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Get ready: Hospitals may have to post prices online—plus 9 other takeaways from the 2019 IPPS proposed rule

April 25, 2018

    Late yesterday, CMS released its Inpatient Proposed Rule for Fiscal Year (FY) 2019. Early reactions from stakeholders have been varied, with some health care stakeholders bemoaning "the death of Meaningful Use" while others praised the triumph of "Patients Over Paperwork" and the clear influence such efforts have played in this year's proposals.

    In keeping with stated goals of the current administration, one aspect of the 1,882-page regulation is undeniably clear: CMS is intently focused on reducing administrative burden for providers. While CMS anticipates that its proposals to eliminate some reporting requirements will save hospitals many hours, providers shouldn't assume that the net effects of these proposals will automatically lead to more favorable financial impacts than in the past, especially since some of the proposed changes are to the Pay-for-Performance programs.

    We've presented some initial takeaways below, but be sure to join us for our annual review of the proposal on Tuesday, May 22, at 3 PM ET, where we'll unpack the various proposals in far greater detail.

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    And for a deeper dive into the proposal's impact on Meaningful Use, join us for a separate webconference on Thursday, May 31, at 3:00 PM ET.

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    Our 10 initial takeaways

    1. CMS is doubling down on price transparency

    Echoing statements made earlier this year by Department of Health and Human Services Secretary Alex Azar, the Proposed Rule discusses hospital price transparency at length. The Rule updates CMS guidelines by requiring hospitals to publish a machine-readable, public list of their standard charges via the internet effective January 1, 2019. (Note that, as worded in the legislation, this change in transparency guidelines is not described as a “proposal,” but rather a firm guideline update —so it’s likely that we’ll emerge from the FY 2019 Final Rule with a firm set of requirements for public charge reporting). CMS has also requested comments on how hospitals might be incentivized to report charge or payment rates in the future, and whether penalties should be applied if they avoid doing so. One particularly consumer-focused push sees CMS' request for feedback extending to ideas for improving upfront patient awareness of financial obligation and out-of-pocket costs for medical services.

    2. The Meaningful Use program faces significant overhauls—including a new name

    CMS often releases updates to Meaningful Use (MU) in regulations throughout the year, but this proposal contains a complete overhaul of the program, which incentivizes hospitals to adopt electronic health records (EHRs) and use them effectively. CMS details a series of proposals that would modify the scoring methodology, measure requirements, and the roster of measures. CMS also proposes moving to a performance-based standard in lieu of the prior all-or-nothing-thresholds.

    Perhaps the flashiest modification is CMS' proposal to rebrand "Meaningful Use" as the "Promoting Interoperability" (PI) for eligible hospitals, critical access hospitals, and Medicaid providers. Additionally, CMS proposes to rename the Merit-Based Incentive Payment System's "Advancing Care Information" performance category as the "PI Performance Category." The name change is intended to reflect a new programmatic emphasis on sharing information between providers and with patients.

    Readers interested in getting into the weeds with MU changes should register for Advisory Board's upcoming MU-focused Proposed Rule webconference.

    3. CMS proposed a robust inpatient payment rate increase for FY 2019

    CMS proposes an overall inpatient payment rate increase of +1.75% in FY 2019. The proposed update is the product of a strong market basket increase and fewer downward adjustments than in recent years, as detailed in the table below.

    Under current proposals, inpatient payments would rise by roughly $4B in FY 2019.

    4. The expected increase in the U.S. uninsured rate for 2019 will expand available uncompensated care payments

    As proposed, the total pool of uncompensated care payments would increase by $1.48B in FY 2019 as compared to FY 2018, due to an anticipated increase in the rate of uninsured U.S. residents to 9.6% in 2019 (up from 9.1% this year). This is the second year in a row that available uncompensated care payments will increase substantially: We saw an $800M increase from FY 2017 to FY 2018. However, as occurred last year, not all hospitals will see an equivalent bump in uncompensated care payments:

    5. CMS proposed eliminating duplication of measures across the P4P and IQR programs

    With a new scoring methodology entering the Hospital Acquired Conditions Reduction Program (HAC) this year and a new methodology impacting the Hospital Readmissions Reduction Program (HRRP) in FY 2019, we might have expected CMS to refrain from proposing substantial changes to the P4P programs this year. Not so.

