CMS Releases FY 2019 IPPS and LTCH Final Rules

by King & Spalding

On August 2, 2018, CMS released the final rule for the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) (Final Rule). (A summary of the proposed rule issued in April 2018 is available here).  The Final Rule will affect discharges on or after October 1, 2018.  The Final 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 as part of several programs, and eliminate certain administrative burdens associated with inpatient admissions, graduate medical education (GME) cap sharing, and others.

1. Rate Changes for IPPS and LTCH Prospective Payment Systems

CMS states that the increase in 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 EHR users is approximately 1.85 percent.  This reflects the projected hospital market basket update of 2.9 percent reduced by a 0.8 percentage point productivity adjustment.  This also reflects a 0.5 percentage point adjustment required by legislation, and the 0.75 percentage point reduction to the update required by the Affordable Care Act.

CMS projects that the rate increase, together with other changes to IPPS payment policies, will increase Medicare spending on inpatient hospital services in FY 2019 by approximately $4.8 billion, including an increase in new technology add-on payments of $0.2 billion.  Other additional payment adjustments will include continued penalties for excess readmissions, a continued 1 percent penalty for hospitals in the worst performing quartile under the Hospital Acquired Condition (HAC) Reduction Program, and continued upward and downward adjustments under the Hospital Value-Based Purchasing (VBP) Program.

2. Burden Reduction

In the Final Rule, CMS aims to reduce the burden borne by hospitals, through efforts which are anticipated to “reduce the number of hours hospitals spend on paperwork by well over 2 million hours.”  Specifically, CMS is taking the following actions:

  • Removing the requirement that physician certification statements detail where in the medical record required information can be found; 
  • Reducing the number of denied claims for clerical errors in documenting physician admission orders by removing the requirement that a written inpatient admission order be present in the medical record as a specific condition of Medicare Part A payment;
  • Providing more flexibility for new urban teaching hospitals to enter into Medicare GME affiliation agreements, which allows hospitals to share full-time equivalent cap slots to accommodate the cross training of residents;
  • Reducing 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 labor market area for the purpose of meeting an exemption from certain wage index geographic reclassification requirements beginning with applications for reclassification for FY 2021;
  • Revising regulations to allow certain hospitals that 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); and
  • Revising regulations to allow that an IPPS-excluded satellite of an IPPS-excluded unit of an IPPS-excluded hospital will not have to comply with the separateness and control requirements so long as the satellite of the unit is not co-located with an IPPS hospital.

3. Price Transparency

In the Final Rule, CMS requires hospitals to 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 Affordable Care Act (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.  Effective CY 2019, CMS will require hospitals to make public a list of their standard charges (a “chargemaster”) via the internet in a machine readable format and to update this information at least annually, or more often as appropriate.

This new change is being implemented 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.  These transparency requirements were met with comments, both in favor of and against the change.  Some commenters stated that the information contained in the chargemaster would not be useful to patients and would only increase confusion, as it would not inform them of their out-of-pocket costs for a particular service.  Others were concerned that transparency requirements would undermine competition.  In response, CMS noted that it does not require that any information be published in a payer-specific manner and that hospitals should and can provide information on “shoppable” healthcare services that can typically be scheduled in advance.  CMS noted that nothing in its guidelines precludes a hospital from providing this information to patients and the public.  CMS agreed with commenters that CMS should continue to work with stakeholders to determine the best approach to making price transparency information available to consumers, and it intends to do so.  Other commenters expressed concern that patients may forgo needed care if they are informed of the charges in advance.  CMS believes that if that information is placed in the proper context by hospitals, this will not be a concern.

4. Medicare Uncompensated Care Payments

Under the Final Rule, CMS updates its estimates of the three factors used to determine uncompensated care payments for FY 2019.  CMS will continue to use uninsured estimates produced by CMS’s Office of the Actuary as part of the development of the National Health Expenditure Accounts in the calculation of Factor 2.

Additionally, CMS will 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.

CMS projects that the amount available to distribute as payments for uncompensated care for FY 2019 will increase by approximately $1.5 billion, as compared to the estimate of overall payments, including Medicare DSH payments and uncompensated care payments, that will be distributed in FY 2018.

As discussed in the proposed rule, since the publication of the FY 2018 IPPS/LTCH PPS Final Rule, CMS has continued to monitor the reporting of Worksheet S-10 data from hospitals’ FY 2014 and FY 2015 cost reports in the calculation of Factor 3.  In the Final Rule, CMS acknowledges the concerns that have been raised regarding the instructions for Worksheet S-10.  In particular, commenters expressed concerns that the lack of clear and concise line level instructions prevents accurate and consistent data from being reported on Worksheet S-10.  In the proposed rule, CMS stated that it could no longer conclude that alternative data to the Worksheet S-10 are available for FY 2014 and FY 2015 that are a better proxy for the costs of subsection (d) hospitals for treating individuals who are uninsured.  In the Final Rule, CMS states that its reviews of selected FY 2014 and FY 2015 data and the potential data aberrances pointed out by commenters have not altered that conclusion.  CMS notes that it will consider commenters’ suggestions for further incorporating Worksheet S-10 into the calculation of Factor 3, or computing proxies for uncompensated care costs using a blend of Worksheet S-10 data, low-income insured days, or other data sources, as it develops its proposed policies for determining uncompensated care payments for FY 2020.

