Category: Featured

IPPS Final Rule – FFY2020

CMS-1716-F drafted on 8/2/2019; Published in the Federal Register on 8/16/2019

On August 2, 2019, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that focuses the agency’s efforts on a singular objective: transforming the healthcare delivery system through competition and innovation to provide patients with better value and results. The final rule updates Medicare payment policies and rates for hospitals under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), effective for discharges on or after October 1, 2019.

The policies in the IPPS and LTCH PPS final rule would represent historic changes to the way rural hospitals are paid and help ensure access to a world-class healthcare system with access to potentially life-saving diagnostics and therapies by unleashing innovation in medical technology and removing barriers to competition.

Overall, the final rule is projected to result in an estimated increase of $3.8B (or 3%) in payments to providers, ranging from 0.8% increases for urban hospitals in the New England Region up to 3.4% increases for smaller, rural hospitals.Medicare IPPS Base Rates 
CMS is increasing the base rate 2.7% for hospitals, mostly driven by a market basket increase of 3.0%.

Click here for the full base rate calculation table and comparison to prior year.

Medicare IPPS Base Rates 
CMS is increasing the base rate 2.7% for hospitals, mostly driven by a market basket increase of 3.0%.

Click here for the full base rate calculation table and comparison to prior year.

MS-DRG v 37 Changes
As expected, CMS is recalibrating the MS-DRG weights for FFY2020. Heart transplants and extensive burn DRGs appear to be getting a boost, while external heart assist devices and pancreas transplants are seeing significant reductions in weighting. DRG 319 and 320 (Endovascular Cardiac Valvular Disorders) are new in FFY2020. Below is a listing of the largest changes in weighting between v36 and v37 of the MS-DRGs:
Click here for a table of the MS-DRG v36 to v37 comparison.

Post-Acute Care Transfer Policy Changes

Effective 10/1/2019, DRGs 273 & 274 (Percutaneous Intracardiac Procedures) will no longer be subject to the transfer policy.

 New Technology Add-On Payment Calculation

In an effort to recognize the rising costs of new technology, CMS has finalized that the existing new technology add-on payment calculation (currently at a 50% limit) be increased to equal the lesser of:

1.)    65% of the cost of the new medical device or technology; OR

2.)    65% of the amount by which the cost of the case exceeds the standard DRG payment

3.)    75% for antimicrobials designated by the FDA as Qualified Infectious Disease Products (QIDPs)

Note: Unless the discharge qualifies for an outlier payment, the additional Medicare payment would be limited to the full MS-DRG payment plus 65% of the estimated costs of the new technology or device.

As a result of this increase, the maximum payment for CAR-T Cell Therapies (KYMRIAH^TM and YESCARTA^TM) would increase from $186,500 to $242,450, which may help to increase the use of this new technology.

Wage Index Changes

CMS has calculated an occupational-mix adjusted national average hourly wage of $44.15. Of note, 164 hospitals will receive the rural floor in FY 2020. This is approximately 99 fewer hospitals receiving the rural floor in FY 2020 than in FY 2019. This is due to the revised calculation for FY 2020 (and subsequent fiscal years) that excludes the wage data of hospitals that have reclassified as rural under 42 CFR 412.103. Eleven urban providers in Massachusetts are expected to receive the rural floor wage index value, which will increase payments overall to the hospitals in Massachusetts by an estimated $25M. This is in comparison to FFY2019 where twenty-nine urban providers in Massachusetts received its rural floor wage index value, increasing payments overall to the hospitals in Massachusetts by an estimated $123M.

CMS remains concerned that the current wage index system exacerbates disparities between high and low wage index hospitals. In addition, CMS also wants to address concerns that the rural floor calculation has been manipulated by a limited number of states to achieve higher wage index factors at the expense of hospitals in other states. As a result, CMS has finalized several significant changes to the wage index calculation.

CMS is finalizing their proposal to reduce disparities by increasing the values for low wage index hospitals below the 25^th percentile (or a WIF of 0.8457). The increases for the low wage index hospitals would be equal to half the difference between the original final wage index value for the hospital and the final 25^th percentile value (e.g., 0.756 = 0.6663 + (0.8457 – 0.6663)/2). CMS would like this policy to be effective for a period of at least 4 years in an effort to allow employee compensation increases sufficient time to be reflected in the wage index calculation. CMS intends to visit the duration of this policy in future rulemaking as it gains experience under the policy.

CMS has also finalized their proposal to change the rural floor calculation, including the removal of urban-to-rural reclassifications under 42 CFR 412.103. Beginning in FFY2020, state rural floors would be calculated without including the wage data of urban hospitals that have reclassified as rural.

In order to mitigate the negative impacts to hospitals with significant decreases as a result of CMS policy changes, CMS will place a cap of 5% on the decrease of any hospital’s wage index from FFY2019 to FFY2020, allowing the effect of these policy changes to be phased in over 2 years. However, no such cap to limit the decrease in a hospital’s wage index would be applied during the second year.

Overall Medicare spending will not increase as a result of this policy. CMS is accomplishing this through a budget neutrality adjustment of .998838 to the standardized amount that is applied across all IPPS hospitals, rather than a decrease to the wage index for hospitals above the 75^th percentile as proposed.