    CMS has proposed a set of fairly sweeping changes to the inpatient quality measure set, including retirement for several that are no longer deemed to be clear indicators of quality, represent duplication across programs, or have costs that outweigh the perceived benefits of reporting. This set of proposals extends to remove measures from two P4P programs as well as the Inpatient Quality Reporting Program, starting in FY 2019.

    6. Look out for a dramatic overhaul of the Hospital Inpatient VBP Program

    CMS has proposed a set of changes that, if finalized, would result in a very different Value-Based Purchasing (VBP) program by 2021. The agency has announced its intentions to eliminate several measures, including a whole domain, from the current program. Three sets of proposed measure removals are worthy of calling out specifically:

    • Elective delivery, which is considered to be "topped-out;"
    • All three 30-day episodic payment measures (AMI, heart failure, and pneumonia), which CMS feels are redundant since VBP also assesses overall Medicare Spend Per Beneficiary (MSPB); and
    • The entire Patient Safety Domain, including the PSI-90 patient safety composite plus five hospital-acquired infection measures, as CMS seeks to eliminate overlap between the VBP and HAC programs.

    If finalized, the removal of the condition-specific episodic payment measures would mean that providers would be assessed only on the single broader efficiency measure (MSPB) under the Cost Efficiency Domain.

    CMS proposes to fill the role of the Patient Safety domain, currently responsible for 25% of a hospital's total VBP performance, by adjusting the weight of the Clinical Quality Domain to 50% of the Total Performance Score. This means that, for a provider reporting every VBP quality measure in FY 2021, each individual measure would carry far greater weight than they do at present: Each clinical outcomes measure would account for 10% of overall performance, and MSPB would continue to account for 25% (as it currently does).

    Interestingly, CMS' preliminary analyses of the proposal indicates that, if finalized, a variety of hospitals would see their performance move closer to the median, including many large, urban, safety-net, and teaching hospitals—all groups that have historically fared poorly in VBP. However the overall number of hospitals receiving a positive payment adjustment would dip from 57% to 45%.

    7. Within HAC, the proposal would eliminate domain distinctions and equally weight all measures—helping some small hospitals

    CMS proposes equally weighting all six measures assessed in HAC, eliminating the distinction between the Patient Safety domain (which sets the PSI-90 composite measure equal to 15% of a hospital's total HAC score) and the Infection Measures domain (which, weighted at 85%, sets each of five hospital-acquired infection measures equal to roughly 17% of a hospital's Total HAC Score). The proposal is intended to ameliorate problems for some low-volume hospitals that are disproportionately assessed on only one or two measures in the weightier Infection Measures domain.

    8. Within IQR, 39 measures are proposed for removal—the largest pruning we've seen in years

    CMS has proposed to eliminate 21 measures assessed in the P4P programs from the IQR to avoid measure overlap. Such a change represents the largest single pruning of quality metrics in recent years. CMS is also proposing to eliminate 18 measures that are deemed to be "topped out" or no longer worth the burden of reporting. CMS also proposes to add two new measures to the IQR: a hospital-wide mortality measure and an electronic clinical quality measure to track opioid adverse events. In the coming days, we will release our updated quality measure tracking sheet that illustrates exactly which measures are expected to stay, and the relevant programs impacted, if the proposal is finalized.

    9. Quality reporting will increasingly incorporate social risk factors

    Despite the flurry of proposals in this year's regulations, CMS is clearly intent on advancing the scope of the IQR in future years. The agency states that it intends to include measure rates for certain measures, stratified by patients' dual eligibility status, in hospitals' confidential feedback reports later this year. This event could be viewed as an important first step toward CMS' goal of exposing disparate outcomes across different patient populations at a given hospital and signals a greater likelihood of further modification to the methodology, and public reporting of stratified quality metrics, in the future.

    10. These changes aren't set in stone, so expect a lively debate between now and June 25

    As always, this is a proposed rule, and a wide range of outcomes can be expected when the Final version is released around August 1, 2018. Nevertheless these proposals represent some keen areas of interest for the agency that should provide for some lively discussions in the coming months. The 60-day comment period will close at 5 PM EDT on June 25, 2018. We encourage you to provide feedback to CMS at

    Stay tuned for additional insights from the Financial Leadership Council, including analyses investigating changes in MS-DRG and service line-level volumes and payments. And make sure to register for our upcoming 90 minute webconference, where we'll explore in detail the contents of this year's Proposed Rule.

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