Regulatory Advisor 2020 Proposed IPPS LTCH Rule

CLA’s Regulatory Advisor: 2020 proposed IPPS/LTCH rule offers a concise summary of the proposed rule and highlights key changes to the wage index, new technology payments and quality, and interoperability programs.

Navigating health reform

CMS Releases Proposed IPPS/LTCH Rule for 2020

  • Jennifer Boese
  • 5/9/2019

On April 23, 2019, the Centers for Medicare & Medicaid Services (CMS) released the 2020 proposed Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) rule. The following includes a high level overview of key provisions in the 1,800+ page proposed rule (CMS-1716-P). The comment deadline is June 24, 2019.

Quick look on key changes

  • Wage index changes to assist lowest wage index hospitals
  • Medicare Disproportionate Share Hospital (DSH) payments transition to one year of Worksheet S-10
  • Key changes to new technology add-on payments
  • Long-term care hospitals fully transition to site-neutral payments (for certain discharges)
  • Quality and interoperability program changes

IPPS payment, policy changes

Market-basket update

CMS proposes a 3.2 percent update.

Wage index

CMS is proposing a significant change to the wage index to positively help hospitals in the lowest quartile. CMS proposes to increase the wage index for hospitals with a wage index value below the 25th percentile wage index. For these hospitals, CMS increases the wage index by half the difference between the otherwise applicable final wage index value for a year for that hospital and the 25th percentile wage index value for that year across all hospitals. Based on the data for this proposed rule, for fiscal year (FY) 2020, the 25th percentile wage index value across all hospitals is 0.8482. (If this policy is adopted in the final rule, this number would be updated in the final rule based on the final wage index values.) CMS is proposing the policy would be effective for at least four years, beginning in FY 2020, in order to allow sufficient time for employee compensation increases implemented by these hospitals to be reflected in the wage index calculation.

CMS example: wage index (lowest quartile)

Assume a wage index value for a geographically rural hospital in Alabama is 0.6663, and the 25th percentile wage index value for FY 2020 is 0.8482. Half the difference between the otherwise applicable wage index value and the 25th percentile wage index value is 0.0910 (that is, (0.8482 - 0.6663)/2). Under the CMS proposal, the FY 2020 wage index value for such a hospital would be 0.7573 (that is, 0.6663 + 0.0910).

In implementing the policy, CMS proposes to keep it budget-neutral by compressing the wage index of the highest quartile of hospitals. It does so by determining the 75th percentile wage index (1.0351) and subtracting that from the hospital’s wage index value. That value is then adjusted by a multiplicative budget neutrality factor (3.4 percent). CMS recognizes some of these hospitals will be negatively impacted by these changes and proposes a five percent cap in FY 2020 in reductions to assist in the transition. The policy will take full effect the following year (2021) when no cap is applied.

In a corollary policy change, CMS specifically cites the problems with urban to rural reclassifications and how those impact the rural floor, stating: “We believe an adjustment is necessary to address the unanticipated effects of urban to rural reclassifications on the rural floor and the resulting wage index disparities, including the inappropriate wage index disparities caused by the manipulation of the rural floor policy by some hospitals.” CMS, therefore, proposes to remove urban to rural reclassifications in the calculation for the rural floor under the wage index.

CMS example: why adjustment is needed

For a real world example of the impact of the rural floor policy, in FY 2018, 366 urban hospitals benefitted from the rural floor. The increase in the wage indexes of urban hospitals receiving the rural floor were offset by a nationwide decrease in all hospitals’ wage indexes of approximately 0.67 percent. In Massachusetts, that meant that 36 urban hospitals received a wage index based on hospital wages in Nantucket, an island that is home to the only rural hospital contributing to the state’s rural floor wage index. In the FY 2018 IPPS/LTCH PPS final rule, CMS estimated those 36 hospitals would receive an additional $44 million in inpatient payments for the year. These increased payments were offset by decreased payments to hospitals nationwide, and those decreases were not based on actual local wage rates but on the current rural floor calculation.