Click here for a comparison of current and prior WIFs for each hospital. These tables are an estimate compiled from Table 2 of the IPPS Final Rule, as CMS has noted that there are errors in Table 3.

Toyon’s Take:

In recent years, CMS has hinted at addressing what it describes as “wage index disparities;” however, no specific changes were proposed and finalized until this year. The finalized changes are noteworthy and were heavily commented on by hospital associations and the provider community in the Final Rule. The finalized changes have significant reimbursement benefit to states that fall below the 25^th percentile in terms of its wage index value as well as negative impacts to the standardized amount for all IPPS hospitals. Hospitals should challenge the AWI policies finalized in the FFY 2020 IPPS Final Rule. Hospitals should first appeal to the Medicare Provider Reimbursement and Review Board (PRRB). All appeals are due within 180 days of issuance of the final rule, which is January 29, 2020. Subsequent appeals must be filed annually to preserve appeal rights for each year the policy is in place. CMS has noted its intent to keep the reduction in the standardized amount in effect for a minimum of 4 years (FFYs 2020 – 2023); the rural floor policy is final. Toyon has developed a model analyzing the finalized changes to the wage index using FFY2020 Final Rule data sources. We are happy to share our analysis specific to your hospital.

Other Finalized Changes Impacting Wage Index

• The overhead rate calculation would now be equal to the following:
  • (Lines 26 through 43 – Lines 28, 33, 35) / ((((Line 1 + Lines 28, 33, 35) – (Lines 2, 3, 4.01, 5, 6, 7, 7.01, 8, and 26 through 43)) – (Lines 9 and 10)) + (Lines 26 through 43 – Lines 28, 33, 35)).
  • The change made by CMS was to eliminate the removal of the sum of overhead contract labor (Lines 28, 33, 35) from the Revised Total Hours calculation in the denominator
    • So (Lines 9, 10, 28, 33, and 35) will now simply be (Lines 9 and 10).
• The rounding of values for the wage index calculation would be changed as follows:
  • “Raw data” from any individual line item or field would not be rounded.
  • Summed or averaged wage amounts would be rounded to 2 decimals.
  • Hours would be rounded to the nearest whole number.
  • Ratios, percentages, or inflation factors would be rounded to 5 decimals.
  • Actual unadjusted and adjusted wage indexes would continue to be rounded to 4 decimals.
• A new methodology for calculating the wage index for urban areas without wage data would be calculated by dividing the total urban salaries plus wage-related costs in the state by the total urban hours in the state, all of which would then be divided by the national average hourly wage.
• Applications to the Medicare Geographic Classification Review Board (MGCRB) for FFY2021 reclassifications, as well as cancellations and terminations, were due by September 3, 2019. All applications and supporting documents must be submitted via the Office of Hearings Case and Document Management System (OH CDMS). Because this new system is available, CMS is eliminating the requirement to copy CMS on these MGCRB filings. More information can be found at https://www.cms.gov/regulations-and-guidance/review-boards/MGCRB/electronic-filing.html.
• Likewise, applications to CMS for rural redesignations may also now be submitted electronically, by fax, or by other electronic means, as well as by mail.
• Rural redesignation cancellation requirements specific to RRCs previously required that the hospital be paid as a rural hospital for at least one 12-month cost reporting period before the status can be cancelled. CMS believes that these requirements are no longer relevant, now that hospitals may have simultaneous MGCRB and 42 CFR 412.103 reclassifications. As a result, CMS is revising these provisions to make any cancellations effective for all hospitals at the beginning of the next Federal fiscal year following the cancellation request, if requested within 120 days of the Federal fiscal year end, which is June 2 of each year.

For additional information, please contact Ryan Sader at ryan.sader@toyonassociates.com.

UCC DSH Payments

CMS has finalized a modest increase to Medicare DSH UC payments by $78M, to $8.35B in FFY2020. This increase is partially driven by a statutory elimination of the 0.2% reduction factor in the determination of DSH UC funding.

After consideration of the public comments on whether to use FY2015 or FY2017 uncompensated care data from W/S S-10 as the base year for FFY2020 DSH UC payments, CMS determined that the best available data on uncompensated care costs is from FY2015, in part because CMS has conducted audits of the data. CMS will use a single year of data as opposed to the prior method that used an average of three years of data.

Toyon’s Take: During the CMS and MAC reviews of FY2015 W/S S-10 uncompensated care data, many issues were identified, resulting in hospitals having to entirely resubmit data. This was primarily due to the cost reporting instructions in place during FY2015, which can be challenging to understand and are often subject to interpretation. This points to an industry-wide issue (beyond the hospitals selected for review) and indicates that FY2015 may continue to include aberrant data.

For FY2017 uncompensated care amounts, there is a new set of reporting instructions. There is considerable industry agreement that these instructions are less challenging than instructions in place for FY2015.

Recommended Action: If your hospital has revisions to its FFY 2017 WS S-10 data, Toyon strongly urges these revisions are submitted to your MAC before December 31, 2019. This is the deadline for MACs to submit FFY 2017 S-10 revisions for hospitals under audit.

Click here for the DSH Supplemental PUF data.

Click here for the Analysis of UCC DSH Factor 1.

Toyon has a new national analysis tool to assist hospitals with the evaluation of uncompensated care and the relationship to current and projected DSH UC payments. For additional information, please contact Fred Fisher at fred.fisher@toyonassociates.com.

