On Wednesday, August 2, 2017, the Centers for Medicare & Medicaid Services (CMS) issued its final Inpatient Prospective Payment System (IPPS) rule for Fiscal Year 2018. The rule outlines how hospitals are paid for inpatient Medicare stays, starting October 1, 2017. This rule finalizes a number of changes proposed in the IPPS proposed rule issued in April, but does not respond to the Request for Information in that rule regarding physician-owned hospitals.

The rule contains a significant increase in hospital payments, as well as a number of tweaks to CMS’ quality efforts. If you have questions about how these proposals could impact your business or the patients you serve, please contact us at (202) 588-5272 or jscott@appliedpolicy.com.

CMS Projects Payment Increase to Hospitals of $2.4 Billion in FY 2018

Under the final rule, hospitals paid under IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful EHR users will see an increase in the operating payment rates of approximately 1.2 percent. In addition, the final rule outlines a market basket update of 2.7 percent, compared to 2.9 percent in the proposed rule.

The rate increase and other changes to IPPS policies contribute an increase of approximately 1.3 percent while changes to uncompensated care will increase payments by 0.7 percent. CMS is projecting that total spending for inpatient hospital services will increase by about $2.4 billion in FY 2018. This estimate is down from an estimated $3 billion increase projected in the proposed rule.

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

In order to allow healthcare providers more time to adopt newer edition electronic health records (EHRs), CMS finalized, as proposed, flexibilities for healthcare providers to use either 2014 Edition CEHRT, 2015 Edition CEHRT, or a combination of 2014 Edition and 2015 Edition CEHRT, for an EHR reporting period in 2018. To further increase flexibilities, a reduction of EHR reporting periods for new and returning participants from the full year to any continuous 90-day period during the calendar year was finalized as proposed for 2018.

As mandated by the 21st Century Cures Act, CMS finalized the addition of 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 the Office of the National Coordinator for Health IT (ONC).

Many of the Clinical Quality Measure (CQM) requirements were reduced to further alleviate healthcare provider recording and reporting burdens. For 2018, the CQM proposal reducing reporting requirements down to 4 CQMs for 2018 was finalized along with a reduction in the reporting period down to one, self-selected quarter of CY 2018.

While many of these finalized changes do not take effect until October 1, 2017 (the beginning of FY 2018) in order to more rapidly reduce burdens placed upon workflows, CMS also finalized changes to CY 2017, including:

  • Reducing the CQM reporting period for new and returning hospital meaningful to one self-selected quarter of CQM data in CY 2017;
  • Reducing the CQM reporting period for providers in the Medicaid EHR Incentive Program to be a minimum of a continuous 90-day period during CY 2017; and
  • Aligning the specific CQMs available to providers participating in the Medicaid EHR Incentive Program with those available to professionals participating in the Merit-based Incentive Payment System.

CMS Reduces eCQM Reporting Requirements to Ease Provider Burden

Transitioning quality measures into an electronic form has long been an issue for CMS, providers, and hospitals. Further reporting of the few electronic clinical quality measures (eCQMs) that are available provided additional hurdles in recent years for CMS quality programs. In response to these issues, CMS reduced the requirements for reporting and made other changes to ease the burden on providers. Most notably, CMS reduced, beyond reductions proposed earlier, eCQM reporting requirements down to submitting only 4 eCQMs in the Hospital Inpatient Quality Reporting Program measure set for FY 2017 and FY 2018, and to provide one, self-selected calendar quarter of data. CMS initially proposed reporting six eCQMs for both years and two, self-selected quarters for FY 2017 and three, self-selected quarters for 2018.

In an effort to provide additional assistance to hospitals, CMS formalized:

  • an educational review process for chart abstracted measures,
  • modifications to the measure validation process to reduce the number of cases required to be submitted, and
  • flexibility for the required EHR edition utilized for quality measurement.

For submitting eCQMS in CY 2018, hospitals will now be able to use one of three options: the 2014 Edition of certified EHRs, the 2015 Edition of EHRs, or a combination of both the 2014 and 2015 Editions.