New technology add-on payments

CMS proposes two substantive policy changes related to new technology add-on payments.

  • Currently, if the cost of discharge exceeds a hospital’s full DRG payment, Medicare will make an add-on payment for the new technologies at equal to the lesser of: 50 percent of the costs of the new medical service or technology or 50 percent of the amount by which the costs of the case exceed the standard DRG payment. CMS responded to concerns from stakeholders that this is an insufficient amount and is proposing to increase these percentages to 65 percent. As such, beginning with discharges on or after October 1, 2019, if the costs of a discharge involving a new technology exceeds the full DRG payment (including payments for indirect medical education [IME] and DSH, but excluding outlier payments), Medicare will make an add-on payment equal to the lesser of: 65 percent of the costs of the new medical service or technology or 65 percent of the amount by which the costs of the case exceed the standard DRG payment.
  • CMS proposes an alternative pathway for transformative medical devices. In situations where a new medical device is part of the Breakthrough Devices Program and has received FDA marketing authorization (that is, the device has received premarket approval, 510(k) clearance, or the granting of a De Novo classification request), CMS proposes an alternative inpatient new technology add-on payment pathway to facilitate access to this technology for Medicare beneficiaries.
  • Beginning in FY 2021, for applications received for new technology add-on payments, if a medical device is part of the FDA’s Breakthrough Devices Program and receives FDA marketing authorization, it is considered new and not substantially similar to an existing technology for purposes of the new technology add-on payment under the IPPS. CMS also proposes the medical device would not need to meet the requirement that it represent an advance that substantially improves the diagnosis or treatment of Medicare beneficiaries, relative to technologies previously available.

CAR-T-cell therapy

CMS proposes that the maximum new technology add-on payment amount for a case involving the use of KYMRIAH® and YESCARTA® would be increased to $242,450 for FY 2020, which is 65 percent of the average cost of the technology. CMS finalized in last year’s IPPS rule that the add-on payment would be $186,500.

CMS does not propose modifications to the current MS-DRG 016 designation for CAR-T cell therapies, and seeks comment on alternative models to pay for CAR-T cell, including payment for any potential future MS-DRG designation. In addition, CMS seeks comments on whether certain add-on payments or adjustments should apply to CAR-T therapy payments in the future, such as the geographic wage index adjustment, DSH payments, and IME payments.

For the future: It should be noted that CMS appears to be signaling with this proposed rule that it may not consider various adjustments (DSH, wage index, and IME) appropriate for CAR-T therapy reimbursement. This could mean proposed policy changes may be forthcoming in future rulemaking to exclude those.

Medicare Disproportionate Share Hospital (DSH) payments

There are three factors that go into determining the “75 percent pool” of dollars, which are distributed among DSH hospitals. CMS proposes that for FY 2020, Factor 1 will total roughly $12.65 billion. CMS is proposing that Factor 2 for FY 2020 will be 67.14 percent. As such, the FY 2020 uncompensated care amount translates into roughly $8.5 billion (Factor 1 x 0.6714). For Factor 3, CMS is fully transitioning to using Worksheet S-10s to determine hospital-specific uncompensated care numbers. Instead of the previous three years of various data and Worksheet S-10, CMS proposes to use only either Worksheet S-10 data from FY 2015 cost reports or FY 2017 to calculate Factor 3 in the FY 2020 methodology.

CMS seeks comments on which year’s S-10 data to use. CMS also seeks comments on ways to reduce appeals to the Provider Reimbursement Review Board (PRRB) related to a hospital’s Medicaid fraction which is used in the DSH adjustment calculations. CMS notes many hospitals annually appeal their cost reports to the PRRB in an effort to try and use updated state Medicaid eligibility data to calculate the Medicaid fraction.

Key take-away: Worksheet S-10 is becoming increasingly important and has a direct impact on payments.

