On April 24, 2018, CMS issued the annual Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Prospective Payment System (PPS) Proposed Rule for FY 2019 (the Proposed Rule) which will affect discharges on or after October 1, 2018.  CMS estimates that IPPS operating payments will increase by 1.75 percent and spending will increase by $4 billion in FY 2019.  The Proposed Rule also includes disproportionate share hospital (DSH) payment adjustments, and introduces new rules intended to promote price transparency, encourage greater interoperability of electronic health record (EHR) systems, reduce the number of quality measures hospitals are required to report across a number of programs, and eliminate certain administrative burdens associated with inpatient admissions, graduate medical education (GME) cap sharing, and others.

Rate Changes for IPPS and LTCH Prospective Payment Systems

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 users of certified EHR technology (CEHRT), CMS proposes an increase in operating payment rates of 1.75 percent.  The 1.75 percent increase reflects a market basket update of 2.8 percent, minus a 0.8 percent productivity reduction, minus 0.75 percent in accordance with the Affordable Care Act (ACA), plus a 0.5 percent increase as required by the 21st Century Cures Act.  CMS projects that the 1.75 percent rate increase, combined with proposed changes to IPPS payment policies and proposed changes in uncompensated care payments, capital payments, and low-volume hospital payments, will increase overall IPPS payment rates by 3.4 percent.  Other payment adjustments will continue, including the one 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.

CMS projects that its proposed changes to LTCH PPS rates will result in LTCH PPS payments decreasing by approximately 0.1 percent, or $5 million, in FY 2019.  CMS is also proposing to eliminate the 25-percent threshold policy, which generally provides for a payment adjustment when the number of patients originating from a single referring hospital exceeds a 25-percent threshold.  CMS proposes that the elimination will be made in a budget-neutral manner by adjusting the LTCH PPS standard Federal payment rate by 0.9 percent.

Uncompensated Care Payments and Worksheet S-10

In FY 2019, CMS proposes to distribute approximately $8.25 billion in uncompensated care payments, an increase of $1.5 billion from FY 2018.  The increase results from an estimate by the CMS Office of the Actuary of payments that otherwise would be made for DSH, as well as an updated estimate of the number of uninsured individuals.

Additionally, CMS proposes to continue incorporating uncompensated care data from Worksheet S-10 of the Medicare cost report for FY 2019, and plans to use S-10 data from the FY 2014 and FY 2015 cost reports.  It is worth noting that CMS has a policy of disregarding or “trimming” aberrant S-10 data.  In 2017, CMS provided hospitals an opportunity to resubmit S-10 data for FY 2014 and FY 2015 (likely due to lack of clarity in the instructions for completing the forms). The Proposed Rule states that CMS will consider data “aberrant” for any hospital with significant increases in uncompensated care reflected in its resubmitted S-10 data for FY 2014 and FY 2015.  CMS will exclude this data and use alternative data, most likely from FY 2016. There is a risk that certain data may be improperly excluded.  Many hospitals were more conservative when following the old instructions and may have significantly understated their uncompensated care numbers as a result.

Although not formally proposed, CMS has said that for FY 2020 it will consider discontinuing its policy of using three years of data for calculating uncompensated care payments, meaning that for FY 2020, CMS might only use 2016 S-10 data to calculate Factor 3.  This could be significant because CMS issued revised S-10 instructions in September 2017 after many hospitals had already submitted their FY 2016 cost reports.  CMS has not given hospitals an opportunity to amend their FY 2016 cost reports, so these cost reports could misstate uncompensated care if they were prepared using the old instructions.

EHR Interoperability and Meaningful Use Reporting

CMS proposes to overhaul the Medicare and Medicaid EHR Incentive Programs, which are commonly known as the “Meaningful Use” program.  (Indeed, CMS has announced it is changing the name of the program to the “Promoting Interoperability Program.”)  CMS notes that, despite widespread adoption of CEHRT among Medicare and Medicaid participating hospitals under the Promoting Interoperability Program, the usefulness of this new technology is diminished by obstacles to exchanging information across various EHR platforms.  CMS’s goal is to improve interoperability so that different EHR platforms can communicate with each other, similar to the way that an iPhone can communicate with cellular phones using other platforms such as Android.  CMS is requesting information from the public regarding ideas to promote and enhance interoperability.