CMS Continues to Explore Opportunities to Adjust Quality Measures for Social Risk Factors

CMS solicited public comment on how to account for social risk factors and methods with which to do so across various quality programs and they continue to seek input at this time. Examples of methods included: confidential reporting to providers of measure rates stratified by social risk factors; public reporting of stratified measure rates; and potential risk adjustment of a particular measure as appropriate based on data and evidence. Further, examples of social risk factors included, but were not limited to: dual eligibility/low- income subsidy, race and ethnicity, and geographic area of residence. CMS remains concerned about holding providers to different standards for the outcomes of their patients with social risk factors, because they do not want to mask potential disparities or minimize incentives to improve outcomes for disadvantaged populations. CMS intends to explore options such as: (1) stratified reporting of a measure by patient factors, which highlights disparities in outcomes by patient subgroup; and (2) peer-to-peer benchmarking based on hospital’s share of patient factors, which allows hospitals to compare their performance with like-peers. The Agency intends to conduct further analyses on the impact of different approaches such as measure-level risk adjustment and stratifying performance scoring to account for social risk factors including the options suggested by commenters. Additionally, CMS will consider the suggestion from stakeholders that they conduct empirical testing of risk-adjusted quality metrics, and assess the potential impact of the findings from such testing on the prioritization of national data collection, in relation to risk adjustment methodologies.

Payment Adjustment for 2-Midnight Rule Removed

The rule finalizes a proposal to remove the one-time adjustment of 0.6 percent made in FY 2017. CMS had eliminated the 0.2% reduction in payments from FY 2014, 2015, and 2016 to account for expected shifts in utilization due to the two-midnight payment rule for inpatient admissions. Subsequently, in FY 2017, CMS applied a one-time 0.6% increase in payments to offset the costs and essentially refund the reductions. This final rule removes that adjustment, which will result in a 0.6 percent reduction in payments for FY 2018.

CMS Finalizes Return to 24-Month Data Collection Period for Hospital-Acquired Condition (HAC) Reduction Program in FY 2020

The Hospital-Acquired Condition (HAC) Reduction Program is intended to create an incentive for hospitals to reduce the incidence of hospital-acquired conditions. The program requires CMS to impose a payment reduction of one percent for applicable hospitals that rank in the worst-performing quartile.

In this rule, CMS is finalizing the proposal to return to a 24-month data collection period for FY 2020 for the calculation of HAC Reduction Program measure results. CMS received comments that supported the return to the 24-month period and comments that recommended adopting a 12-month data collection period. In their response, CMS states that it believes the 24-month period support their goal to minimize provider burden.

In addition, CMS ins finalizing the following proposals that modify the Extraordinary Circumstance Exception (ECE) policy for the HAC Reduction Program:

  • Facilities will be allowed to submit a form signed by the facility’s CEO or designated personnel
  • CMS will work to provide formal responses notifying the facility of the decision within 90 days of receiving the request
  • CMS is specifying that they may grant ECEs due to CMS data system issues which affect data submission

These ECE-related policies will apply beginning in FY 2018.

Hospital Readmissions Reduction Program (HRRP) Payment Adjustment Factor Modified to Meet Requirements of 21st Century Cures Act
The HRRP requires a reduction to a hospital’s base operating Diagnosis Related Group (DRG) payment to account for excess readmissions associated with selected applicable conditions. For FY 2018, CMS finalizes proposals which implement the changes passed in the 21st Century Cures Act to the HRRP payment adjustment factor. CMS will assess penalties based on a hospital’s performance relative to other hospitals with a similar proportion of patients who are dually eligible for Medicare and full-benefit Medicaid. In order to do so, CMS finalizes proposals to:

  • Define the proportion of full benefit dual-eligible beneficiaries as the proportion of dual-eligible patients among all Medicare fee-for-service and Medicare Advantage stays during the 3-year period that corresponds to the performance period;
  • Assign hospitals into one of five peer groups; and
  • Revise the payment adjustment formula calculation methodology.

