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CMS just finalized the 2,610-page IPPS rule. Here are our 5 early takeaways.

August 3, 2018

    Yesterday, CMS released its Inpatient Final Rule for Fiscal Year (FY) 2019. The Rule is a staggering 2,610 pages and, for those who tuned in to the Proposed Rule, contains very few surprises, since many of CMS' changes were finalized as proposed. There's some good news for hospitals: FY 2019 marks the largest update in years, with payments under the IPPS expected to increase by $4.8B in FY 2019.

    Editor's note: This story was updated on August 7, 2018.

    The changes finalized in this regulation will go into effect on Oct. 1, 2018. We've highlighted our five key takeaways from the Rule below, but be sure to join us for our annual review of the Rule on Thursday, August 16 at 1 PM ET, where we'll unpack the updates in far greater detail.

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    For a deeper dive into the Rule's impact on the Promoting Interoperability program (formerly Meaningful Use), join us for a separate webconference on Thursday, August 30, at 1 PM ET.

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    Our 5 takeaways from the Rule

    1. CMS is taking strides toward price transparency in January 2019, with bigger moves to come

    CMS' price transparency discussion was perhaps the most newsworthy topic in this past April's IPPS Proposed Rule. To the surprise of hospitals everywhere, CMS used that Rule to unveil new charge reporting requirements. Specifically, CMS announced that effective Jan. 1 2019, hospitals are required to publish machine-readable, public lists of their standard charges via the internet.

    In response to the change, CMS received several comments asking the agency to amend or clarify the new requirement. CMS in the final rule did not change its proposal but clarified that the list of charges can be drawn directly from a hospital's chargemaster, and that the charges do not have to be reported in a payer-identifiable manner. The IPPS Final Rule also contains numerous public requests for further details about the new price transparency requirement.

    Not surprisingly, several commenters argued that reporting charges for services—which can differ considerably from actual insurer payments or patient obligations—will be unhelpful or misleading for patients. CMS replied that providers are welcome to provide more context for patients: "Making charge information more easily accessible to patients and the public does not preclude hospitals from taking additional steps or continuing to provide the information they currently provide."

    The intent in CMS' response is clear: the agency aims to spur providers more meaningfully into useful price transparency efforts by setting a common baseline. This relatively limited requirement to post charges is merely a first step.

    2. Projected increase in uninsured rate after ACA individual mandate repeal will expand available uncompensated care payments by $1.5B

    The total pool of uncompensated care payments is projected to increase by $1.5B in FY 2019 as compared to FY 2018. The payment increase can be largely attributed to an anticipated increase in the rate of uninsured U.S. residents following the repeal of the Affordable Care Act's individual mandate penalty. This is the second year in a row that available uncompensated care payments will increase substantially, although this year's increase is nearly twice as large as the FY 2018 increase. Providers should note that not all DSH-eligible hospitals will see an equivalent bump in uncompensated care payments. Payment increases will play out differently across hospital types and regions:

    3. FY 2019 rate increase is the largest in years

    The FY 2019 inpatient payment rate increase will be even larger than what CMS initially proposed: inpatient payment rates are expected to increase by 1.85% in FY 2019, thanks to a healthy market basket update.

    Hospitals will be pleased to hear that FY 2019 marks the last year of the ACA-mandated 0.75% cut, which has depressed inpatient rates significantly for the past several fiscal years.

    4. CMS updates VBP measure set and HAC program scoring

    FY 2019 has shaped up to be a big year for Pay-for-Performance: it marks the first year of scoring based on the Hospital Readmissions Reduction Program's (HRRP) new methodology, which adjusts for a hospital's proportion of low-income inpatient stays. In addition, CMS has finalized changes to the measure set of the Value-Based Purchasing Program and the scoring methodology of the Hospital-Acquired Conditions programs starting in FY 2021.

    In departure from past years, final FY 2019 HRRP results have not yet been released. A note to providers who rely on Advisory Board's Hospital Readmissions Reduction Program Modeler: CMS did not release final FY 2019 HRRP results alongside this year's Final Rule. Instead, CMS is providing time for providers to review their results before this information is made public. We recommend that hospitals check their QualityNet account for more information ahead of the results' formal release.

    CMS caves to public pressure; retains patient safety domain of VBP program. CMS in the Final Rule changed course on its proposal to "de-duplicate" measures between the VBP and HAC programs following stakeholder comments that overwhelmingly supported the measures’ continued inclusion. Those removals would have reweighted the program's remaining measures, resulting in an increase in the number of hospitals penalized under the program. 

    Moving forward, CMS will retain the five hospital-acquired infection measures and PSI-90 measure in VBP.

    CMS has finalized the removal of four measures from VBP, effective for FY 2021:

    • 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
    • Elective delivery, which is considered to be "topped-out."

    The removal of the three condition-specific episodic payment measures from the program means that for the foreseeable future, 25% of a provider's VBP score will continue to be based upon a single cost efficiency measure: (MSPB).

    HAC scoring change for FY 2020: all measures will be equally weighted. CMS finalized its proposal to remove the HAC program's domain structure effective FY 2020, instead of calculating the HAC score based upon an equal weighting of all measures that a hospital reports. The methodology change is intended to make scoring more fair for a sizeable minority of low-volume hospitals that are currently disproportionately assessed on only one or two measures in the weightier Infection Measures domain.

    5. CMS trims roster of measures assessed through Inpatient Quality Reporting Program (IQR)

    Beginning in FY 2020, CMS will eliminate the 21 measures assessed through P4P programs from the IQR, along with an additional 18 measures deemed to be "topped out" or no longer worth the burden of reporting.

    Check the webpage for our upcoming webconference in the coming days to download Advisory Board's updated Inpatient Quality Reporting Tracker, which will illustrate which measures are leaving the program and in which years. We'll also provide an analysis investigating changes in MS-DRG and service line-level volumes and payments. Finally, make sure to register for our upcoming webconference, where we'll explore how hospitals will be impacted in FY 2019.

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