5. Promoting Interoperability Program or “Meaningful Use”

The Final Rule overhauls the Medicare and Medicaid EHR Incentive Programs, which are commonly known as the “Meaningful Use” program.  (CMS has announced it is changing the name of the program to the “Promoting Interoperability Program.”)  In the Final Rule, CMS re-emphasized that providers are required to use the 2015 Edition of the Certified EHR technology (CEHRT) next year in order to qualify for incentive payments and avoid cuts to Medicare payments.  The technology uses application programming interfaces (APIs) with the goal of improving the flow of information between providers and patients.  CMS states that this will enable patients to collect their health information from multiple providers and incorporate it into an app. Then patients can share the information with multiple providers in order to reduce duplications and share information more efficiently.

In addition, the Final Rule includes changes to the 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.  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. 

CMS is not finalizing its proposals to remove the following six patient safety measures until CY 2020, one year later than proposed in the Proposed Rule.  These measures are: (1) National Healthcare Safety Network (NHSN) Catheter-Associated Urinary Tract Infection Outcome Measure (NGF #0138); (2) NHSN Central Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF # 0139); (3) American College of Surgeons –Centers for Disease Control and Prevention Harmonized Procedure Specific Surgical Site Infection Outcome Measure (NQF #0753); (4) NHSN Facility-wide Inpatient Hospital-onset MRSA outcome Measure (NQF #1716); (5) NHSN Facility-wide Inpatient Hospital-onset CDI Outcome Measure (NQF # 1717); (6) Patient Safety and Adverse Events (Composite) (NQF #0531). 

6. Meaningful Measures

The Final Rule reduces the total number of measures acute care hospitals are required to report across the four quality and value-based purchasing programs—IQR, VBP, HAC Reduction, and Hospital Readmissions Reduction (HRRP) Programs.  Overall, the Final Rule eliminates a significant number of measures hospitals are required to report and “de-duplicates” measures across hospital quality programs, while maintaining measures the importance of which stakeholders have emphasized.  Specifically, the Final Rule removes a total of 18 measures from CMS quality programs and will de-duplicate another 25 measures.

    • Hospital IQR Program

The Final Rule reduces certain measures for the Hospital IQR Program.  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.”  CMS states that it intends to apply this measure removal factor on a case-by-case basis “because the costs and benefits associated with each measure are unique to that measure.”

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

    • Hospital VBP Program

In the Final Rule, CMS finalizes its proposal 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 revises the program’s domain weighting beginning FY 2021 by increasing the weight of the Clinical Care domain in calculating hospitals’ total performance scores.

    • HAC Reduction Program and the HRRP

For the HAC Reduction Program and the HRRP, the FY 2019 measures will remain the same. However, for the HAC Reduction Program, CMS is updating measure weighting to simplify its methodology and address concerns raised by small hospitals.  For the HRRP, CMS is implementing 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 Final Rule, CMS adopts one new claims-based hospital 30-day unplanned readmission outcome measure beginning with the FY 2021 program year and removes 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.

7. New Technologies: CAR T-Cell Therapy and Others

After consideration of public comments on the proposed rule, in the Final Rule CMS approves a new technology add-on payment for FY 2019 for 10 of the 11 applications discussed in the proposed rule in which the technology received FDA approval by July 1, 2018.  Included among the 10 approved applications for new technology add-on payments for FY 2019 are applications for Chimeric Antigen Receptor (CAR) T-cell therapy.  Separately, for FY 2019, CMS finalizes its proposal to assign CAR T-cell therapy to a MS-DRG and rename this MS-DRG “Autologous Bone Marrow Transplant with CC/MCC or T-cell immunotherapy.”

8. Wage Index

The Final Rule updates geographic payment adjustments for IPPS hospitals.  By allowing the imputed wage index floor to expire for all-urban states, CMS states that it has begun the process of attempting to make geographic payments more equitable.

9. LTCH PPS Changes

In the Final Rule, CMS updates the LTCH PPS standard federal payment rate by 1.35 percent.  This is the payment rate is applicable to LTCH patients that meet certain clinical criteria under the dual rate LTCH PPS payment system required by the Pathway for SGR Reform Act of 2013.  Overall, under the changes included in the Final Rule, CMS projects that LTCH PPS payments will increase by approximately 0.9 percent, or $39 million, in FY 2019.

In the Final Rule, CMS finalizes its proposal to eliminate the 25 percent threshold policy in a budget neutral manner.  To do so, CMS adopted a budget neutrality adjustment.

10. Long Term Care Hospital Quality Reporting Program (LTCH QRP)

In the Final 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 removing three measures which either have significant operational challenges with reporting or are duplicative of other measures.  CMS notes that it will continue to work with stakeholders on these operational challenges and may consider these three measures for future use “if they can be reported with lower burden.”

A copy of the Final Rule is available in its entirety here.  CMS’ press releases on the release of the Final Rule can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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