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HFMA’s Regulatory Sound Bites

HFMA’s Regulatory Sound Bites. An Overview of the Final 2018 Inpatient Prospective Payment System Rule. Presentation Objectives. Review the 2018 Final Medicare Inpatient Prospective Payment System (IPPS) Rule. 1. Modest Increase. Urban. Rural. All Hospitals. Non-Teaching.

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HFMA’s Regulatory Sound Bites

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  1. HFMA’s Regulatory Sound Bites An Overview of the Final 2018 Inpatient Prospective Payment System Rule

  2. Presentation Objectives • Review the 2018 Final Medicare Inpatient Prospective Payment System (IPPS) Rule 1

  3. Modest Increase Urban Rural All Hospitals Non-Teaching <= 100 Residents > 100 Residents The Final Rule Increases Payments to the Following Facilities Reimbursement Impact of the 2018 Final IPPS Rule Geographic Area Teaching Status Source: https://www.gpo.gov/fdsys/pkg/FR-2017-08-14/pdf/2017-16434.pdf pgs. 38552-38554 2

  4. Operating Base Rates CMS Is Adjusting the Market Basket Update IPPS Provisions • The FY18 market basket update is 2.7% • The payment rate update factors are summarized below: • -0.6 % multifactor productivity adjustment • -0.75% Affordable Care Act (ACA) update adjustment mandate • +0.4588 documentation and coding adjustment required by 21st Century Cures Act • -0.6 “2 Midnight” adjustment • Resulting in a net increase in national standardized amounts (before application of budget neutrality factorsof 1.2 % See Appendix 1 for final IPPS FY18 base and operating rates. 3

  5. Final Operating Rates 4

  6. Capital Base Rates and Payments • CMS established a national capital federal rate of $453.95 for FY18. • For FY18, the national capital federal rate will increase by 1.60%, compared to the FY17 national capital federal rate ($446.79). See Appendix 2 for FY18 standard federal capital rates 5

  7. Outlier Payments • For FY18, the final outlier fixed-loss threshold will be $26,601. • This is an increase from $23,573 in FY17 which will decrease outlier payments. • To qualify for outlier payments for high cost cases, a case must have costs greater than the sum of the prospective payment rate for the DRG, plus IME, DSH, and new technology add-on payments, plus the “outlier threshold” or “fixed-loss” amount. • The sum of these components is the outlier “fixed-loss cost threshold” applicable to a case. To determine whether the costs of a case exceed the fixed-loss cost threshold, a hospital’s total covered charges billed for the case are converted to estimated costs using the hospital’s cost-to-charge ratio. 6

  8. Wage Index • For FY18, CMS applies the wage index to the labor-related share of 62 percent of the national standardized amount for hospitals with wage indices less than 1, and 68.3 percent of the national standardized amount for hospitals with wage indices greater than 1.0. • Tables 1A, 1B, and 1C reflect the national labor-related share, which is also applicable to Puerto Rico hospitals. • These tables are also found in Appendix I of this presentation. • Applications for FY19 reclassifications were due to the Medicare Geographic Reclassification Review Board by September 1, 2017, which is also the deadline for canceling a previous wage index reclassification withdrawal or termination. • Footnote: FY18 wage index values are based on the data collected from the Medicare cost reports submitted by hospitals for cost reporting periods beginning in FY14 (the FY17 wage indexes were based on data from cost reporting periods beginning during FY13). 7

  9. Disproportionate Share • CMS continues to make interim DSH payments equal to 25 percent of what the DSH payment would have been absent the ACA changes. • Based on the June 2017 estimate, the estimate for empirically justified Medicare DSH payments for FY18, with the application of section 1886(r)(1) of the Act, is approximately $3.888 billion (or 25 percent of the total amount of estimated Medicare DSH payments for FY18). • Therefore, in the final rule, Factor 1 for FY18 is $11.665 billion, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY18 ($15.553 billion - $3.888 billion ). • The uncompensated care portion of the DSH payment amount for each DSH hospital is the product of three factors: • Factor 1 equals 75 percent of the aggregate DSH payments that would be made under section 1886(d)(5)(F) without application of the DSH changes made by the ACA • Factor 2 reduces the amount based on the ratio of the percent of the population who are insured in the most recent period following implementation of the ACA to the percent of the population who were insured in a base year prior to ACA implementation • Factor 3 is determined by a hospital’s uncompensated care amount for a given time period relative to the uncompensated care amount for that same time period for all hospitals that receive Medicare DSH payments in that fiscal year, expressed as a percentage. 8

