increase in Medicare operating rates.

2. Hospitals that do not submit quality data would lose a fourth of the market basket update (2.7 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 0.95 percent (again, which only would apply to hospitals that report quality data and attest to meaningful use) through the following updates: a positive 2.7 percent market basket update, a negative 0.3 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 removed this adjustment for FY 2017 and also its effects in FYs 2014 through 2016. "CMS believes the assumptions underlying the -0.2 percent adjustment were reasonable at the time they were made," wrote CMS in the final rule. However, in light of the unique circumstances surrounding this adjustment, the agency decided to remove it.

5. CMS projects total medical spending on inpatient hospital services will increase by about $746 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. CMS will distribute nearly $6 billion in DSH payments in FY 2017, about $400 million less than in FY 2016.

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

Hospital Value-Based Purchasing Program
8. CMS made changes to the Hospital Value-Based Purchasing Program, which was established under the ACA. CMS added 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. CMS said the condition-specific payment measures capture payments for all care, including readmissions and subsequent cardiac events, across multiple care settings, services, and supplies during the 30-day episode of care.

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

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