[co-author: Michael Lisitano]

On May 11, 2020, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule to update Medicare payment policies for hospitals under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) for FY 2021 (the “Rule”). IPPS and LTCH PPS proposed rules are released on a fiscal year cycle to define payment and policies for inpatient hospitals, long-term care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, skilled nursing facilities, and hospices. CMS also released a fact sheet highlighting certain major provisions in the Rule.

As highlighted in the fact sheet, among other things, the Rule would:

• Increase operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users. CMS estimates that, when the other provisions of the Rule are accounted for, overall IPPS payments are expected to increase approximately 1.6 percent.
• Decrease the LTCH PPS payments by approximately .9 percent overall for FY 2021, which according to CMS reflects the continued statutory implantation of the revised LTCH PPS payment system.
• Decrease the amount of uncompensated care payments to Medicare disproportionate share hospitals (DSH) by approximately $0.5 billion in FY 2021. The Rule would use a single year of data on uncompensated care costs from Worksheet S-10 of the FY 2017 cost report to determine the amount. For all subsequent fiscal years, the Rule would require that eligible hospitals (except Indian Health Service and Tribal hospitals) use the most recent available single year of audited Worksheet S-10 data to distribute uncompensated care payments.
• Make changes to the Hospital-Acquired Condition (HAC) Reduction Program and Hospital Readmissions Reduction Program (HRRP) that involve automatically adopting applicable performance periods for measures used in the program beginning with FY 2023.
• Make changes to the Hospital Inpatient Quality Reporting (IQR) Program including increasing the number of quarters of eCQM data reported, beginning to publicly display the data, and revising the IQR validation process.
• Provide estimated and newly established performance standards for certain measures in the Hospital Value-Based Purchasing (VBP) Program for FY 2023 through FY 2026, but not add new measures or remove existing measures.
• Make changes to the Medicare Promoting Interoperability Program including, among others, increasing the number of quarters of electronic clinical quality measure data reported, from one self-selected quarter to four quarters; maintaining an electronic health record reporting period of a minimum of any continuous 90-day period in CY 2022 for new and returning participants; and maintaining the Electronic Prescribing Objective’s Query of Prescription Drug Monitoring Program measure as optional worth 5 bonus points for CY 2020.
• Revise policies to provide greater flexibility for residents to transfer from teaching hospitals or residency programs that are closing, including the transfer of funding for certain residents not physically present at the closing of the programs.

CMS noted it was not proposing to make any revisions to the Hospital Star Ratings, despite the comments it had received. The Rule is scheduled for formal publication in the Federal Register on May 29, 2020. The deadline for comments is July 10, 2020.

*Legal Intern at Robinson+Cole. Michael is not yet admitted to practice law.

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