Graduate Medical Education Changes

In an effort to address barriers to training residents in rural areas, CMS will allow hospitals to include residents training in a Critical Access Hospital (CAH) in its FTE count, as long as the nonprovider setting requirements at 42 CFR 413.78(g) are met.  This represents a change in CMS’s policy since it was initially implemented in FFY2014.  CMS is updating the definition of a “nonprovider” setting to include CAHs.

Effective with portions of cost reporting periods beginning October 1, 2019, hospitals may include FTE residents training at a CAH, on the condition that the hospital incurs the residents’ salaries and fringe benefits.  This change does not impact the continuing ability of CAHs to alternatively incur the costs of training residents in an approved program and receive payment based on 101% of their reasonable cost.

In addition, CMS announced an additional round of Section 5506 FTE cap redistributions (Round 15):

Applications for these additional FTE slots are due to CMS by October 31, 2019.

For additional information, please contact Tom Hubner at tom.hubner@toyonassociates.com.

Low Volume Hospitals

CMS is revising the regulations at 42 CFR 412.101 to add a subsection (e), which will now allow Indian Health Services (IHS) hospitals to qualify by measuring only the distance between other IHS and Tribal hospitals when assessing the mileage criterion. CMS is also allowing these hospitals to reopen cost reports in order to apply for the low volume adjustment back to FFY2011, subject to the reopening rules at 42 CFR 405.1885.

Rate Updates for Sole Community Hospitals (SCH) and Medicare-Dependent Hospitals (MDH)

CMS is finalizing the updates to the hospital-specific rates for SCHs and MDHs by the following percentages, depending on the hospital’s ability to meet the different qualifying criteria:

Rural Referral Center (RRC) Annual Qualifying Data

Hospitalshave different options to meet the RRC criteria set forth at 42 CFR 412.96. For those that do not qualify under the 275-bed rule, other optional factors must be met. Those factors are updated annually by CMS and include the following finalized amounts:

PRRB Appeal Changes

In an effort to address the large number of cases before the PRRB, CMS is considering actions to assist in the reduction of the current PRRB case backlog:

• Develop standard formats and more structured data for submitting cost reports and supporting documentation.
• Create more clear standards for documentation to be used in auditing of cost reports.
• Enhance the MCReF portal by creating more automation for letter notifications and increased provider transparency during the cost report submission and audits.
• Utilize artificial intelligence (AI) protocols based on historical audit data to drive audit processes.
• Triage the current PRRB case inventory and expand the providers’ options for resolving issues through the reopening process.

Procedural Changes Specific to Appealing Empirical DSH Updates

CMS has determined that a significant number of appeals are related to hospitals’ disproportionate patient percentage (DPP), specifically concerning updating the Medicaid fraction. To address this, CMS is proposing that regulations be developed to govern the timing of the data for determining Medicaid eligibility.

These routine updates would be handled via reopening, with CMS issuing directives to the MACs requiring them to reopen cost reports for this issue at a specific time and realistic period during which the provider could submit updated data.

CMS is also considering allowing hospitals a one-time option to resubmit cost reports with updated Medicaid eligibility information, similar to SSI realignments. CMS would need to undertake rulemaking in order to determine the timeframe for exercising this option.

CMS has reviewed public comments on these procedural changes and will take the comments into consideration in future rulemaking.

For additional information, please contact Karen Kim at

karen.kim@toyonassociates.com.

PRRB Appeal Changes

In an effort to address the large number of cases before the PRRB, CMS is considering actions to assist in the reduction of the current PRRB case backlog:

• Develop standard formats and more structured data for submitting cost reports and supporting documentation.
• Create more clear standards for documentation to be used in auditing of cost reports.
• Enhance the MCReF portal by creating more automation for letter notifications and increased provider transparency during the cost report submission and audits.
• Utilize artificial intelligence (AI) protocols based on historical audit data to drive audit processes.
• Triage the current PRRB case inventory and expand the providers’ options for resolving issues through the reopening process.

Procedural Changes Specific to Appealing Empirical DSH Updates

CMS has determined that a significant number of appeals are related to hospitals’ disproportionate patient percentage (DPP), specifically concerning updating the Medicaid fraction. To address this, CMS is proposing that regulations be developed to govern the timing of the data for determining Medicaid eligibility.

These routine updates would be handled via reopening, with CMS issuing directives to the MACs requiring them to reopen cost reports for this issue at a specific time and realistic period during which the provider could submit updated data.

CMS is also considering allowing hospitals a one-time option to resubmit cost reports with updated Medicaid eligibility information, similar to SSI realignments. CMS would need to undertake rulemaking in order to determine the timeframe for exercising this option.

CMS has reviewed public comments on these procedural changes and will take the comments into consideration in future rulemaking.

For additional information, please contact Karen Kim at

karen.kim@toyonassociates.com.

Quality Program Changes

While CMS is finalizing several of the proposed changes to the hospital quality reporting and payment programs, none of these changes represent significant structural or procedural changes to the programs.

