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Category: Industry News

FFY2020 Final Rule

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 (KYMRIAHTM and YESCARTATM) 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 25th 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 25th 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 75th 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 25th 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%.

 

 
 
 
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Wage Index Changes

Based on the CMS proposed changes for FFY2020, the occupational-mix adjusted national average hourly wage is estimated to be $43.99.  

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 proposed several significant changes to the wage index calculation.  

CMS has proposed to reduce disparities by increasing the values for low wage index hospitals below the 25th percentile (or a WIF of 0.8482) and decreasing the values for high wage index hospitals above the 75th percentile (or a WIF of 1.0351). The proposed increase 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 25th percentile value (e.g., 0.7573 = 0.6663 + (0.8482 – 0.6663)/2). The proposed decrease for the high wage index hospitals would be equal to the full difference between the original final wage index value for the hospital and the final 75th percentile value, multiplied by the estimated budget neutrality factor for these adjustments, which CMS currently projects to be 4.3% (e.g., 1.8263 = (1.8619 – 1.0351) x 0.043). 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.  

Note: The budget neutrality factor noted in the body of the rule mentions 3.4%. However, this appears to be a typo by CMS, as Table 2 (Proposed CMI and Wage Index by CCN) is calculated using 4.3%.  

CMS has also proposed to change the rural floor calculation, including the removal of urban-to-rural reclassifications. 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, CMS plans to 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.  

CMS Proposed Wage Index Alternatives
As instructed under Executive Orders 12866 (10/4/1993) and 13563 (1/21/2011), CMS is directed to assess all costs and benefits of available alternatives for significant regulatory actions that are likely to have an economic effect of $100M or more or that raise novel legal or policy issues that arise out of legal mandates or the President’s priorities, among other criteria. Consequently, CMS has proposed three alternative methods for adjusting the wage index. These alternatives are not described in the body of the Proposed Rule, but are mentioned in Section I.O.1. of the Appendix A and are calculated in the 13th data file posted to the Proposed Rule homepage on the CMS website.

The three alternatives to the Proposed Rule as posed by CMS are the following:

1.  Applying a budget neutrality factor to the standardized amount, rather than focusing the adjustment on the wage index of high wage index hospitals (See III.N.3.d):
* Same as the Proposed Rule, but this alternative removes the reduction to the high wage index hospitals above the 75th percentile, as well as the 5% cap on any negative impacts.
* Budget neutrality factor would be higher, and therefore, the standard Federal rate would decrease for all hospitals, as this alternative would not be funded by reducing the wage index factor for the high wage index hospitals.

2.  Mirroring the proposed approach of raising the wage index for low wage index hospitals in reducing the wage index values for high wage index hospitals:
* The proposed increase for the low wage index hospitals would be equal to half the difference between the otherwise applicable final wage index for these hospitals and the 25th percentile wage index value [e.g., (0.8482 – Hosp WIF)/2].

* The proposed decrease for the high wage index hospitals would be equal to half the difference between the otherwise applicable final wage index value for these hospitals and the 75th percentile wage index value [e.g., (Hosp WIF – 1.0351)/2].

* The 5% cap on negative impacts to the high wage index hospitals would be removed.A budget neutral adjustment factor would be made to the standardized amount.

3.  Creating a single national rural wage index and elimination of the individual state rural floors.

Click here for a comparison of current and prior WIFs for each hospital, as well as the estimated WIFs for each of the alternative CMS proposals.

Toyon’s Take:
In recent years, CMS has hinted at addressing what it describes as “wage index disparities;” however, no specific changes were proposed until this year. The proposed changes are noteworthy and will be heavily commented on by hospital associations and the provider community in the Final Rule. Should the proposed changes be made final, it will have significant reimbursement benefit to states that fall below the 25th percentile in terms of its wage index value and conversely, significant reimbursement reduction to states that have wage index values above the 75th percentile, notably California, New York and New Jersey. Toyon has developed a model analyzing the proposed changes to the wage index using FFY2020 proposed data sources. We are happy to share our analysis specific to your hospital.  

Other Proposed 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 MGCRB for FFY2021 reclassifications, as well as cancellations and terminations, are due by 9/3/2019.   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 require 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 Section 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 45 days of the date of public display of the Proposed Rule prior to the applicable Federal fiscal year end. 

