On Friday, April 14, 2017, the Centers for Medicare and Medicaid Services (CMS) issued the proposed Inpatient Prospective Payment System (IPPS) rule. The rule outlines how hospitals are paid for inpatient Medicare stays, starting October 1, 2017 (FY 2018). This is the first Medicare payment rule completed under the new Trump administration; while the proposals have taken a predictably moderate turn towards hospitals and physicians (such as a reduction in reporting burden for EHR and quality programs), overall policy proposals are in-line with expectations.

CMS opened the proposed rule by posting a broad Request for Information from stakeholders on ways that the program could better meet transparency, flexibility, program simplification, and innovation goals. The agency is casting a wide net for suggestions on everything from payment reforms, care-delivery reforms, and administrative rule simplification, among other subjects. A similar RFI was issued in conjunction with the release of the Medicare Advantage and Part D Call Letter, released April 3.

CMS is also seeking public comments about the appropriate role of physician-owned hospitals in the delivery system. Specifically, they are requesting comments about how the scope of and restrictions on these hospitals impacts healthcare delivery, particularly on Medicare beneficiaries.

Comments on the rule and the RFI are due by 5:00 pm ET Tuesday, June 13, 2017.

If you have questions about how these proposals could impact your business or product, or would like assistance in preparing comments, please contact us at (202) 588-5272 or jscott@appliedpolicy.com.

Payment Increase of Almost 3% Expected for 2018

Hospitals will likely be pleased to see an expected average payment increase of close to 3% for 2018, compared to a relatively modest payment increase of 1% last year. That would amount to a payment increase of approximately $3 billion. Approximately half that increase (+1.2%) is accounted for in adjustments to uncompensated care payments, while the remainder (+1.7%) is a result of the proposed payment policy changes included in the rule.

CMS anticipates paying $6.9 billion in uncompensated care payments (disproportionate share, or DSH payments) in FY 2018. This would be an increase of $1 billion over the amount of DSH payments made in FY 2017. The increase is predicted to be felt evenly between urban and rural hospitals.

As for the aggregate impact of the proposed payment policy changes, the agency anticipates that hospitals in rural areas will see an approximate increase of less than 1% (+0.8%), while hospitals in urban areas will see an approximate payment increase of +1.8%.

Disproportionate Share Hospital Payments to Increase, but New Cost Data to be Incorporated

Under the Affordable Care Act, funding for Medicare disproportionate share hospitals (DSHs) has been based since 2014 on a formula whereby DSHs receive 25 percent of the funding they previously would have received under the prior funding formula, and the remaining amount based on additional payments that is reduced for changes in the percentage of people uninsured.

For 2018, CMS’ proposed calculation of this formula will result in an increase of funds distributed to DSHs of approximately one billion dollars, to a total of just under seven billion. The calculation is based on a shift in CMS’ uninsured estimates from using CBO data to National Health Expenditure Accounts data. CMS requests comments on these revised calculations and funding amounts.

Also for 2018, CMS is proposing to incorporate data from Worksheet S-10 in calculating hospitals’ share of uncompensated care. Specifically, CMS will use S-10 data from 2014 cost reports, along with proxy data for a hospital’s share of low-income insured days for 2012 and 2013. Together, these factors will determine the distribution of uncompensated care payments. We note here that a number of hospitals have previously expressed concern over consistency between hospitals in the completion of the S-10 worksheet.

Payment Adjustment for 2-Midnight Rule Would End Under Proposal

In FY 2017, CMS eliminated the 0.2% reduction in payments from FY 2014, 2015, and 2016 that was done to account for expected shifts in utilization due to the two-midnight payment rule for inpatient admissions. Instead, for FY 2017, CMS applied an additional, one-time +0.6% increase in payments, which was meant to offset the estimated costs of the two-midnight policy and essentially refunded the reductions from the previous years. CMS is proposing to remove the one-time adjustment of 0.6 percent made in FY 2017, which will result in a 0.6 percent reduction in payments for 2018.

Six Therapies Request New Technology Add-On Payments, but CMS Appears Skeptical

CMS received nine applications for new technology add-on payments for FY 2018, three of which withdrew before the proposed rule was issued. Of these remaining six:

Bezlotoxumab (ZINPLAVA™) – Merck & Co. Inc.

CMS is concerned with regard to the adverse event of cardiac failure of ZINPLAVA™ and is inviting public comments as to whether it is a substantial clinical improvement.

EDWARDS INTUITY Elite™ Valve System (INTUITY) and LivaNova Perceval Valve (Perceval)

CMS considered the two applications from separate manufacturers together because it views these technologies as substantially similar to one another.   While CMS had concerns with the substantial clinical improvement offered by the Edwards valve, CMS seemed to acknowledge that Edwards had adequately addressed those concerns.  However, after reviewing the publications submitted by LivaNova, CMS remained concerned that the lack of randomization and blinded investigators may have influenced the outcomes in many of the studies provided.

However, CMS believes that the INTUITY and Perceval valves are the same or similar to other prosthetic aortic valves used to treat the same or similar diagnoses.  Therefore, they will not meet CMS’ newness criterion.   CMS is inviting public comments on this issue as well as whether rapid deployment valves, specifically the INTUITY and Perceval valves, are substantial clinical improvement over current technologies.

Ustekinumab (Stelara®) – Janssen Biotech

CMS is concerned that Stelara has the same mechanism of action as other immune system suppressors such as TNF blockers for the treatment of Crohn’s disease, and that the manufacturer’s claims of a new patient population are not sufficient. In addition, they express doubt as to whether it represents a substantial clinical improvement over existing technologies, citing a lack of head-to-head trials.

KTE-C19 (Axicabtagene Ciloleucel) – Kite Pharma, Inc.