Hospital Inpatient Quality Reporting (IQR)

CMS is making the following adjustments to the program:

• Adopt the Hybrid Hospital-Wide All-Cause Readmission (Hybrid HWR) measure, beginning with two voluntary reporting periods running from 7/1/2021 to 6/30/2022 and from 7/1/2022 to 6/30/2023.
• Adopt the Safe Use of Opioids – Concurrent Prescribing electronic clinical quality measure (eCQM), with a clarification and update, beginning with CY 2021 reporting period/FY 2023 payment determination.
• Remove the Claims-based Hospital-Wide All-Cause Unplanned Readmission measure (HWR claims-only measure) beginning with the FY2026 payment determination.
• Extend current eCQM reporting and submission requirements for both the CY2020 reporting (FY2022 payment) and the CY2021 reporting (FY2023 payment) periods.
• Change eCQM reporting and submission requirements for the CY2022 reporting (FY2024 payment) period, such that hospitals would be required to report one self-selected calendar quarter of data for three self-selected eCQMs and the proposed Safe Use of Opioids eCQM.
• Continue requiring that EHRs be certified to all available eCQMs used in the Hospital IQR program for the CY2020 and subsequent reporting periods.

CMS is not finalizing its proposal to adopt the Hospital Harm – Opioid-related Adverse Events eCQM.

Hospital Value Based Purchasing (HVBP)

CMS will now require that the HVBP program use the same data used by the HAC program for purposes of calculating the Centers for Disease Control and Prevention (CDC) National Health Safety Network (NHSN) Healthcare-Associated Infection (HAI) measures beginning with the CY2020 data collection, when the hospital IQR program will no longer collect data on those measures.

CMS is not adding or removing any measures for the FY2022 and FY2023 program years. However, CMS will be establishing new performance standards for FY2024 and FY2025.

Hospital Readmission Reduction (HRR)

CMS will adopt the following adjustments to the program:

• Establish the performance period for the FY 2022 program year.
• Adopt a measure removal policy that aligns with the policies for other quality programs.
• Update the definition of “dual-eligible” as a beneficiary who has full benefit status in both the Medicare and Medicaid programs for the month the beneficiary was discharged, except for those beneficiaries who die in the month of discharge, who will be identified using the previous month’s data.
• Adopt a process to make nonsubstantive changes to the payment adjustment factors, which would include updated naming or locations of data file or minor discrepancies, but which would not include different methodologies to use data or the use of a different component in the methodology.
• Update 42 CFR 412.152 and 412.154 to reflect policies finalized in previous Rules.

Hospital Acquired Conditions (HAC)

CMS will make the following adjustments to the program:

• Adopt a measure removal policy that aligns with the policies for other quality programs.
• Clarify policies for validating CDC NHSN HAI measures.
• Adopt the collection periods for the FY2022 program year.
  • CMS PSI 90 measure – 24-month period from 7/1/2018 to 6/30/2020
  • CDC NHSN HAI measures – 24-month period from 1/1/2019 to 12/31/2020.

Update 42 CFR 412.172(f) to reflect policies finalized in the FFY2019 IPPS Final Rule.

Quality Program Changes

While CMS is finalizing several of the proposed changes to the hospital quality reporting and payment programs, none of these changes represent significant structural or procedural changes to the programs.

Hospital Inpatient Quality Reporting (IQR)

CMS is making the following adjustments to the program:

• Adopt the Hybrid Hospital-Wide All-Cause Readmission (Hybrid HWR) measure, beginning with two voluntary reporting periods running from 7/1/2021 to 6/30/2022 and from 7/1/2022 to 6/30/2023.
• Adopt the Safe Use of Opioids – Concurrent Prescribing electronic clinical quality measure (eCQM), with a clarification and update, beginning with CY 2021 reporting period/FY 2023 payment determination.
• Remove the Claims-based Hospital-Wide All-Cause Unplanned Readmission measure (HWR claims-only measure) beginning with the FY2026 payment determination.
• Extend current eCQM reporting and submission requirements for both the CY2020 reporting (FY2022 payment) and the CY2021 reporting (FY2023 payment) periods.
• Change eCQM reporting and submission requirements for the CY2022 reporting (FY2024 payment) period, such that hospitals would be required to report one self-selected calendar quarter of data for three self-selected eCQMs and the proposed Safe Use of Opioids eCQM.
• Continue requiring that EHRs be certified to all available eCQMs used in the Hospital IQR program for the CY2020 and subsequent reporting periods.

CMS is not finalizing its proposal to adopt the Hospital Harm – Opioid-related Adverse Events eCQM.

Hospital Value Based Purchasing (HVBP)

CMS will now require that the HVBP program use the same data used by the HAC program for purposes of calculating the Centers for Disease Control and Prevention (CDC) National Health Safety Network (NHSN) Healthcare-Associated Infection (HAI) measures beginning with the CY2020 data collection, when the hospital IQR program will no longer collect data on those measures.

CMS is not adding or removing any measures for the FY2022 and FY2023 program years. However, CMS will be establishing new performance standards for FY2024 and FY2025.

Hospital Readmission Reduction (HRR)

CMS will adopt the following adjustments to the program:

• Establish the performance period for the FY 2022 program year.
• Adopt a measure removal policy that aligns with the policies for other quality programs.
• Update the definition of “dual-eligible” as a beneficiary who has full benefit status in both the Medicare and Medicaid programs for the month the beneficiary was discharged, except for those beneficiaries who die in the month of discharge, who will be identified using the previous month’s data.
• Adopt a process to make nonsubstantive changes to the payment adjustment factors, which would include updated naming or locations of data file or minor discrepancies, but which would not include different methodologies to use data or the use of a different component in the methodology.
• Update 42 CFR 412.152 and 412.154 to reflect policies finalized in previous Rules.