In addition, the Proposed Rule includes changes to Promoting Interoperability Program requirements, including a proposal to revamp the program scoring method from a threshold-based method to a performance method that takes into account scoring on a reduced number of measures in four specific categories:  (i) e-Prescribing, (ii) Health Information Exchange, (iii) Provider to Patient Exchange, and (iv) Public Health and Clinical Data Exchange.  The overall number of required measures would be reduced from 16 to 6, with weighted scores based on CMS’s view of their importance.  Providers will receive an aggregate score based on performance of those measures, with only certain registry-exchange measures remaining a “yes/no” attestation.  Providers that score more than 50 combined points on their measures would be considered meaningful users.  Providers will select “a minimum of any continuous 90-day period within each of the CYs 2019 and 2020” and all eligible providers will use the 2015 Edition of CEHRT.  Though some providers expressed concern that adopting the 2015 Edition is costly, CMS believes that continuing to permit older editions among providers increases system fragmentation and undermines interoperability.     

Transparency

In the Proposed Rule, CMS proposes a change to make hospitals establish and make public a list of their standard charges specifically via the Internet.  According to CMS, this is an “effort to encourage price transparency by improving public accessibility of charge information.”  Previously, in section 2718(e) of the Public Health Service Act, as added by the ACA, each hospital was required to make public a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.  The original requirement did not specify the format that the process had to take, and CMS originally permitted hospitals to post only their policy for making their charges available for review.  This new change is being proposed because CMS deemed that “challenges continue to exist for patients due to insufficient price transparency,” including surprise out-of-network bills such as those from anesthesiologists and radiologists.  The proposed change sets forth guidelines that require hospitals to make available a list of their current standard charges via the Internet “in a machine readable format” and to update this information at least annually, or more often as appropriate. 

CMS is also seeking input from stakeholders regarding additional requirements applicable to this process.  For instance, CMS asks whether to define “standard charges” to mean average or median rates for items in the chargemaster, average or median rates for items and services typically grouped/billed together, average discounts off of the chargemaster for all payors, or simply requiring only the posting of chargemaster prices.

Meaningful Measures

In the Proposed Rule, CMS is proposing to reduce the number of measures acute care hospitals are required to report.  CMS removed measures if they were “duplicative,” “topped out” (meaning that the overwhelming majority of providers are performing highly on them), or excessively burdensome to report.  In total, the proposals will remove 19 measures from the quality programs and will de-duplicate another 21 measures, while adopting one claims-based readmissions measure.  The reasons given for removal of the measures were that they are duplicative, do not result in better patient outcomes, their cost outweighs the benefit of the measure’s continued use, the measure data are captured under a more broadly applicable measure, or measure performance is “topped-out.”

Hospital Inpatient Quality Reporting (IQR) Program

CMS proposes to reduce certain measures for the Hospital Inpatient Quality Reporting (IQR) Program, while retaining the same measures in the Hospital Value-Based Purchasing, Hospital Readmissions Reduction, and Hospital-Acquired Condition Reduction Programs.  In this area, CMS is removing 18 previously adopted measures and de-duplicating 21 measures to simplify and streamline measures.  CMS is adopting one additional factor to consider when evaluating measures for removal from the Hospital IQR Program, which is whether the “cost associated with a measure outweighs the benefit of its continued use in the program.” 

In addition, to align with the Medicare and Medicaid EHR Incentive Programs, CMS is proposing two changes in relation to the reporting of electronic clinical quality measures (eCQMs) in the Hospital IQR Program.

Hospital Value-Based Purchasing (VBP) Program

CMS also proposes to reduce measures in the VBP Program for FY 2019 by de-duplicating 10 measures, all of which are included in the Hospital IQR and/or HAC Reduction Program measure sets.  CMS is also removing three condition-specific payment measures from the Efficiency and Cost Reduction domain, and revised the program’s domain weighting beginning FY 2021 by increasing the weight of the Clinical Care domain in calculating hospitals’ total performance scores.

Hospital-Acquired Conditions (HAC) Reduction Program and the Hospital Readmissions Reduction Program (HRRP)

For the HAC Reduction Program and the HRRP, the FY 2019 measures would remain the same. However, for the HAC Reduction Program, CMS is proposing to update measure weighting to simplify its methodology and address concerns raised by small hospitals.  For the HRRP, CMS is proposing several updates to clarify definitions needed to implement statutory requirements of the 21st Century Cures Act.

PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

In the Proposed Rule, CMS is proposing to adopt one new claims-based hospital 30 day unplanned readmission outcome measure beginning with the FY 2021 program year, and remove six previously adopted measures because most hospitals either “topped-out” or the burden associated with the measures outweighed the benefit of their continued use in the program.

Long Term Care Hospital Quality Reporting Program (LTCH QRP)

In the Proposed Rule, the applicable annual update to the LTCH PPS standard Federal rate for discharges applicable to an LTCH is reduced by two percentage points “if the LTCH does not submit to CMS data in accordance with the requirements of the LTCH QRP.”  In addition, for the FY 2019 LTCH QRP, CMS is proposing to remove three measures which either have significant operational challenges with reporting or are duplicative of other measures.

Burden Reduction

In the Proposed Rule, CMS proposes to reduce the burden borne by hospitals, which would “reduce the number of hours hospitals spend on paperwork by well over 2 million hours.”  Specifically the burden reduction measures include the following:

• A proposal to remove the requirement that physician certification statements detail where in the medical record required information can be found.  CMS notes that claims are routinely denied under this previous requirement “even in situations where the location of the information within a paper medical record is readily apparent to the reviewer.”  CMS asserts that the impact on the skilled nursing facility setting is significant, which would reduce denials for this reason by 1.4 percentage points.

• A proposal to remove “the requirement that written inpatient admission orders are a specific requirement for Medicare Part A payment.”  CMS is clear that the proposal does not change the policy that an individual is considered an inpatient if formally admitted as an inpatient under an order for inpatient admission, but recognizes that “technical discrepancies with the documentation of inpatient admission orders” have led to the denial of otherwise medically necessary inpatient admissions.  CMS stated that “[t]o reduce this unnecessary administrative burden on physicians and providers, we are no longer requiring that the specific documentation requirements of inpatient admission orders be present in the medical record as a condition of Medicare Part A payment.”

• A proposal to update Graduate Medical Education (GME) affiliation to offer more flexibility for new urban teaching hospitals to enter into such affiliation agreements, where such agreements allow “hospitals to share full‑time equivalent cap slots to accommodate the cross training of residents” by forming a “Medicare GME affiliated group.”

• A proposal to “reduce documentation requirements by allowing hospitals to use average hourly wage data from the current year’s IPPS final rule that is available on the CMS website to demonstrate they are the only hospital in their Metropolitan Statistical Area for the purpose of meeting an exemption from certain wage index geographic reclassification requirements beginning in FY 2021.” 

• A proposal to “allow certain hospitals which are excluded from the IPPS (for example, LTCHs) to operate IPPS-excluded units (so long as such an arrangement would be allowed under the applicable hospital conditions of participation).”  CMS stated that the agency believes such change would be consistent with the revisions to CMS’s hospital-within-a-hospital policy that were finalized in the FY 2018 IPPS/LTCH PPS final rule and the proposed changes to the satellite regulation discussed in the Proposed Rule.  CMS stated that it does “not expect any significant payment impact as a result of either of these proposed policies because these policies are primarily administrative in nature and are not expected to result in additional Medicare expenditures that would have been made, regardless of our changes, because IPPS hospital co-location is already allowed under existing regulations.”

• A proposal to allow an IPPS-excluded satellite to not be required to comply with certain separateness and control requirements so long as the satellite is not co-located with an IPPS hospital.  CMS stated its belief that “there is no compelling policy rational[e] for treating satellite facilities and [hospitals-within-hospitals] HwHs differently on the issue of separateness and control because there is no meaningful distinction between these types of facilities that would justify a satellite facility having to comply with separateness and control requirements in a situation in which an HwH would not be required to comply.…”

New Technologies: CAR T-Cell Therapy and Others

The Proposed Rule also includes an analysis of the FY 2019 applicants for add-on payments for new high-cost medical services and other technologies.  The Proposed Rule covers a total of 15 applications for services and technologies.  One notable technology is Chimeric Antigen Receptor (CAR) T-cell therapy, which is an emerging form of cancer treatment.  CMS is seeking comments on a proposal to move CAR T-cell therapy to a higher-weighted MS-DRG classification.