CMS finalizes a 1.2% payment rate update
The table below summarizes the key payment rate adjustments finalized in this year's regulation.
In addition to these adjustments, CMS estimates an $800 million increase in uncompensated care payments. Although that represents about $200 million less than CMS estimated in the proposed rule, it's still a sizable increase from FY 2017. Overall, CMS estimates that Medicare spending on inpatient hospital payments will increase by $2.4 billion in FY 2018.
Final rule's service line volume shifts are less dramatic than proposed
While payment changes in most years include refreshed DRG-specific relative weights and some minor volume shifts, this year's Rule includes much more significant shifts—although the finalized changes are less dramatic than in the proposed rule.
CMS in April proposed to rescind operating room (OR) status for roughly 700 procedure codes, re-designating them as non-OR codes following the transition to ICD-10. As a result, many cases that would have been classified under various surgical service lines were relocated to General Medicine.
According to our analysis, that would have led to a marked in decrease in projected discharge volumes for the Thoracic and General Surgery service lines. Under the final rule, we now estimate similar, albeit less dramatic, effects. We project that overall payments for Medical cases will increase by 2.5%, while surgical payments will drop by 0.3%.
FY 2017 to FY 2018
FY 2017 to FY 2018
We will further examine the specific surgical codes that CMS finalized with OR status in the coming weeks, but a high-level look at volumes by service line in our final rule analysis indicates significantly less outflow from General Surgery and Thoracic Surgery compared with the proposed rule. Our proposed rule analyses saw about 30,000 cases shifting from General Surgery and about 10,000 cases shifting from Thoracic Surgery.
FY 2017 (V34.0) to FY 2018 (V35.0) (MedPAR FY 2016 Volumes)
It appears that public comment played a significant role in CMS's re-examination of many codes originally proposed to lose OR status. Most notably, commenters called for 200 new procedure codes to be reviewed, based on the broad requirement for an OR, sterile technique, and anesthesia. CMS agreed and has re-designated roughly 80 of those procedures with OR status. These re-evaluations have reversed a significant proportion of the projected shift observed in our prior analysis.
CMS finalizes new methodology for hospital readmission penalties
Under the rule, CMS finalized its methodology for implementing socioeconomic adjustment of the Hospital Readmissions Reduction Program, starting in FY 2019. CMS will sort hospitals into five cohorts according to each hospital's proportion of dual-eligible inpatient stays. Within each cohort, hospitals' excess readmission ratio for each of the program's six conditions will be compared to the cohort's median excess readmission ratio for that condition. Those hospitals performing worse than the cohort median will receive a penalty.
As with any budget-neutral change, this methodology shake-up will create winners and losers. CMS notes that the "mean penalty increase for those hospitals seeing an increase is larger than the mean decrease for those hospitals seeing a decrease." In addition, certain groups of hospitals are expected to see swings in their overall penalties.
Join our webconference for additional insights
To learn more about these and other changes in the regulation, make sure to register for our detailed webconference on Thursday, Aug. 24, and watch for more Financial Leadership Council updates as we continue to analyze the final rule.