Hospital Acquired Conditions (HAC)

CMS will make the following adjustments to the program:

• Adopt a measure removal policy that aligns with the policies for other quality programs.
• Clarify policies for validating CDC NHSN HAI measures.
• Adopt the collection periods for the FY2022 program year.
  • CMS PSI 90 measure – 24-month period from 7/1/2018 to 6/30/2020
  • CDC NHSN HAI measures – 24-month period from 1/1/2019 to 12/31/2020.

Update 42 CFR 412.172(f) to reflect policies finalized in the FFY2019 IPPS Final Rule.

Other Rules, Transmittals, and Articles Recently Published

Inpatient Psych Facility PPS Final Rule [CMS-1712-F]

(Display Copy available here 7/30/2019; FR Publish Date 8/06/2019)

Fact Sheet Link

Federal Register Link

• Per diem base rate increase from $782.78 to $798.55.
• Elimination of 1-year lag in WIF, aligning it with concurrent IPPS WIF.

Inpatient Rehab Facility PPS Final Rule [CMS-1710-F]

(Display Copy available here 7/31/2019; FR Publish Date 08/08/2019)

Fact Sheet Link

Federal Register Link

• Standard payment conversion factor increase from $16,021 to $16,489.
• Elimination of 1-year lag in WIF, aligning it with concurrent IPPS WIF.

Long-Term Care Hospital PPS Final Rule [CMS-1716-F]

(Display Copy available here 08/02/2019; FR Publish Date 8/16/2019) – Published as part of the IPPS Acute Care Hospital Final Rule

Fact Sheet Link

Federal Register Link

• LTCH-PPS payments expected to increase by 1% or $43M.
• Finalized the proposal to modify the “Discharge to Community” measure to exclude nursing home residents who already reside in the nursing home.

Skilled Nursing Facility PPS Final Rule [CMS-1718-F]

(Display Copy available here 7/30/2019; FR Publish Date 08/07/2019)

Fact Sheet Link

Federal Register Link

Increase in unadjusted Federal per diem rates of 2.4%.

 

Here’s what happened: A major victory was won today for Providers who have appealed the inclusion of Medicare Part C days in the SSI ratio/exclusion of dual-eligible Medicare Part C days in the Medicaid ratio for years ending 2004-2012.

The Supreme Court of the United States has affirmed Allina Health Services, et al. v. Price, 863 F.3d 937 (CADC 2017), wherein the United States Court of Appeals supported Providers and held that HHS violated the Medicare Act when it changed its reimbursement formula without providing notice and opportunity for comment. 

HHS arbitrarily began including Part C days in the Medicare fraction through its 2004 Final Rule, and Toyon has been helping Providers in appealing the agency’s actions. The Providers’ position has consistently been that only Medicare Part A days should be included in the SSI ratio and that dual-eligible Part C days instead belong in the numerator of the Medicaid ratio calculation. Providers argued CMS’ actions were tantamount to retroactive rulemaking, which the D.C. Circuit agreed was impermissible in Northeast Hospital Corp. v. Sebelius, 657 F.3d 1 (CADC 2011). Providers also disputed the fact that HHS violated statutory notice-and-comment obligations in establishing its practice of including Medicare Part C days in the SSI ratio, a position both the DC Circuit Court and U.S. Court of Appeals upheld through the prior Allina decisions. 

What it means to you
Today the Supreme Court settled the issue once and for all by agreeing with Providers and holding that HHS did indeed violate its rulemaking obligations in including Part C days in the SSI ratio. This decision should effectively invalidate the agency’s actions andProviders should expect to be offered settlement amounts from CMS for any negative reimbursement impacts caused by its inclusion of Part C days.

What Now?
No details are yet available on how or when the amounts will be calculated nordispensed to affected Providers, but Toyon Associates, Inc. will be contacting affected hospitals in the coming weeks as more details become available.

Please contact Karen Kim at (925) 685-9312 or karen.kim@toyonassociates.com if you have any questions or concerns. 

The following is the link to the ruling. 

https://www.supremecourt.gov/opinions/18pdf/17-1484_4f57.pdf

CMS-1694-F drafted on 8/2/2018; Published in the Federal Register on 8/17/2018

On August 2, 2018, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to help empower patients through better access to hospital price information, improve the use of electronic health records, and make it easier for providers to spend time with their patients. The final rule updates Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), effective for discharges on or after October 1, 2018.

The policies in the IPPS/LTCH PPS final rule further advance the agency’s priority of creating a patient-centered healthcare system by achieving greater price transparency, interoperability, and significant burden reduction so that hospitals can operate with better flexibility and patients have what they need to be active healthcare consumers.

These changes result in the elimination of 39 total measures across 5 programs with well over 2 million burden-hours reduced for hospital providers impacted by the IPPS rule, saving them $75 million.

Overall, the final rule is projected to result in an estimated increase of $4.8B (or 4.0%) in payments to providers, ranging from 0.7% increases for rural, sole community hospitals up to 4.7% increases for larger urban hospitals in the New England region.

