The Centers for Medicare & Medicaid Services (CMS) has released its final rule updating the Medicare inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) for fiscal year (FY) 2019.  The following are highlights of the lengthy rule, which is scheduled to be published August 17, 2018.

IPPS Payments to Rise by $4.8 BillionCMS expects total IPPS payments by $4.8 billion in FY 2019 compared to FY 2018.  The annual hospital update for FY 2019 is 1.35%, based on a 2.9% hospital market basket update that is reduced by a 0.8 percentage point productivity adjustment and an additional 0.75 percentage point statutory reduction.  CMS also is applying a 0.5 percentage point documentation and coding increase mandated by the Medicare Access and CHIP Reauthorization Act of 2015, for a 1.85% increase to operating payment rates.

Quality Measures and Related Payment Adjustments.  Updates to acute hospitals are subject to several quality-related adjustments.  For example, the maximum update of 1.35% applies to a hospital that submits quality data and is a meaningful electronic health record (EHR) user.  On the other hand, a hospital that does not submit quality data and is not a meaningful EHR user is subject to an update of -1.55%.  Other factors impacting payments include excess readmissions under the Hospital Readmissions Reduction Program, Hospital-Acquired Condition Reduction Program performance, and Hospital Value-Based Purchasing (VBP) Program adjustments.

CMS adopted numerous changes to hospital quality and value programs to reduce the burden on hospitals and to align with the Administration’s “Meaningful Measures” initiative.  For instance, CMS is remove 18 measures from CMS quality programs and “de-duplicating” 25 additional measures that are reported in multiple quality programs. In response to public comments, however, CMS is retaining six patient safety measures it had proposed to remove from the VBP Program.  CMS also is revising requirements under the Medicare and Medicaid Electronic EHR Incentive Programs, which CMS now calls “Promoting Interoperability Programs.”

Other IPPS PoliciesThe final rule also addresses, among many other things:  changes to MS-DRG classifications; new technology add-on payment applications; updates to Medicare uncompensated care payments; wage index updates; payments for certain hospitals paid on a reasonable cost basis; and revisions to documentation requirements for Medicare cost report submissions and physician certification and recertification of claims.

LTCH Policies.  Under the final rule, CMS expects LTCH PPS payments will increase by approximately 0.9% ($39 million) in FY 2019.  The standard federal rate for FY 2019 is $41,579.65 (compared to $41,415.11 in FY 2018).  This rate reflects a 1.35% annual update, an area wage level budget neutrality factor of 0.999713, and a one-time budget neutrality adjustment of 0.990884 in connection with elimination of the “25 Percent Rule” (discussed below).  The update for an LTCH that does not submit required LTCH Quality Reporting Program data is reduced by 2 percentage points, resulting in a standard federal rate of $40,759.12.  The final fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $27,124, and the fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $25,769.

Elimination of the 25 Percent Rule.  As previously proposed, CMS is eliminating the current 25% threshold policy.  By way of background, under the 25% rule, an LTCH is allowed to admit up to 25% of its patients from a single general acute care hospital, beyond which there is a significant reimbursement reduction (with certain exceptions).  Full implementation has been subject to statutory and regulatory delays.  Under the final rule, CMS is eliminating the 25% threshold policy effective beginning in FY 2019 by removing the provisions of 42 C.F.R. § 412.538.  In light of the full implementation of the site neutral payment rate beginning in FY 2016, CMS determined that the concerns that led to the introduction of the 25-percent threshold policy (i.e. LTCHs acting like IPPS step-down units) have been ameliorated. CMS is applying a one-time adjustment to the LTCH PPS standard federal payment rate in FY 2019 to make this change budget neutral.