Policy Update

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The following update was provided by Hall Render, NOSORH Legislative Liaison:

CMS Releases Final IPPS Rule for FY 2017

On August 2, CMS issued its final rule for the hospital inpatient prospective payment system (IPPS) for fiscal year 2017. The rule would increase payment rates by 0.95% compared to 2016 rates. CMS will also implement the Notice of Observation Treatment and Implication for Care Eligibility Act, which requires hospitals and CAHs to provide written and oral notification to Medicare enrollees receiving observation services under outpatient status for more than 24 hours.

The agency finalized in its rule two provisions to reverse the effects of the 0.2% payment cut under the two-midnight policy implemented in FY 2014. A permanent adjustment of 0.2% would be used to remove the cut prospectively for FY 2017 and beyond. In addition, a one-time adjustment of 0.6% would be used to address the impacts of the two-midnight policy payment cut to address its impacts on hospitals for FYs 2014-2016. The final rule also includes an initial market-basket update of 2.7% for hospitals that submit data on quality measures and were meaningful users of electronic health records in FY 2015.

CMS will make cuts to Medicare Disproportionate Share Hospital (DSH) payments, which will decrease overall Medicare DSH payments by $400 million. The agency will also expand the requirement to report electronic clinical quality measures (eCQMs), beginning with the FY 2019 Inpatient Quality Reporting Program (IQR). In CY 2017, CMS will require hospitals to select and submit quarterly data on eight of 15 IQR eCQMs. The agency will start validating reported eCQM data in CY 2018, which will impact payments in FY 2020. The final rule will go into effect in January 2017.

CMS Issues FY 2017 LTCH PPS Final Rule

On August 2, CMS released its long-term care hospital prospective payment system (LTCH PPS) final rule for fiscal year 2017. The rule finalized a 0.3% cut for productivity, a 2.8% market-basket update, and a 0.75% cut required under the Affordable Care Act.

The agency will also implement the second year of the move to a LTCH dual-rate payment system, during which site-neutral payments are paid a 50/50 mix of the LTCH PPS and site-neutral payment rates. The rule includes a 23% decrease in payments for LTCH site-neutral cases and a 0.7% net increase in payments for cases paid at a standard LTCH PPS rate. CMS estimates that the provisions included in its final rule will reduce payments to LTCHs by 7.1%, or $363 million, compared to FY 2016 payment rates.

CMS also finalized several new measures for the LTCH Quality Reporting Program (QRP) to satisfy requirements of the Improving Medicare Post-Acute Care Transformation Act. The agency will add measures for discharge to community, potentially-preventable 30-day post-discharge readmissions, and overall Medicare spending per enrollee for the FY 2018 LTCH QRP. For the FY 2020 LTCH QRP, CMS will add a drug regimen review measure. The final rule will begin to affect discharges from LTCHs occurring on or after October 1, 2016.

CMS Introduces Integrated Care Demonstration for CAHs

On August 4, CMS announced that 10 CAHs in North Dakota, Nevada and Montana began participating in a demonstration to test new models of coordinated, integrated care in rural communities. The three-year Frontier Community Health Integration Project (FCHIP) Demonstration aims to increase access to health services for Medicare beneficiaries in areas of the country where access to care can be limited due to patients’ distance from providers.

Specifically, the demonstration is intended to: support CAHs and local delivery systems in keeping patients in community health facilities rather than transferring them to distant providers; test new CAH activities in skilled nursing care, ambulance services, and telehealth; and test whether payments for certain services will improve access to care, increase the coordination and integration of care between providers, and reduce unnecessary hospitalizations and transfers. The program will provide financial incentives for CAHs implementing care coordination activities to reduce avoidable admissions and readmissions across their networks of care.


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