The Centers for Medicare & Medicaid Services late today issued its long-term care hospital prospective payment system proposed rule for fiscal year 2017. The rule proposes a 2.7% market-basket update, a 0.5% cut for productivity and an additional 0.75% cut as mandated by the Affordable Care Act. The rule also notes that FY 2017 will be the second year of the two-year transition to a dual-rate payment system for LTCHs, which was mandated under the Bipartisan Budget Act of 2013 and represents a transformative change for the field. During this phase-in, site-neutral cases are paid a 50/50 blend of the LTCH PPS and site-neutral rates. The proposed rule would increase traditional LTCH PPS rates by a net of 0.3%, while CMS projects that net payments for site-neutral cases would drop by 21%. When accounting for all the rule’s provisions, LTCH payments are estimated to decrease by 6.9% compared to FY 2016 payment levels. CMS is also proposing to replace the current 25% Rule guidelines with a streamlined version, for implementation when the current 25% Rule relief expires in 2017. The rule also would add four new measures for the LTCH Quality Reporting Program to meet the requirements of the Improving Medicare Post-Acute Care Transformation Act. For the FY 2018 LTCH Quality Reporting Program, CMS proposes to add measures for Medicare spending per beneficiary, discharge to community and potentially-preventable 30-day post-discharge readmissions. For the FY 2020 LTCH QRP, CMS proposes a drug regimen review measure. The proposed rule will be published in the April 27 Federal Register and comments will be accepted through June 16. AHA staff are reviewing the rule, and members will receive more information.