On April 14, 2017, CMS issued the annual Hospital Inpatient Prospective Payment System (IPPS) Rule for FY 2018 (the “Proposed Rule”) which will affect discharges on or after October 1, 2017.  CMS estimates that IPPS operating payments will increase by 2.9 percent and spending will increase by $3.1 billion in FY 2018.  The Proposed Rule also adjusts disproportionate share hospital (DSH) payment adjustments, changes quality of care payment provisions and extends the Rural Community Hospital Demonstration, among numerous others policy developments.  Additionally, in an effort to start a national conversation about improving the healthcare delivery system, CMS is requesting ideas to reduce clinician burdens in a manner that allows for increased quality of care and decreased costs.  Comments on the Proposed Rule will be accepted until June 13, 2017. 

Under the Proposed Rule, available here, for inpatient acute care hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users, CMS proposes an increase in operating payment rates of 1.6 percent.  The 1.6 percent increase reflects a market basket update of 2.9 percent, minus a 0.4 percent productivity reduction, minus a 0.6 percent reduction to remove the one-time 0.6 percent increase to offset costs of the two midnight policy, minus 0.75 percent in accordance with the Affordable Care Act (ACA), plus a 0.4588 percent increase as required by the 21st Century Cures Act.  CMS projects that the 1.6 percent rate increase combined with the 1.2 percent increase for uncompensated care payments, will increase overall IPPS operating payment rates by 2.9 percent.  Other payment adjustments will continue, including the 1 percent penalty for hospitals performing in the lowest quartile of the Hospital Acquired Condition Reduction Program and upward and downward adjustments under the Hospital Value-Based Purchasing Program.

Uncompensated Care and DSH Payments

In FY 2018, CMS proposes to distribute approximately $7 billion in uncompensated care payments, an increase of $1 billion from FY 2017.  The increase results from the CMS proposal to incorporate data from the its National Health Expenditure Accounts to estimate the change in the rate of uninsurance.  Additionally, in FY 2018, in disbursing uncompensated care funds, CMS will begin to incorporate uncompensated care data from Worksheet S-10 of the Medicare cost report.  CMS proposes to use Worksheet S-10 data from FY 2014 cost reports in combination with insured low income days data from the two preceding cost reporting periods. 

Hospital-Acquired Conditions (HAC) Reduction Program

The HAC Reduction Program, which was established under the ACA, penalizes hospitals performing in the lowest quartile with a 1 percent payment adjustment.  In the Proposed Rule, CMS specifies the time period used to calculate performance for the FY 2020 HAC Reduction Program and updates the Extraordinary Circumstance Exception policy. CMS also requests comments on additional measures for future adoption, that account for social risk factors, and that account for disability and medical complexity in the CDC NHSN measures in Domain 2.

Hospital Readmissions Reduction Program (HRRP)

In FY 2018, CMS proposes a change to the payment adjustment factor in accordance with the 21st Century Cures Act.  In the Proposed Rule, CMS will assess penalties based on a hospital’s performance compared to other hospitals with a comparable proportion of dually eligible Medicare and Medicaid patients.  CMS proposes a methodology for calculating the proportion of dual-eligible patients and assigning hospitals to peer groups, and a payment adjustment formula.  The Proposed Rule specifies the applicable time period for calculating aggregate payment for excess readmission and also updates the Extraordinary Circumstance Exception Policy.

EHR Incentive Programs

For the EHR Incentive Program, CMS has proposed that the reporting period in CY 2017 will be two self-selected quarters. For CY 2018 the reporting period will be the first three quarters of 2018.  For both CYs 2017 and 2018, hospitals must report on at least six Clinical Quality Measures (CQMs).  In CY 2018, for those hospitals only participating in the Medicare EHR Incentive Program, electronic CQM submission will be available for the two months following the close of the year ending on February 28, 2019.  For eligible professionals reporting electronically, CMS proposes to modify the EHR Incentive Program reporting period from a full year to a minimum of a continuous 90-day period during the year.  The Proposed Rule also aligns CQMs with the measures available under the Merit-based Incentive Payment System.

