The Centers for Medicare & Medicaid Services late today issued its hospital inpatient prospective payment system final rule for fiscal year 2018. The rule will increase rates by 1.2% in FY 2018, after accounting for inflation and other adjustments required by law. The rule includes an initial market-basket update of 2.7% for hospitals that were meaningful users of electronic health records in FY 2016 and that submit data on quality measures, less a productivity cut of 0.6% and an additional market-basket cut of 0.75%, as mandated by the Affordable Care Act. CMS also finalizes 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 finalizes a cut of 0.6% to remove the one-time, temporary adjustment that it made in FY 2017 to restore unlawfully instituted two-midnight policy cuts. The rule also includes ACA-mandated Medicare Disproportionate Share Hospital adjustments that reflect changes in the rate of uninsurance and CMS’s finalized proposal to incorporate data from its National Health Expenditure Accounts into these estimates. As a result, Medicare DSH uncompensated care payments in FY 2018 will increase approximately $800 million from the FY 2017 amount. CMS also finalizes a three-year transition, beginning in FY 2018, to using Worksheet S-10 data to determine the amounts and distribution of uncompensated care payments. In response to concerns from AHA and the field, CMS indicated that it will continue to work with stakeholders to address issues related to the accuracy and consistency of the S-10 data through provider education and refinement of the instructions for the Worksheet S-10. Additionally, CMS will be providing hospitals with an opportunity to resubmit certain Worksheet S-10 data to their Medicare Administrative Contractors by Sept. 30, 2017. For the FY 2019 Hospital Readmissions Reduction Program, CMS finalizes the socioeconomic adjustment approach mandated by the 21st Century Cures Act. CMS will 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. The agency also adopts a number of updates to the measures and scoring approaches 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. For 2018, CMS finalized modifications to the EHR Incentive Program. Hospitals and critical access hospitals will have the option to report modified stage 2 for the 2018 reporting period. CMS also finalized a reduction in the 2018 EHR reporting period from the full year to a minimum of any continuous 90-day period during the calendar year. Additionally, CMS finalized a reduction in the electronic clinical quality measure reporting requirement for the 2017 Hospital Inpatient Quality Reporting program. Hospitals will be required to report on at least four self-selected eCQMs for a reporting period of one self-selected quarter of CQM data in CY 2017. CMS also modified its proposals related to the Rural Community Demonstration Program so that hospitals already participating in the program will receive their reasonable cost payments continuously without a gap in payments. “Today, CMS finalized a rule that could impact hospitals’ ability to provide services for patients who rely on them for their care,” said AHA Executive Vice President Tom Nickels. “Specifically, we continue to have concerns over the accuracy and consistency of the ‘Worksheet S-10’ data that CMS will use to determine the cost of treating uninsured patients. We had urged the agency to delay its use in calculating DSH payments by one year to further educate hospitals about how to accurately and consistently complete the S-10, and also implement a stop-loss policy and audit process. We are disappointed CMS chose to implement its use for FY 2018 and without these additional protections for hospitals. We will continue to communicate with the agency on the steps that should be taken to improve the quality of these data, which would ensure fair payment for hospitals treating vulnerable communities. We are also disappointed that CMS has decided not to 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 Congress specified…[W]e appreciate the agency allowing hospitals and critical access hospitals to report meaningful use modified Stage 2 in 2018, as well as implementation of a 90-day meaningful use reporting period in fiscal year 2018.” The final rule will be published in the Aug. 14 Federal Register. AHA members will receive a Special Bulletin with further details.