The Centers for Medicare & Medicaid Services late today issued its hospital inpatient prospective payment system proposed rule for fiscal year 2018. The rule would increase rates by 1.6% in FY 2018 compared to FY 2017, after accounting for inflation and other adjustments required by law. The proposed rule includes an initial market-basket update of 2.9% for those hospitals that were meaningful users of electronic health records in FY 2016 and that submit data on quality measures, less a productivity cut of 0.4% and an additional market-basket cut of 0.75%, as mandated by the Affordable Care Act. CMS also proposes an increase of 0.4588% to partially restore cuts made as a result of the American Taxpayer Relief Act of 2012 requirement that the agency recoup what it claims is the effect of documentation and coding changes from FYs 2010-2012, which CMS says do not reflect real changes in case mix. In addition, the agency proposes a cut of 0.6% to remove the one-time, temporary adjustment that it made in FY 2017 to restore the unlawfully instituted two-midnight policy cuts. The rule also includes ACA-mandated Medicare Disproportionate Share Hospital reductions; however, due to CMS’s proposal to use data from its National Health Expenditure Accounts, instead of from the Congressional Budget Office, to estimate the percent change in the rate of uninsurance, overall Medicare DSH payments would increase by about $1 billion in FY 2018 compared to FY 2017. CMS also proposes a three-year transition, beginning in FY 2018, to using Worksheet S-10 data to determine the amounts and distribution of uncompensated care payments. For FY 2018, the agency proposes to modify the EHR reporting periods for new and returning participants attesting to CMS or their state Medicaid agency from the full year to a minimum of any continuous 90-day period during the calendar year. For the FY 2019 Hospital Readmissions Reduction Program, CMS proposes to implement the socioeconomic adjustment approach mandated by the 21st Century Cures Act. The agency would assess readmission penalties based on a hospital’s performance relative to other hospitals with a similar proportions of patients who are dually eligible for Medicare and Medicaid. For the FY 2019 inpatient quality reporting program, CMS proposes to reduce the number of electronic clinical quality measures hospitals must report, and to shorten the data reporting period. The agency also proposes various updates to the measures and scoring approach for the hospital value-based purchasing program, Hospital-Acquired Conditions Reduction Program and the quality reporting programs for inpatient psychiatric facilities and PPS-exempt cancer hospitals. “Today’s rule outlines some promising proposals intended to reduce regulatory barriers for hospitals, health systems and the patients they serve,” said AHA Executive Vice President Tom Nickels. “…[W]e appreciate the agency’s proposal to implement a 90-day meaningful use reporting period in [FY] 2018. In addition, CMS’s proposal to use a more complete data source to determine the overall payment amount for hospitals that care for a disproportionate share of uninsured patients is a good step. Yet we are concerned about some troubling elements within the proposed rule, including CMS’s intent to not restore last year’s excess cut to reimbursement rates for hospital services. While a reduction to the hospital update factor was mandated by law in 2012, CMS ignored Congress’ intent by imposing a cut that was nearly two times what was specified. We will continue to urge the agency to restore the excess cut and help ensure that hospitals have sufficient resources to be able to care for their communities.” Nickels also expressed concern about CMS’ proposals around the use of the Worksheet S-10 data to determine the cost of treating uninsured patients, stating “we are concerned that CMS has proposed to use the ‘Worksheet S-10’ data to determine the cost of treating uninsured patients without taking sufficient action to ensure the accuracy, consistency and completeness of these data prior to their use. We have communicated with the agency on the steps that should be taken to improve the quality of these data and thereby help ensure fair payment for hospitals treating vulnerable communities. We will continue to advocate that the agency adopt these changes, as well as a broad definition of uncompensated care that includes Medicaid shortfalls and discounts to the uninsured.” The proposed rule will be published in the April 28 Federal Register and comments will be accepted through June 13. AHA members will receive a Special Bulletin with further details.