In addition, the proposal 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 was finalized as proposed.

Removal of 1 Measure and Addition of 2 Measures Finalized for 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 finalizing, as proposed, minor program updates to the following:

  • Removal of the current 8-indicator Patient Safety for Selected Indicators (PSI 90) measure from the Safety domain beginning with the FY 2019 program year.
  • Adoption of the 10-indicator modified Patient Safety and Adverse Events Composite PSI 90 measure beginning in the FY 2023 program year (which will be a replacement for the removed 8-indicator measure).
  • Adoption of 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.
  • Revisions to the Efficiency and Cost Reduction domain weighting beginning with the FY 2021 program year to reflect the implementation of condition-specific payment measures (including the overall Medicare Spending per Beneficiary measure) in the Hospital VBP Program.

 Minimal Changes Finalized to Hospital Inpatient Quality Reporting (IQR) Program Measures
The Hospital IQR Program has previously finalized 62 measures for the FY 2019 payment determination and subsequent years. In addition to the 62 finalized measures, minor changes to a few existing measures were finalized, including:

  • Re-wording of 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;
  • Changes to 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
  • Calling on participants to voluntarily report one new measure, the Hybrid Hospital-Wide Readmission Measure, for the CY 2018 reporting period.

Many stakeholders have reached out in opposition of the public display of hospital performance data on the refined pain management questions. They site that providers have received negative responses on previous surveys due to their following the standard of care and refusing to prescribe pain medication when a patient had requested it. In response to these comments, CMS delayed public posting of the survey information for one year so that hospitals may gain more experience with the refined questions.

$6.8 Billion of DSH Payments to be Based on S-10 Data – 5 Years After First Proposal

The Patient Protection and Affordable Care Act made significant adjustments to the allocation of the DSH payment adjustment, which this year amounts to approximately $6.8 billion to be distributed to hospitals ($800 million more than in 2017).  Under the new methodology, hospitals that qualify for Medicare DSH payments receive 25% of the amount they previously would have received under the statutory formula for Medicare DSH payments. The remaining 75% is based on three factors, including the hospital’s amount of uncompensated care for a given time period relative to the total amount of uncompensated care for that same time period reported by all hospitals that receive Medicare DSH payments.

In order to determine the amount of uncompensated care, CMS proposed in FY 2014 to use Worksheet S-10 of the Medicare cost report, but declined to do so in 2014 – 2017 due to concerns about completeness and accuracy of the data. Convinced that the data derived from Worksheet S-10 had improved in these respects, in the FY 2018 proposed rule CMS again proposed to begin using S-10 to calculate uncompensated care for DSH payments. This rule finalizes that proposal, and CMS will use Worksheet S-10 data from 2014, along with other data, to determine how DSH payments will be distributed.

Commenters expressed concern about the instructions included with Worksheet S-10, and CMS included clarification in this final rule about discounts to patients receiving charity care. In addition, CMS committed to provide additional education and to continue to improve these instructions. Hospitals will also have the opportunity to resubmit certain data in order to ensure that the most accurate information is available in FY 2019.

New Technology Add-On Payments Approved for Three New Therapies

CMS considered six new therapies for new technology add-on payments for FY 2018, expressing significant skepticism at each. After receiving public comment, CMS ultimately approved half of the applications submitted.

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

CMS believes that ZINPLAVA meets the newness and cost criteria, and is now satisfied as to its clinical utility and safety. Therefore, it is approved for a maximum NTAP payment of $1,900 in FY 2018.

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

CMS now believes that INTUITY and Perceval are sufficiently new and clinically superior, in addition to sufficiently costly. They will receive a maximum NTAP payment of $6,110.23 in FY 2018.

Ustekinumab (Stelara®) – Janssen Biotech

CMS reversed its previous concern that Stelara was neither new nor represented substantial clinical improvement, and approved it for a maximum NTAP payment of $2,400 in FY 2018.

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

Application withdrawn prior to final rule.

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

Did not receive FDA approval prior to July 1, 2017 deadline.

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

Application withdrawn prior to final rule.

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