CMS releases FY 2018 inpatient PPS final rule

The Centers for Medicare & Medicaid Services yesterday issued final fiscal year 2018 rules for the hospital inpatient prospective payment system and long-term care hospital PPS.

The inpatient PPS final rule will increase rates by 1.2%. The update accounts for inflation and other adjustments required by law. The LTCH PPS final rule will decrease rates by 1%, or $110 million, based on the changes included in the final rule.  


Inpatient PPS rule. 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 2012 American Taxpayer Relief Act 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.

Among other provisions, 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.

“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. “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.”

The AHA 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,” said Nickels, adding that the AHA “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.”

On other issues, the AHA laso expressed disappointment in the agency’s decision 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,” the AHA’s Nickels observed.

He said the association appreciates CMS 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.


LTCH PPS final rule. In its final rule, CMS finalized a regulatory moratorium on the 25% Rule during FY 2018 so it can evaluate whether the policy is still needed; this proposal is estimated to increase payments by $70 million.

“We are pleased that CMS has decided to place a moratorium on the implementation of the 25% Rule for LTCHs to allow time to determine if the policy is still necessary,” said Nickels.

In addition, CMS finalized as proposed a new short-stay outlier policy that pays a graduated per diem rate, blending the inpatient PPS and LTCH amounts, which is intended to remove the financial incentive to delay discharge. The agency also finalized, with slight modifications, its proposal to narrow the "separateness and control" requirements so that they apply only to IPPS-excluded hospitals that are co-located with IPPS hospitals.

The rule finalizes a number of changes to the FY 2020 LTCH Quality Reporting Program, including the addition of measures assessing pressure ulcer changes, compliance with a spontaneous breathing trial, and ventilator liberation rates, for which agencies will begin reporting data on July 1, 2018. CMS will remove an existing pressure ulcer measure, and a measure assessing all-cause readmissions within 30 days of LTCH discharge.

Among other provisions, CMS substantially scaled back its proposal to require LTCHs to collect certain standardized patient assessment data beginning with LTCH admissions on or after April 1, 2018.

Changes will be effective Oct. 1. AHA members will receive a Special Bulletin with further details.


Inpatient psychiatric facilities. In other regulatory action, CMS yesterday issued a notice updating the payment rates for inpatient psychiatric facilities for fiscal year 2018. CMS makes a net payment increase of 0.99%, or $45 million, compared to FY 2017. This includes a 2.6% market-basket update, offset by cuts of 0.6% for productivity and a further ACA-mandated cut of 0.75%, as well as a decrease of 0.26% for high-cost outlier cases.

CMS also completes its transition to the most recent labor market areas issued by the Office of Management and Budget. Specifically, when implementing these new areas, several IPFs changed from rural to urban, thus losing eligibility for the rural payment add-on of 17%. In the FY 2016 IPF PPS final rule, CMS implemented a policy to gradually phase out the rural adjustment for these IPFs over three years. The affected IPFs received two-thirds of the rural adjustment in FY 2016, one-third of the rural adjustment for FY 2017, and will not receive an adjustment in FY 2018.

The updates will take effect Oct. 1.

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