  10. Disproportionate Share • Beginning in FY18, the statute permits the use of a data source other than the CBO estimates to determine the percent change in the rate of uninsurance as part of the calculation of Factor 2. • CMS uses uninsured estimates produced by the Office of the Actuary as part of the development of the National Health Expenditure Accounts in the calculation of Factor 2. This explains the one-time increase in the DSH-UC payment pool. • For FY18, CMS also incorporates data from Worksheet S–10 in the calculation of hospitals’ share of uncompensated care, by combining data on uncompensated care costs from the worksheet for FY14 with proxy data regarding a hospital’s share of low-income insured days for FYs 2012 and 2013, to determine Factor 3. • CMS will continue to use data from three cost reporting periods to calculate Factor 3, which will gradually incorporate uncompensated care data from Worksheet S–10. • While CMS expects to carry forward the transition schedule for incorporating Worksheet S-10 data into the uncompensated care distribution methodology, its decision in the final rule only applies to FY18. 9

  11. UC-DSH Allocation ACA Reduces DSH Payments to 25%, Reallocating A Portion Back to Hospitals Based on the Percentage Who Remain Uninsured Step 4: Allocate Funding to DSH Hospitals Step 3: Determine Funding For Reallocation Step 1: Determine DSH Reduction Step 2: Determine Remaining Uninsured DSH Funds $, Millions 1-.4179-.002 =.5821 .5821*$12.0 B = $6.96 Billion The Pool Is Allocated to Hospitals as a Percentage of Total Indigent on Care (Based On Medicaid and SSI Days) Provided by All DSH Hospitals ∆.4179

  12. Documentation & Coding Adjustment • In FY18, CMS is beginning a six-year process required by statute to restore prior payment adjustments removed from the IPPS rates to recoup $11 billion in additional IPPS payments attributable to documentation and coding. • As required by the 21st Century Cures Act, CMS proposed and is finalizing an adjustment of +0.4588 percentage points as the FY18 installment in the six-year process to restore prior payment adjustments to the IPPS standardized amounts. • This adjustment represents the amount of the increase in aggregate payments as a result of not completing the prospective adjustment authorized until FY13. 11

  13. Two Midnight Payment Reduction Reversal • CMS is finalizing its proposal to remove the 0.6 percent adjustment applied to FY17 IPPS rates from the FY18 IPPS rates. • Adjustment removes the one-time increase to FY17 rates that CMS made to compensate hospitals for a 0.2 percent adjustment made to FY14 IPPS rates, and maintained on rates for FY15 and FY16. • Hospitals that closed or converted to other hospital types, were no longer being paid under the IPPS in FY17, and were not compensated by the one-time adjustment of +0.6 percent, can work with MACs to receive a cost report adjustment for any revenues lost as a result of the 2-midnight rule adjustment. 12

  14. IME Payment Adjustment • Pursuant to statute, for discharges occurring in FY18, CMS continues to apply the IME adjustment factor of 5.5 percent for every approximately 10-percent increase in a hospital’s resident-to-bed ratio. • See section 1886(d)(5)(B) of the Act which provides for an IME formula multiplier of 1.35 for discharges occurring on or after October 1, 2007. 13

  15. Inpatient Quality Reporting Program • CMS finalizes several changes to the Hospital IQR Program, including refinements to two existing measures for the FY20 payment determination, a new voluntary readmission measure, and changes to requirements with respect to reporting of electronic clinical quality measures (eCQMs) that align with changes to the Medicare and Medicaid EHR Incentive Program. • CMS adopts refinements to the following existing IQR Program measures, beginning with the FY20 payment determination: • HCAHPS Pain Management - The pain management questions on the HCAHPS survey will be modified to focus on the hospital’s communication with patients about the patients’ pain during the inpatient stay, and the composite measure will be renamed “Communication About Pain.” • New questions will be applicable to patients beginning with January 1, 2018, discharges. • In a change from the proposed rule, public reporting of performance on new HCAHPS communication about pain composite measure on Hospital Compare will begin October 2020, using 2019 data.  14