Medicare IPPS Base Rates

CMS is increasing the base rate for hospitals by 1.4%, mostly driven by a market basket increase of 2.9%.

Click here for the full base rate calculation table and comparison to prior year

MS-DRG v 36 Changes

As expected, CMS is recalibrating the MS-DRG weights for FFY2019. One noteworthy change is the inclusion of maternity-related DRGs in MDC 14, as discussed by CMS in the FFY2018 Proposed and Final Rules. Below is a listing of the largest changes in weighting between v35 and v36 of the MS-DRGs:

Click here for a table of the MS-DRG v35 to v36 comparison.

Post-Acute Care Transfer Policy Changes

Effective for discharges on or after 10/1/2018, patients discharged to hospice are to be included as transfer cases, as required by the Bipartisan Budget Act of 2018, saving the program an estimated $240M in FFY2019. The discharge status codes 50 or 51 will now be subject to the transfer policy.

Changes to Wage Index

CMS has calculated an occupational-mix adjusted national average hourly wage of $42.955567020. Of note, 263 hospitals will receive the rural floor.  Twenty-nine Massachusetts hospitals will receive an additional $121M (3.3%) due to the application of the rural floor.  In addition, Arizona hospitals will also experience a significant benefit of $58M from the application of the rural floor.

Click here for a comparison of current and prior WIFs in Table 3.

Three notable changes to wage index for FFY2019:

>1) Removal of “other” wage-related costs beginning with FFY2020

“Other” wage-related costs are traditionally reported on W/S S-3, Pt. IV line 25 and W/S S-3, Pt. II line 18 to recognize unusually large wage-related costs that are not reflected on the “core” list but may represent a significant wage-related cost. Such costs are subject to a specified 1-percent test to be considered allowable; this calculation was clarified in the Final Rule. Despite the clarification of the calculation of the 1-percent test, CMS is moving forward with excluding “other” wage-related costs from the wage index calculation starting with FFY 2020.

This is a result of the negligible impact these costs have on the overall wage index considering that only 8 hospitals out of 3,000+ IPPS hospitals in the wage index reported “other” wage related costs correctly. Many commenters were concerned about physician malpractice costs being excluded, as such costs are not specifically reported on W/S S-3, Pt. II line 18, though the costs are subject to the 1-percent test as an “other” wage-related cost. CMS clarified that the exclusion does include physician malpractice costs as well and provided statistics to denote the negligible impact that this would have on the overall wage index.

Toyon’s Take:  In an effort to begin to simplify wage index reporting, we agree with CMS’ decision to move forward with the exclusion of “other” wage related costs from the wage index calculation.

>2) Changing the “Lock-in” date for rural-designated hospitals

Based on current regulations, for a hospital’s wage data to be recognized in the rural wage index for the upcoming FFY, a hospital’s rural filing date (“lock-in” date) must be no later than 70 days prior to the second Monday in June of the current FFY, and the application must be approved by CMS in accordance with the regulations specified at 42 CFR 412.103.  In the current year, this “lock-in” date was April 2, 2018.

CMS confirmed that it will change the regulation at 42 CFR 412.103(b)(6) to reference the “lock-in” date as no later than 60 days after the public display date. This means that a provider’s urban to rural request must be approved by the CMS Regional Office no later than 60 days after the public display of the IPPS notice of proposed rulemaking in the Federal Register. CMS believes that allowing for such additional time (at least one month from current regulations) in the rate-setting process will eliminate errors and assist in ensuring a more accurate wage index, and also aligns the “lock-in” date with the 60 day-window for accepting public comments to the proposed rulemaking.

>3) Request for public comments on wage index disparities

CMS recognizes that there are disparities in wage reporting and regulations and sees an overall need for improving the wage index system.  While CMS did not publically address any comments in the Final Rule, CMS acknowledged that it looks forward to continuing to work on wage index disparities and that it has begun the process of “making wage index more equitable” with a policy allowing for the expiration of the imputed rural floor in all-urban states, notably New Jersey, Rhode Island and Delaware.

For additional information, please contact Ryan Sader at ryan.sader@toyonassociates.com.

UCC DSH Payments

CMS is increasing Medicare DSH UC payments by $1.5B, to $8.3B in FFY 2019.

CMS finalized its proposal to increase Medicare DSH UC payments by $1.5B, to $8.3B in FFY 2019. This increase is driven by the annual change in the estimated uninsured population, from 58.01% in FFY 2018 to 67.51% in FFY 2019. As anticipated, CMS is using uncompensated care cost from federal year 2014 and 2015 cost reports, as well as one final year of Medicaid and SSI proxy data, in the determination of each hospital’s allocation (i.e., “Factor 3”) of the $8.3B UC funding.

Hospitals Can Validate Their Data (Until August 31, 2018)

To arrive at estimated hospital UC payments in FFY 2019, CMS used uncompensated care cost, per publicly available cost report data, as of June 30, 2018. Hospitals have until August 31 to notify CMS at Section3133DSH@cms.hhs.gov with issues affecting the accuracy of their uncompensated care data. Hospital DSH UC data corresponding to the FFY 2019 Final Rule is here on the CMS website.

Toyon’s Take: Toyon will be using our S-10 HCRIS database to assist our clients with confirming their data. Sole community hospitals (SCH) should take note that CMS published uncompensated care amounts in the DSH Supplemental File for SCHs that may not receive DSH payments.