For additional information, please contact Ryan Sader at ryan.sader@toyonassociates.com
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OPPS Proposed Rule – CY 2019

CMS-1695-P drafted on 7/25/2018; Published in the Federal Register on 7/31/2018

On July 25, 2018, the Centers for Medicare & Medicaid Services (CMS) proposed changes to ensure that seniors can access the care they need at the site of care that they choose and to lower drug prices as outlined in the President’s Blueprint. The proposed policies in the CY 2019 Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rule would help lay the foundation for a patient-driven healthcare system.

To increase the sustainability of the Medicare program and improve quality of care for seniors, CMS is moving toward site neutral payments for clinic visits (which are essentially check-ups with a clinician). Clinic visits are the most common service billed under the OPPS. Currently, CMS often pays more for the same type of clinic visit in the hospital outpatient setting than in the physician office setting.  If finalized, this proposal is projected to save patients about $150 million in lower copayments for clinic visits provided at an off-campus hospital outpatient department. CMS is also proposing to close a potential loophole through which providers are billing patients more for visits in hospital outpatient departments when they create new service lines.

As part of active efforts to reduce the cost of prescription drugs, CMS is issuing a Request for Information to solicit public comment on how best to leverage the authority provided under the Competitive Acquisition Program (CAP) to get a better deal for beneficiaries as part of a CMS Innovation Center model. CMS believes a CAP-based model would allow the program to introduce competition to Medicare Part B, the part of Medicare that pays for medicines that patients receive in a doctor’s office.

In 2018, CMS implemented a payment policy to help beneficiaries save on coinsurance on drugs that were administered at hospital outpatient departments and that were acquired through the 340B program-a program that allows hospitals to buy certain outpatient drugs at a lower cost. Due to CMS’s policy change, Medicare beneficiaries are now benefiting from the discounts that 340B hospitals enjoy when they receive 340B-acquired drugs. In 2018 alone, beneficiaries have saved an estimated $320 million on out-of-pocket payments for these drugs. For 2019, CMS is expanding this policy by proposing to extend the 340B payment change to non-excepted off-campus departments of hospitals that are paid under the Physician Fee Schedule.

CMS is also seeking comment through a Request for Information asking whether providers and suppliers can and should be required to inform patients about charge and payment information for healthcare services and out-of-pocket costs, what data elements would be most useful to promote price shopping, and what other changes are needed to empower healthcare consumers.

Overall, the proposed rule is projected to result in an estimated decrease of $610M (or -0.1%) in payments to providers, ranging from 3.4% decreases for hospitals in the New England region up to 2.1% increases for non-teaching, non-DSH urban hospitals.

For more information regarding this Proposed Rule, see below:

Fact Sheet Link

Federal Register Link

Medicare OPPS Base Rates

CMS is proposing a base rate increase of 1.25% for hospitals that submit OQR quality data and 2.0% for ASCs that submit ASCQR quality data.

APC Changes

As expected, CMS is proposing weighting changes to APC weights for CY2019, along with new APC codes and new HCPCS codes. Below is a listing of the largest changes in weighting between CY2018 and CY2019 APCs:
 
Click here for a table of the full APC weighting comparison between CY2018 and CY2019.
 
Click here for a table of the new HCPCS codes effective 7/1/2018.
Other APC Changes
CMS has proposed to create three new comprehensive APCs (C-APCs) for ears, nose, and throat (ENT) and vascular procedures. CMS also proposes to remove two procedures from the inpatient-only list and add one procedure to the list.
Click here for a table of the changes to the inpatient-only procedures.

Changes to Quality Reporting

CMS is proposing several changes to the Outpatient Quality Reporting (OQR) in an effort to reduce burdens on hospitals, including the removal of 10 measures from the OQR (1 from CY2020 and 9 from CY2021). CMS also proposes to remove the three recently revised pain communication questions, starting with services on Jan. 1, 2022, to address concerns that providers might feel pressure to offer opioids in order to raise survey scores.
Click here for a table of the 10 OQR measures proposed to be removed.
 