  16. Inpatient Quality Reporting Program • Stroke Mortality Measure - CMS finalizes the proposed refinements to the 30-day stroke mortality measure for the FY23 payment determination. • The measure will be modified to include the National Institutes of Health Stroke Scale in the measure risk adjustment, and other changes are made that reduce the number of risk adjustment variables overall from 42 to 20. • CMS plans to provide hospitals with dry-run results on the refined measure in the confidential hospital feedback reports prior to implementation of the measure for FY23. • CMS anticipates using claims data for discharges occurring between October 1, 2017, and June 30, 2020, for the dry run calculations which would be provided during calendar year 2021. • The claims data will not be publicly reported. 15

  17. Inpatient Quality Reporting Program • CMS finalizes its proposal to add a new measure to the IQR Program for voluntary reporting, the Hybrid Hospital-Wide Readmission Measure with Claims and Electronic Health Record (EHR) Data. • Measure combines claims data with patient data extracted from hospital EHRs, and was endorsed by NQF in December 2016 (NQF #2879) • CMS considering proposing this measure as required IQR Program measure as early as the FY23 payment determination (CY21 reporting period) • If finalized, hospitals required to submit core clinical data elements from EHRs as early as 2020 to support a dry run of measure • Voluntary reporting of data on measure will occur for discharges from January 1, 2018, through June 30, 2018. • See Appendix 3 for a list of 13 data clinical elements drawn from EHRs used in risk adjusting this measure, units of measurement, and time window for first captured values. 16

  18. Inpatient Quality Reporting Program • Electronic Clinical Quality Measures: CMS modifies previously finalized policies for reporting of eCQMs in 2017 (for the FY19 payment determination) and in 2018 (for the FY20 payment determination) to provide for a greater reduction in reporting burden than what was proposed. • For both 2017 and 2018 reporting periods (FY19 and FY20 payment, respectively) hospitals must report only one self-selected quarter of data for four self-selected eCQMs out of the 15 available. • Consistent with requirements in place for 2016 reporting period (2018 payment) except under the final rule, hospitals may choose any quarter for reporting, whereas for 2016, they were limited to last two calendar quarters of the year. • For the 2017 and 2018 reporting years (2019 and 2020 payment determinations), CMS finalizes proposals to require that EHR technology be certified to all 15 available eCQMs. • Recertification is not required each time technology is updated to capture more recent eCQM specifications. • Hospitals are required to use most recent version of the eCQM specifications. 17

  19. Hospital Readmissions Reduction Program • The HRRP will reduce FY18 payments to an estimated 2,577 hospitals by $556 million, an increase of $24 million over estimated FY17 savings. • For FY18, CMS retains same six conditions and the same methodology for calculating the HRRP reduction. • Excess readmissions ratios and the FY18 payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) will be based on data from the 3-year period of July 1, 2013, through June 30, 2016 (the “applicable period”). • Hospitals may request an exception to Hospital readmissions Reduction Program (HRRP) under extraordinary circumstances. 18

  20. Hospital Readmissions Reduction Program • The 21st Century Cures Act (P.L. 114-255) requires the Secretary to assign hospitals to peer groups based on the proportion of Medicare inpatients who are full-benefit Medicare and Medicaid dual eligibles, and to develop a methodology that allows for separate comparisons of readmissions rates for hospitals within these groups. • CMS finalizes its proposal to identify dual eligible beneficiaries using data from the Medicare Modernization Act (MMA) file of dual eligibility. • This file is also used for administration of Part D benefits. • A beneficiary is counted as a full-benefit dual patient if they are identified as having full-benefit dual status in the state MMA files for the month during which they were discharged from the hospital. • The number of stays attributed to dual eligibles will be divided by the total number of inpatient stays by beneficiaries enrolled in fee-for-service Medicare or Medicare Advantage. • The HRRP 3-year applicable period will be used in calculating the proportion of dual eligible stays. • Hospitals will be grouped by quintiles (five peer groups). • Using the five peer groups, CMS will calculate the payment adjustment using a peer group-specific threshold in place of the current formula, which compares a hospital’s excess readmission ratio (ERR) to a threshold of 1.000. • CMS adopts its preferred approach to replace the current standard of 1.000 with the median ERR for the hospital’s peer group. 19