CMS continues to acknowledge that S-10 data “are not perfect”, and expects audits to begin in the fall of 2018. CMS does not disclose cost report years subject to audit, however Toyon expects these audits will relate to FY 2016 cost reports, as these are likely the next set of cost reports to be used for hospital UC DSH funding. CMS is also considering shifting to only one year of data (2016 cost reports) as the basis of hospital UC DSH payments for FFY 2020. Therefore, the accuracy of uncompensated care reporting on the FY 2016 cost report is critical for all DSH hospitals. Currently, CMS does not discuss a time-line for amending FY 2016 UC cost on the cost report, stating:

“To the extent these commenters were requesting a further opportunity to revise their Worksheet S-10 data for use in future rulemaking for FY 2020 or later years, we are not addressing the issue of future resubmissions in this final rule. Therefore, the normal timelines and procedures apply for a hospital to request to amend a cost report.”

Toyon anticipates a deadline for submitting UC revisions to the FY 2016 cost reports is forthcoming. We will send out a prompt update once this deadline is made publicly available. In the meantime, it continues to be extremely important to validate your hospital is compliantly reporting UC cost on the cost report.

Click here for the DSH Supplemental PUF data.

Click here for the Analysis of UCC DSH Factor 1.

For additional information, please contact Fred Fisher at fred.fisher@toyonassociates.com.

Graduate Medical Education Changes

CMS finalized its rule to allow “new” urban teaching hospitals (i.e., hospitals that established permanent FTE caps after 1996) to participate in Medicare affiliated group agreements (AGA) under certain limited circumstances, but with some modifications to the proposed rule. In the past, new teaching hospitals could only participate in an AGA if it resulted in an increase to the cap of the new teaching hospital. CMS confirmed that new urban teaching hospitals can continue to participate in an AGA wherein the new teaching hospitals receive increases to their FTE caps.

However, effective for new AGA’s beginning 7/1/2019 and after, this new rule would also allow two or more new urban teaching hospitals to participate in an AGA, including a reduction to one or more of the hospital’s caps. In addition, a new urban teaching hospital may participate in an AGA with an existing teaching hospital (i.e., a hospital with 1996 FTE caps) and receive a decrease to its FTE caps, as long as the new urban teaching hospital’s caps have been in effect for 5 or more years. To be specific, a new urban teaching hospital can lend FTE cap slots to an existing teaching hospital under an AGA effective with the July 1 date that is at least 5 years after the start of the hospital’s cost reporting period that coincides with or follows the start of the sixth program year of the first new program for which the hospital’s FTE cap was adjusted.

In addition, CMS announced an additional round of Section 5506 FTE cap redistributions (Round 13):

Applications for these additional FTE slots are due to CMS by October 31, 2018.

For additional information, please contact Tom Hubner at tom.hubner@toyonassociates.com.

 

Low Volume Hospitals 

As required by the Bipartisan Budget Act of 2018, CMS is implementing changes to the payment adjustments for low volume hospitals. Effective for FFY2019 through FFY2022, a hospital must be more than 15 road miles (i.e., by use of a web-based mapping tool) from another subsection (d) hospital and have less than 3,800 total discharges. It’s worthy of noting that the requirements have changed from a measure of Medicare discharges to a measure of Total discharges. The payment adjustment is an additional 25% for hospitals with less than 500 discharges, and a sliding scale is then applied for hospitals over that level down to 0% for 3,800+ total discharges.

LVA Adj = 0.25 – ((0.25/3300) x (Number of Total Discharges – 500))

Applications to receive the low volume adjustment must be received by September 1, 2018.

Toyon’s Take: Using the new 3,800-discharge criteria, an additional 38 hospitals may qualify for this Low Volume adjustment, if they meet the mileage criteria. Hospitals should review the data and mileage for this potential opportunity.

Click here  for a table of hospitals that may be eligible for the Low Volume adjustment.

For additional information, please contact Ron Knapp at ron.knapp@toyonassociates.com.

 

Changes to Quality Reporting 

Many measures between the various quality reporting systems have been determined by CMS to be duplicative, excessively burdensome, or “topped out,” meaning that most providers consistently perform well in a measure. As a result, CMS is making the following changes to these programs.

Hospital Inpatient Quality Reporting (IQR)

CMS is stratifying measure rates by dual-eligible Medicare/Medicaid patients. CMS is removing 19 measures and de-duplicating another 20 measures, for a reduction of 39 measures to be reported under the IQR program. CMS will also be adopting 1 claims-based readmission measure.

Click here  for a table of the 39 IQR measures to be removed.

Hospital Value Based Purchasing (HVBP)

CMS has decided to remove only 3 measures from the FFY2019 program year and another one beginning with the FFY2021 program year. Because 6 of the measures previously proposed by CMS to be removed from future program years will now remain, CMS is not planning to change the weighting of the domains for the time being. However, CMS is moving forward with changing the name of the Clinical Process domain to Clinical Outcomes.

 

 

 

 

 

 

 

 

Click here for a table of the 4 HVBP measures to be removed.

Hospital Readmission Reduction (HRR)

The only notable change made by CMS was to clarify the definitions of “dual-eligible” and “applicable period.” No new measures have been proposed.

