Inpatient PPS: The Proposed Rule for FY 2021

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Inpatient PPS: The Proposed Rule for FY 2021 Regulatory Advisory


At Issue

The Centers for Medicare & Medicaid Services (CMS) May 11 issued its hospital inpatient prospective payment system (PPS) and long-term care hospital (LTCH) PPS proposed rule for fiscal year (FY) 2021. The rule affects inpatient PPS hospitals, critical access hospitals (CAHs), LTCHs and PPS-exempt cancer hospitals. A summary of the proposals related to inpatient PPS hospitals, CAHs and PPS-exempt cancer hospitals is attached. The AHA issued a separate advisory on the LTCH PPS-related proposals. Comments on the proposed rule are due to CMS by July 10. While the final rule is typically published around Aug. 1, CMS has waived the typical timeline so that it may provide as few as 30 days between the publishing of the FY 2021 final rule and its effective date. Thus, the final rule could be released as late as Sept. 1. The policies and payment rates will still take effect Oct.1.

AHA Take

We are very disappointed that CMS continues down the unlawful path of requiring hospitals to disclose privately negotiated contract terms. The disclosure of privately negotiated rates will not further CMS's goal of paying market rates that reflect the cost of delivering care. Negotiated rates take into account any number of unique circumstances between a private payer and a hospital and simply are not relevant for fixing fee-for-service Medicare reimbursement

What You Can Do

  • Share this advisory with your senior management team and ask your chief financial officer to examine the impact of the proposed payment changes on your Medicare revenue for FY 2021. Hospitals may assess the impact of these provisions on their organizations by using AHA’s calculators on readmissions, value-based purchasing and Medicare DSH:
  • Verify CMS’s table listing the factor used to calculate uncompensated care payments for Medicare DSH hospitals. Hospitals have until July 10 to review this table and notify CMS in writing of any inaccuracies.
  • Verify that you have attested to meaningful use. Attestation status can be determined through CMS’s website.
  • If applicable, apply for low-volume hospital status by written request to your Medicare Administrative Contractor (MAC) by Sept. 1 in order to receive the low-volume adjustment beginning Oct. 1.
  • Share this advisory with your billing, medical records, quality improvement and compliance departments, as well as your clinical leadership team – including the quality improvement committee and infection control officer – to apprise them of the proposals around the diagnosis-related groups and quality measurement requirements.
  • Submit comments to CMS with your specific concerns by July 10 at The final rule may be published as late as Sept. 1 and will take effect Oct. 1.

Further Questions

Please contact Erika Rogan, AHA senior associate director, policy, at 202-626-2963 or if you have further questions.

Inpatient PPS: The Proposed Rule for FY 2021

Table of Contents

  1. Inpatient PPS Payment Update
  2. “Market-based” MS-DRG Data Collection and Weight Calculation
  3. Disproportionate Share Hospital (DSH) Payment Changes
  4. Chimeric Antigen T-Cell (CAR-T) Therapy
  5. New Technology Add-on Payments (NTAPs)
  6. Area Wage Index Modifications
  7. Key Coding and MS-DRG Changes
  8. Post-acute Care Transfer Policy DRGs
  9. Graduate Medical Education (GME)
  10. Rural Provisions
  11. Promoting Interoperability Programs
  12. Hospital Quality Reporting and Value Programs
  13. Next Steps
  14. Further Questions

Key Takeaways

CMS proposes to:

  • Increase inpatient PPS payments by 3.1% in FY 2021.
  • Require hospitals to report the median payer-specific negotiated rates for inpatient services, by Medicare Severity-Diagnosis-related Group (MS-DRG), for Medicare Advantage organizations and third-party payers on the Medicare cost report.
  • Use data from FY 2017 cost reports (Worksheet S-10) to determine the distribution of FY 2021 Disproportionate Share Hospital (DSH) uncompensated care payments.
  • Create a new a MS-DRG for Chimeric Antigen T-Cell (CAR T) therapy.
  • Modify the definition of “displaced resident” for the purpose of transferring Medicare residency slots after a teaching hospital or residency program closes.
  • Continue a reporting period of a minimum of any continuous 90 days for the calendar year (CY) 2021 reporting period for the Promoting Interoperability Programs.
  • Increase the number of quarters of electronic clinical quality measure (eCQM) data and start publicly reporting eCQM data.

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