  21. Value-Based Purchasing Program • The Value-Based Purchasing (VBP) program is budget neutral and will redistribute about $1.9 billion based on hospitals’ performance scores. This represents 2% of base operating MS-DRG payments. • For FY18, CMS adopts several changes for Hospital VBP Program, including: • Removal (in FY19) and replacement (in FY23) of PSI-90 patient safety composite measure • An ICD-10 version of the current measure is not being developed, and CMS could not calculate performance scores for the measure for FY19 20

  22. Value-Based Purchasing Program • Addition of a 30-day pneumonia episode payment measure beginning with FY22 payment • VBP Program performance period will begin August 2018 • Final rule discusses specifications for this measure, which are similar to 30-day payment measures for Acute myocardial infarction (AMI) and Heart Failure (HF) previously adopted for VBP Program beginning with FY21 payment • For FY22, a 36-month baseline period (July 1, 2013-June 30, 2016) and a 23-month performance period (August 1, 2018-June 30, 2020) will be used for measure • For FY23, the performance period will be expanded to 35 months (August 1, 2018-June 30, 2021) and the 36-month baseline period will remain July 1, 2013-June 30, 2016. • A full 36-month performance period will begin for FY24, defined as beginning on July 1st 5 years prior to the applicable fiscal year, and ending on the June 30th 2 years prior. • The baseline period will begin July 1st 10 years prior to the applicable fiscal year, and end on the June 30th 7 years prior. 21

  23. Value-Based Purchasing Program • Addition of the Agency for Healthcare Research and Quality (AHRQ) Patient Safety and Adverse Events composite measure (NQF#0531) to the VBP Program beginning with FY23. • This measure is also referred to as “modified PSI 90,” and was adopted for the IQR Program beginning with the FY18 payment determination. • The measure specifications can be found on the AHRQ website at: https://www.qualityindicators.ahrq.gov/Modules/PSI_TechSpec_ICD09_v60.aspx • (An ICD-10 specified version of this measure does not yet appear to be publicly available; the rule does not address this issue.) • For FY 23, 21-month baseline period for this measure (October 1, 2015-June 30, 2017) and a 24-month performance period (July 1, 2019-June 30, 2021) is adopted. • For FY 2024 and subsequent years, the baseline and performance periods will be 24 months. • The baseline period will begin on July 1st 8 years prior to the payment year, and end on June 30th 6 years prior. 22

  24. Value-Based Purchasing Program • Baseline and performance periods finalized for FY19 are listed in the table below. See Appendices 5, 6, 7, & 8 for FY20, FY21, FY22, & FY23 VBP Baseline and Performance Periods 23

  25. Value-Based Purchasing Program • Domain Weights • CMS did not propose any changes to the domain weights for the FY18 and FY19 program years. • CMS will retain the equal weight of 25 percent for each of the four domains in the FY20 program year and subsequent years for hospitals that receive a score in all domains. See Appendix 9 for 2017-2023 VBP Program Measures and Domains 24

  26. Value-Based Purchasing Program • CMS finalizes its proposal that hospitals must report a minimum number of 25 cases per measure in order to receive a measure score on the condition-specific payment measures as proposed. 25

  27. HAC Reduction Program • CMS does not provide a specific number for the level of savings achieved by the HAC program, although it is reasonable to assume that the savings from year-to-year are relatively stable, and will not increase in FY18 relative to FY17 as the payment penalty will always apply to 25 percent of hospitals on an annual basis. • CMS adopts time periods for the FY20 HAC Reduction Program and modifies changes to the extraordinary circumstances exceptions beginning in FY18. See Appendix 10 for 2015-2020 HAC Reduction Program Measures, Performance Periods, and Domain Weights 26

  28. HAC Reduction Program • Data Collection Time Periods for FY20 HAC Reduction Program Measures • CMS finalizes that a two-year period will be used for all program measures. • Domain 1 Patient Safety and Adverse Events composite measure will have a data collection period of July 1, 2016, through June 30, 2018. • For the CDC NHSN measures in Domain 2, a two-year period will be calendar years 2017 and 2018. 27