Hospital Acquired Conditions (HAC)

CMS will start measuring hospital performance against peers with similar proportions of dual-eligible patients. In addition, CMS is adopting a new scoring methodology that updates measure weighting to address concerns raised about disproportionate weighting at the measure level for the subset of hospitals with relatively few NHSN HAI measures.

Click here for a table of the 6 HAC Reduction measures for FFY2019.

 

EHR Incentive Program Changes  

CMS is renaming the “EHR Incentive Program” to “Promoting Interoperability Program” to align with their plan to overhaul the incentive program by moving away from meaningful use measures to more of a focus on the patients and healthcare data exchange through interoperability.

CMS is seeking feedback on positive solutions to better achieve interoperability or sharing of data between providers with patients:

• Reducing overall number of required measures from 16 to 6
• New performance-based scoring methodology

Click here  for a table of the new scoring methodology.

 

Eligible hospitals would need to earn a score of 50 points or more out of a possible 100.

Additional Cost Reporting Requirements  

CMS is updating existing requirements related to supporting documentation that must be submitted with cost reports. Some of the changes are simply verbiage changes in the instructions to remove the reference to the Form CMS-339, which is no longer applicable as it has been incorporated into most cost reporting forms, and to change the reference to IRIS data from a separate IRIS diskette, which is no longer used by most providers.

However, effective with cost reporting periods beginning on or after October 1, 2018, the following documentation must be submitted with the Medicare cost report and agree to the amounts reported in the cost report:

• Medicare bad debt listings
• For DSH-eligible hospitals, Medicaid-eligible days listings and detailed listings of charity care and uninsured discounts provided
• For hospitals that are part of a healthcare system, a completed Home Office cost statement
  • A copy of the Home Office cost statement should be submitted directly to the servicing MAC and to each MAC servicing its chain providers, rather than simply submitting a copy of the Home Office cost statement with every cost report submission
  • For hospitals that have a different fiscal year end from their Home Office, the amounts allocated from the Home Office to the hospital’s cost report must correspond to the appropriate portion of the cost reporting period as reflected in the Home Office cost statements

CMS has decided to postpone until a later time, the requirement that IRIS total counts for DGME FTEs (weighted and unweighted) and IME FTEs agree to the cost report. The reason for this postponement is because CMS’ XML-based IRIS software will not be updated to include FTE totals by 10/1/2018.

CMS has also indicated that they will be developing a standard format of required fields for the submission of charity care and uninsured discounts at a later time. For now, hospitals should include typical information for such listings, including patient name, dates of service, insurer (if applicable), and the amount of charity or uninsured discount given to the patient.

Toyon’s Take: This means that hospitals will no longer be able to submit cost reports using high-level data as placeholders for pending logs to be prepared at a later date. Detailed listings that support these key figures on the cost report must be submitted at the time of filing.

For additional information, please contact Daniel Pelayo at daniel.pelayo@toyonassociates

IPPS-Excluded Hospital Changes

CMS finalized a rule that will allow IPPS-excluded hospitals to operate IPPS-excluded units, as long as the unit is not the same type (e.g., psychiatric or rehabilitation) as the hospital. As further clarification, CMS specified that discharges from IPPS-excluded units will not be included in the calculation of a Long-Term Care Hospital’s average length of stay.

CMS also finalized its changes to the regulations at 42 CFR 412.22(h)(2)(iii)(A), effective on or after October 1, 2018. This change stipulates that an IPPS-excluded satellite facility that is part of an IPPS-excluded hospital that provides inpatient services in a building also used by an IPPS-excluded hospital, or in one or more entire buildings located on the same campus as buildings used by an IPPS-excluded hospital, is not required to meet the criteria in paragraphs (1) through (3) of this regulation, in order to be excluded from the IPPS.

Pricing Transparency 

CMS has expressed concerns from patients about hospital pricing, including surprise out-of-network billing from healthcare professionals (e.g., radiologists) and unexpected facility and physician fees after ER visits. In addition, CMS intends to enforce existing requirements of Section 2718(e) of the Public Health Services Act by drafting specific guidelines to address pricing transparency and by implementing a process to make non-compliant hospitals publically known.

CMS is requiring the following actions:

• Posting of hospital and physician charge data on the CMS website
• Effective January 1, 2019, hospitals make available a list of their standard charges via the internet in a machine-readable format and require that these lists be updated at least annually
• As an alternative, hospitals may publish policies on the internet to allow the public to view a list of charges in response to an inquiry

CMS is also seeking feedback on barriers to publishing these charges and how to better inform patients of their obligations:

• How should “standard charges” be defined? Average discount off charges or gross charges from the chargemaster?
• What type of information would be most beneficial to patients?
• Should healthcare providers be required to inform patients how much their out-of-pocket costs for a service will be before those patients are furnished that service?
• Should CMS require healthcare providers to provide patients with information on what Medicare pays for a particular service?
• What is the appropriate mechanism for CMS to enforce pricing transparency?

How does Medigap coverage affect patients’ understanding of their out-of-pocket costs?

Changes to Inpatient Admission Order Documentation 

CMS is removing the requirement that inpatient admission orders be written. If other available documentation, such as a physician certification statement when required, progress notes, or the medical record as a whole, supports that all the coverage criteria are met, and the hospital is operating in accordance with the hospital conditions of participation (CoPs), then written orders to admit are not required to be present in the medical record.