CMS expresses concern in the proposed rule that KTE-C19 may have a similar mechanism of action to existing bispecific T cell engager (BiTE) technology. In addition, CMS notes that there are limited numbers of subjects (n=82) that have been studied after infusion of KTE-C19 therapy for diffuse large B-cell lymphoma, and no published results showing any survival benefit for the treatment.

VYXEOS™ (Cytarabine and Daunorubicin Liposome for Injection) – Celator Pharmaceuticals, Inc.

Although the manufacturer claims that VYXEOS™ is indicated for a unique population of patients diagnosed with high-risk acute myeloid leukemia, CMS questions whether this is the case, and whether it uses a similar method of action to existing treatment for AML. CMS also expresses concern as to whether, despite claims of improved clinical outcomes, the treatment represents a substantial clinical improvement, and whether there is in fact a reduction in adverse events compared to existing treatments.

GammaTile™ – Isoray Medical, Inc. & GammaTile, LLC

CMS expressed doubt in their proposed rule that GammaTile treatment for brain tumors using cesium-131 differs from existing forms of radiation or brachytherapy, specifically whether the placement of cesium-131 in a collagen matrix represents a new mechanism of action. In addition, they question whether this would truly be the first approved use of this therapy for recurrent brain tumors.

Unique among these six applications, CMS questioned whether the applicant’s pricing data represents a large enough sample to meet the cost criteria for NTAP payments, as well as its pricing methodology. Finally, CMS seems particularly concerned that GammaTile’s clinical evidence has not progressed to the point where it is ready to justify claims of increased effectiveness over existing technology.

CMS invites comment on all of their concerns related to NTAP proposals.

Reporting Burden for New and Returning Meaningful Users Reduced, Additional Exemption for Decertified EHRs

For 2017, CMS is proposing to reduce the EHR reporting periods for new and returning participants from the full year to any continuous 90-day period during the calendar year and reducing the CQM requirement down to reporting 6 CQMs. For 2018, CMS is proposing to reduce the EHR reporting periods to the first 3 quarters of CY 2018 and reducing the CQM requirement down to reporting 6 CQMs.

As mandated by the 21st Century Cures Act, CMS is proposing to add a new exception from the EHR Incentive Program penalties for participants who were not able to be a Meaningful User because their certified EHR technology was decertified by ONC.

CMS Adjusts eCQM Reporting Requirements to Ease Provider Burden

For 2017 hospitals would be required to select and submit six of the available eCQMs included in the Hospital IQR Program measure set and provide two, self-selected, calendar year quarters of data. For 2018, hospitals would be required to select and submit six of the available eCQMs, and provide data for the first three calendar quarters (Q1-Q3) of 2018.

Hospital Readmissions Reduction Program (HRRP) Modified to Meeting Requirements of 21st Century Cures Act
For FY 2018, CMS proposes to implement changes passed in the 21st Century Cures Act to the HRRP payment adjustment factor. CMS also proposes changes to:

  • A methodology for calculating the proportion of dual-eligible patients;
  • A methodology for assigning hospitals to peer groups; and
  • A payment adjustment formula calculation methodology.

In addition, CMS is proposing to specify the applicable time period and the methodology for the calculation of aggregate payments for excess readmissions for FY 2018 and to update the program’s Extraordinary Circumstance Exception policy.

CMS Proposes to Remove 1 Measure, Add 2 Measures, and Revise Domain Weighting of the Hospital Value-Based Purchasing (VBP) Program
The Hospital VBP Program adjusts payments to hospitals for inpatient services based on their performance on an announced set of measures. For FY 2018, CMS is proposing to:

  • Remove the current 8-indicator Patient Safety for Selected Indicators (PSI 90) measure from the Safety domain beginning with the FY 2019 program year.
  • Adopt the 10-indicator modified Patient Safety and Adverse Events Composite PSI 90 measure beginning in the FY 2023 program year;
  • Adopt the Hospital-Level, Risk-Standardized Payment Associated with a 30-day Episode of Care for Pneumonia measure for the Efficiency and Cost Reduction domain beginning with the FY 2022 program year; and
  • Revise the Efficiency and Cost Reduction domain weighting beginning with the FY 2021 program year to reflect the implementation of condition-specific payment measures in the Hospital VBP Program.

CMS Solicits Input on How to Include Social Risk Factors in the Hospital-Acquired Conditions (HAC) Reduction Program in Coming Years
The HAC Reduction Program creates an incentive for hospitals to reduce the incidence of hospital-acquired conditions. For FY 2018, CMS proposes five changes to the existing HAC Reduction Program policies:

  • Specify the dates of the time period used to calculate hospital performance for the FY 2020 HAC Reduction Program;
  • Request comments on additional measures for potential future adoption;
  • Request comments on accounting for social risk factors;
  • Request comments on accounting for disability and medical complexity measures; and
  • Update the Extraordinary Circumstance Exception policy.

Hospital Inpatient Quality Reporting (IQR) Program Proposals Produce Minimal Changes to Program Measures
For FY 2018, CMS is proposing to:

  • Re-word the current pain management questions in the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey to focus on the hospital’s communications with patients about the patients’ pain;
  • Change the risk adjustment methodology used in the Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate following Acute Ischemic Stroke Hospitalization (Stroke 30-Day Mortality Rate) measure to include stroke severity codes (based on the NIH Stroke Scale), beginning with the FY 2023 payment determination; and
  • Call on participants to voluntarily report one new measure, the Hybrid Hospital-Wide Readmission for the CY 2018 reporting period.

CMS is inviting public comment on potential new quality measures for future inclusion in the Hospital IQR Program, accounting for social risk factors in the Hospital IQR Program, and providing confidential feedback reports to hospitals with measure rates for certain measures stratified by patients’ dual eligibility status.

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