  29. Rural Community Hospital Demonstration Program • Under the demonstration, a rural community hospital in rural areas of 10 states with low population densities (as identified by the Secretary) is paid reasonable cost for covered inpatient hospital services furnished to Medicare beneficiaries. • Original demonstration was required to begin on January 1, 2005, and last five years. • ACA extended the program for additional five years. • The 21st Century Cures Act extended the program for five more years. • CMS distinguishes among hospitals participating in the Demonstration during different periods by cohort: • Cohort 1 – The 7 originally participating hospitals (selected in 2004 or 2008) that ended their scheduled five-year periods of performance on a rolling basis during FY15 under the ACA extension. • Cohort 2 – The 14 hospitals that began participating in demo under the ACA authority, and ended scheduled five-year periods of performance on a rolling basis from April 30, 2016, through December 31, 2016. (CMS notes that one hospital in Cohort 2 closed in October 2015). 28

  30. Rural Community Hospital Demonstration Program • Cohort 3 – Newly selected participating hospitals under 21st Century Cures Act mandate beginning in FY18. • In final rule, CMS will permit participating hospitals to begin Cures Act 5-year extension on the day after end of the prior performance period. • For example, if a hospital’s 5-year ACA period ended on June 30, 2015, the hospital may begin the five-year Cures Act extension period on July 1, 2015, under finalized policy. • On April 17, 2017, CMS released its solicitation for Cohort 3 participants in the Rural Community Hospital demonstration • Eligible hospitals had until May 17, 2017, to submit applications. • CMS had not finalized selection process as of the date of publication of the final rule. 29

  31. Medicare-Dependent Small Rural Hospital Program • Section 205 of MACRA extended Medicare-Dependent Small Rural Hospital (MDH) Program through the end of FY17. • Legislation extending or making the MDH program permanent has not been enacted into law by the date of final rule. • For discharges occurring on or after October 1, 2017, all hospitals that previously qualified for MDH status will be paid based on the Federal rate. • MDH are allowed to apply for sole community hospital (SCH) status before the MDH program expires, and make that status, if approved, effective the day after the expiration of MDH program. • For an MDH to receive SCH status effective October 1, 2017, it must apply for SCH status at least 30 days before the MDH program expires (i.e., before September 1, 2017). • An MDH must also specify in request that if approved as an SCH, that status would be effective October 1, 2017. • If the MDH applies after the September 1, 2017, deadline, the usual effective date rules for SCH status would apply (i.e., 30 days after the date of CMS’ written notice of approval). 30

  32. Appendices • Appendix 1: IPPS Base Rates/Standard Operating Amounts • Appendix 2: Standard Federal Capital Rate • Appendix 3: Hybrid Hospital-Wide Readmission Core Clinical Data Elements • Appendix 4: FY20 Hospital IQR Measures • Appendix 5: FY20 VBP Baseline and Performance Periods • Appendix 6: FY21 VBP Baseline and Performance Periods • Appendix 7: FY22 VBP Baseline and Performance Periods • Appendix 8: FY23 VBP Baseline and Performance Periods • Appendix 9: 2017-2023 VBP Program Measures and Domains • Appendix 10: HAC Program Measures, Performance Periods, and Domain Weights 31

  33. Appendix 1: IPPS Base Rates/Standard Operating Amounts 32

  34. Appendix 1: IPPS Base Rates/Standard Operating Amounts - Continued 33

  35. Appendix 2: FY18 Standard Federal Capital Rate 34

  36. Appendix 3: Hybrid Hospital-Wide Readmission Core Clinical Data Elements 35

  37. Appendix 4: FY20 Hospital IQR Measures 36

  38. Appendix 4: FY20 Hospital IQR Measures - Continued 37

  39. Appendix 4: FY20 Hospital IQR Measures - Continued 38

  40. Appendix 4: FY20 Hospital IQR Measures - Continued 39

  41. Appendix 4: FY20 Hospital IQR Measures - Continued 40

  42. Appendix 5: FY20 VBP Baseline and Performance Periods 41

  43. Appendix 6: FY21 VBP Baseline and Performance Periods 42

  44. Appendix 7: FY22 VBP Baseline and Performance Periods 43

  45. Appendix 8: FY23 VBP Baseline and Performance Periods 44

  46. Appendix 9: VBP Program Measures and Domains VBP Measures and Domains 2017-2023 45

  47. Appendix 9: VBP Program Measures and Domains - Continued VBP Measures and Domains 2017-2023 46

  48. Appendix 9: VBP Program Measures and Domains – Continued VBP Measures and Domains 2017-2023 47

  49. Appendix 10: HAC Program Measures, Performance Standards and Domain Weights 48

  50. Appendix 10: HAC Program Measures, Performance Standards and Domain Weights - Continued 49

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