Click here for a table of the 26 OQR measures required for CY 2020 and here for a table of the 15 ASCQR measures required for CY2020.

Off-Campus Payment Policy Changes

CMS remains concerned with the shift of services from freestanding physician offices to hospital provider-based departments (PBDs). As a result, they are proposing several significant changes that will negatively impact OPPS reimbursement for these facilities:
Expansion of PFS Rate for All Clinic Visits: CMS will extend the reduced Physician Fee Schedule (PFS) rate for clinic visits (HCPCS code G0463) to all off-campus PBDs, even those excepted under Section 603. (Note: The PFS payment rate is approximately 40% less than the OPPS rate.)CMS estimates that the impact of this change is expected to reduce reimbursement to hospitals by $760M.
Restricting “Clinical Families of Services”: CMS is also proposing to require that if an excepted off-campus PBD furnishes services from any clinical family of services from which it did not furnish and bill during the period from 11/1/2014 to 11/1/2015, such items and services would be paid at the reduced PFS rate applied to non-excepted off-campus PBDs. New items or services within a clinical family of service would continue to be paid under OPPS, as this would be considered a “service expansion.” For mid-build providers, CMS proposes a 1-year baseline period beginning on the first date the off-campus PBD furnished the service under OPPS.
Click here for a table of the clinical families of services.
New “ER” Modifier: Finally, CMS also plans to require a new “ER” modifier to identify services in off-campus ER departments. This is meant to address the MedPAC recommendation for CMS to assess the extent to which OPPS services are shifting to off-campus ER departments. (Critical access hospitals would be exempt from this reporting requirement.)

Changes to Drug Payment Policy 

In response to the President’s Commission on Combating Drug Addiction and the Opioid Crisis, CMS proposes to change the packaging policy for certain drugs. CMS is also proposing to change the payment for separately payable drugs for non-excepted off-campus PBDs to the same lower ASP minus 22.5% (or 77.5% of ASP) that excepted off-campus PBDs receive. Currently these non-excepted departments receive 106% of ASP for these drugs. SCHs, Children’s, and Cancer hospitals would be exempt.
 
Click here for a table of the drugs and biologicals with pass-through status expiring on 12/31/2018.

CMS Request for Information

CMS is seeking feedback as to how providers may safely and effectively transition EHR among other providers and thereby improve interoperability.

CMS is also interested in continuing the discussion as to how hospitals might improve access to charge information across providers in order to help patients understand their financial liability, including out-of-pocket costs.

Finally, CMS is soliciting comments on key designs for developing a potential model that would test private market strategies and introduce competition to improve quality of care for beneficiaries, while reducing both Medicare expenditures and beneficiaries’ out-of-pocket spending.  They are seeking feedback that would accelerate the move to a value-based healthcare system building upon the Competitive Acquisition Program (CAP) for Part B drugs.

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

Other Recently Published Proposed Rules  

CY 2019 HHA PPS Proposed Rule [CMS-1689-P]
(FR Publish Date 7/12/2018)
  • Expected 2.1% increase in payments to HHAs in CY 2019
  • Rural add-on payment extended for CYs 2019 through 2022 with new methodology
  • Cost of remote patient monitoring will be allowable costs on the Medicare cost report
CY 2019 ESRD PPS and DMEPOS Proposed Rule [CMS-1691-P]
[FR Publish Date 7/19/2018)
  • Proposed ESRD
  • Updates to ESRD QIP measures and codifying several previously finalized requirements
  • Changes to the DMEPOS Competitive Bidding Program (CBP)
Physician Fee Schedule, Quality Programs, and Medicaid Interoperability Proposed Rule [CMS-1693-P]
(FR Publish Date 7/27/2018)
  • Updates to PFS RVUs, including an increase in the conversion factor of 0.13% to $36.0463
  • Elimination of payment distinction and documentation requirements E&M visit levels 2
    through 5
  • 50% multiple procedure payment adjustment when E&M visits and procedures with global periods are furnished together
  • Moving forward with Appropriate Use Criteria (AUC) using a Clinical Decision Support Mechanism (CDSM)
    >Effective 1/1/2020, physicians and other practitioners who order advance diagnostic
    imaging must consult with AUC and report the consultation information on the claims.
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