As required by the 21st Century Cures Act, CMS has proposed an exception for providers who do not meet meaningful use requirements because their certified EHR technology has been decertified under ONC’s Health IT Certification Program.  Additionally, CMS proposes that no payment adjustment will be made for professionals who render “substantially all” of their services in an ambulatory surgical center (ASC).  CMS seeks public comment on the following two alternative definitions to determine the final definition regarding ASC services:

• An EP who furnishes 75 percent or more of his or her covered professional services in sites of service identified by the codes used in the HIPAA standard transaction as an ASC setting in the calendar year that is two years before the payment adjustment year; and
• An EP who furnishes 90 percent or more of his or her covered professional services in sites of service identified by the codes used in the HIPAA standard transaction as an ASC setting in the calendar year that is two years before the payment adjustment year.

In the Proposed Rule, CMS also proposes using Place of Service (POS) code 24 to identify services performed in an ASC.  CMS requests comment on whether POS 24 or alternative mechanisms should be used to identify the site of service.

Hospital Inpatient Quality Reporting (IQR) Program

With respect to the IQR Program, which requires hospitals to report data on select measures to receive the full annual percentage increase, CMS is refining two previously adopted measures. First, CMS proposes to re-word the current pain management questions in the Hospital Consumer Assessment of Healthcare Providers and Systems survey to focus on hospital communication with patients regarding the patients’ pain during the hospital stay.  Second, CMS proposes to change the risk adjustment methodology used in the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate following Acute Ischemic Stroke Hospitalization measure to include stroke severity codes.  This change will begin in the 2023 payment determination.

Beginning with the FY 2020 payment determination, CMS proposes to reduce the number of cases required for submission and to include additional exclusion criteria.  CMS also proposes to continue the medical record validation requirement for FY 2021 and subsequent years.  CMS has also asked for public comment on new quality measures to be included in the Hospital IQR Program that account for social risk factors. 

Hospital Value-Based Purchasing (VBP) Program

CMS proposes to update the performance measures in the Hospital VBP program across several performance domains, beginning in 2019.  The agency proposed to remove the Patient Safety for Selected Indicators (PSI 90) safety measure in FY 2019, and will retain all other previously adopted measures for FYs 2019 and 2020. In addition, CMS has proposed new measures for adoption in FY 2022 and beyond, including a new Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for Pneumonia (PN Payment) measure in FY 2022 and a modified version of the previously Patient Safety and Adverse Events Composite measure (NQF #0531) in FY 2023.  CMS will also revise the Efficiency and Cost Reduction domain weighting starting in FY 2021 to account for new condition-specific payment measures such as the AMI Payment and HF Payment measures to be implemented in FY 2021, and the proposed PN Payment discussed above for 2022.

CMS also requests comments on potential social risk factors to be included in the Hospital VBP program and other performance measurement programs, as well as recommendations for the appropriate methods to account for those risk factors and data sources that should be used for measurement. CMS will continue working with the HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) and the National Academies of Science to explore and evaluate feasible methods to consider social risk factors, such as dual eligibility/low-income subsidy, race and ethnicity, and geographic area of residence, in evaluating providers across a spectrum of safety, quality, and performance areas.

PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
The Measure Application Partnership (MAP) component of the National Quality Forum has recommended that integrating end-of-life care considerations is an area of cancer care that could be improved for both patients and caregivers. The MAP reviewed and recommended the proposed measures listed below, which were also supported by the MAP Hospital Workshop for inclusion in PCHQR.  These measures would assess “comprehensive care that addresses medical, emotional, spiritual, and social needs during the last stages of a person’s terminal illness,” including access to palliative care and access to patient and caregiver support services. The proposed end-of-life care measures are:

• Proportion of Patients Who Died from Cancer Receiving Chemotherapy in the Last 14 Days of Life (NQF #0210);
• Proportion of Patients Who Died from Cancer Admitted to the ICU in the Last 30 Days of Life (NQF #0213);
• Proportion of Patients Who Died from Cancer Not Admitted to Hospice (NQF #0215); and
• Proportion of Patients Who Died from Cancer Admitted to Hospice for Less than Three Days (NQF #0216).

CMS also proposes to remove three of the current measures for cancer hospitals, based on the agency’s determination that performance on these measures have “topped out,” i.e., they are so high and unvarying across the provider population that distinctions related to performance cannot be made.  For the measures below, CMS has determined that PCHs have integrated the related clinical standards consistently.

• Adjuvant Chemotherapy is Considered or Administered Within 4 Months (120 Days) of Diagnosis to Patients Under the Age of 80 with AJCC III (Lymph Node Positive) Colon Cancer (PCH-01/NQF #0223);
• Combination Chemotherapy is Considered or Administered Within 4 Months (120 Days) of Diagnosis for Women Under 70 with AJCC T1c, or Stage II or III Hormone Receptor Negative Breast Cancer (PCH-02/NQF #0559); and
• Adjuvant Hormonal Therapy (PCH-03/NQF #0220).

Inpatient Psychiatric Facility Quality Reporting Quality Reporting (IPFQR) Program

CMS proposes to update the IPFQR program with new measures for Medication Continuation following Inpatient Psychiatric Discharge, which is calculated from claims data, in FY 2020.

Beginning with the FY 2019 payment determination, CMS has proposed to update the extraordinary circumstances exception (ECE) for inpatient psychiatric facilities to align with policies for other provider settings.  Specifically, CMS proposes to update this policy by: (1) allowing designated personnel to provide their contact information and sign the ECE request in lieu of the Chief Executive Officer; (2) allowing up to 90 days after the extraordinary circumstance to submit the request; and (3) implementing a 90-day response standard for CMS to respond to ECE requests.  CMS is proposing similar updates across other quality reporting programs in Medicare, including the Hospital IQR, PCHQR, Hospital Acquired Condition Reduction, and Hospital Readmission Reduction programs. 

Other proposed changes to the IPFQR program include changing the data submission period to a 45-day period beginning at least 30 days following the end of the collection period and aligning the Notice of Participation and Notice of Program Withdrawal deadlines with the revised data submission period; and proposing factors to be used for evaluating measure removal, similar to factors used in other quality reporting programs.

Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) Changes

Accompanied with other proposed changes in this rule, CMS projects that LTCH PPS payments would decrease by approximately 3.75 percent, or $173 million in FY 2018, due in large part to the continued phase in of the dual payment rate system.  CMS also signaled that it is evaluating the need for continuing the 25-percent threshold payment policy in light of implementation of new payment methodologies required by MACRA and the 21st Century Cures Act.  In the interim, the agency has proposed a moratorium on the threshold policy for FY 2018.  CMS has also proposed revisions to the short-stay outlier payment adjustment, classification as an LTHC hospital, and previous expansion moratorium, among other applicable policy changes in the 21st Century Cures Act.

Long Term Care Hospital Quality Reporting Program (LTCH QRP)

Under the LTCH QRP, CMS proposes an annual payment reduction of two percentage points if an LTCH does not submit data on specified quality measures.  The agency also proposes to require reporting on standardized patient assessment data for beginning in the FY 2020 program year in five areas: functional status, such as mobility and self-care at admission to a PAC provider and before discharge from a PAC provider; cognitive function, such as ability to express ideas and to understand and mental status, such as depression and dementia; special services, treatments and interventions such as the need for ventilator use, dialysis, chemotherapy, central line placement and total parenteral nutrition; medical conditions and comorbidities such as diabetes, congestive heart failure and pressure ulcers; and impairments, such as incontinence and an impaired ability to hear, see or swallow.  CMS announced its intention to continue evaluating the need for additional standardized patient assessment data in future years.  Related to the standardized patient assessment data, CMS proposed to replace the current pressure ulcer measure with an updated version as well as adopt companion measures related to ventilator weaning, beginning in FY 2020.  The agency has also proposed two measures for removal: Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) and All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from LTCHs.

Finally, CMS proposes to begin publicly reporting quality measures on the LTCH Compare website by fall 2018 for existing measures, and by fall 2020 for new measures; and making procedural updates to the reporting schedule.

Additional Provisions in the FY 2018 IPPS/LTCH Proposed Rule

• CMS has proposed a number of changes to reduce regulatory burden on certain provider settings, including discretionary enforcement of Critical Access Hospital 96-Hour certification reviews, flexibility in requirements for IHS facilities and tribal hospitals within hospitals, and eliminating required newspaper publication of termination notices for Ambulatory Surgical Centers (ASCs), Federally Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs) and Organ Procurement Organizations (OPOs).
• CMS has proposed new policy requirements for national accrediting organizations to post provider/supplier survey reports online, consistent with federal and state government practices of reporting survey findings publicly.
• Finally, CMS has extended the Rural Community Hospital Demonstration for an additional 5-year period, including allowing current participants to request a second extension period and allowing additional facilities to apply for the program, up to the statutory limit of 30 hospitals.  CMS announced its intention to release the application for this extended program to be released in April.