O.R and non-O.R procedure code lists

CMS notes that it will be undertaking a comprehensive, systematic, multi-year review of extensive and non-extensive operating room (O.R.) and non-O.R. designations. This is due to the significant amount of time that has elapsed since they were established, the incremental changes that have occurred to these O.R. and non-O.R. procedure code lists, and changes in the way inpatient care is delivered. CMS is soliciting comments until November 1, 2019, on the review, factors, and criteria the agency should consider when determining what should be a designated O.R. procedure in the ICD–10–PCS classification system.

Graduate medical education (GME) at critical access hospitals (CAHs)

Based on stakeholder feedback and reviewing statutory authority, CMS proposes to modify its policy related to GME resident training at CAHs so that a hospital could include residents training in a CAH in its FTE count as long as the nonprovider setting requirements are met. CMS specifically states: “We believe that, to the extent possible, in accordance with current statutory language, it is important to support residency training in rural and underserved areas, including residency training at CAHs.” Therefore, a CAH can be considered a nonprovider setting for direct GME and IME payment purposes, effective for cost reporting periods beginning October 1, 2019. CMS does not propose to change policy with respect to CAHs incurring the costs of training residents. That is, a CAH may continue to incur the costs of training residents in an approved residency training program(s) and receive payment based on 101 percent of the reasonable costs for these training costs. CMS would work closely with HRSA and the Federal Office of Rural Health Policy to communicate the increased regulatory flexibility to CAHs as well as existing residency programs and the options it affords for increasing rural residency training. CMS seeks public comments on this proposed policy change.

Ambulance services policy for CAHs

In addition to the wage index policy adjustments, CMS adjusts several additional policies to support rural, critical access hospitals. In 2018, CMS introduced its first ever Rural Health Strategy document, indicating the agency’s interest in bringing rural health into CMS’ policymaking.

Current policy for ambulance services furnished by a CAH or an entity that is owned and operated by a CAH is 101 percent of the reasonable costs of the CAH or the entity in furnishing those services, but only if the CAH or the entity is the only provider or supplier of ambulance services located within a 35-miles of the CAH. CMS is revising its interpretation to exclude consideration of ambulance providers or suppliers that may be within that 35-mile range, but are not legally authorized to furnish ambulance services to transport individuals either to or from the CAH.

IPPS promoting interoperability program (PI)

90-day reporting period

For 2021, CMS proposes the electronic health records (EHR) reporting period be a minimum of a continuous 90-day period.

Measures changes

CMS proposes to:

  • Require that measure actions must occur within the EHR reporting period beginning with the EHR reporting period in calendar year (CY) 2020.
  • Extend the optional nature of the Query of Prescription Drug Monitoring Program (PDMP) measure in CY 2020 and, again, make it eligible for five bonus points. In addition, CMS proposes to remove the numerator and denominator aspect of this measure and make it a yes or no response.
  • Remove the Verify Opioid Treatment Agreement measure from the PI program in the EHR reporting period in CY 2020.
  • Adjust the Support Electronic Referral Loops by Receiving and Incorporating Health Information measure by requiring that the electronic summary of care record must be received using certified EHR technology (CEHRT) and that clinical information reconciliation for medication, medication allergy, and current problem list must be conducted using CEHRT.
  • Add two opioid-related CQMs, beginning with reporting period in CY 2021: Safe Use of Opioids — Concurrent Prescribing eCQM and Hospital Harm — Opioid-Related Adverse Events eCQM.
  • Request for Information on various topics including efficiency in EHRs, additional opioid measures for future consideration, posting of PI measures on Hospital Compare, Provider to Patient Exchange measure.

IPPS quality programs, measures

After significant regulatory changes were implemented under the 2019 final IPPS rule to better align measures across programs and reduce regulatory burdens, CMS does not propose a significant amount of changes for 2020. Several key changes are noted.

Hospital Inpatient Quality Reporting (IQR) Program

CMS proposes several measures changes to the IQR program, including:

  • Add two opioid-related electronic clinical quality measures (eCQMs) to the IQR eCQM measure set, beginning with the CY 2021 reporting period/FY 2023 payment determination. Those are both related to opioids: Safe Use of Opioids — Concurrent Prescribing eCQM and Hospital Harm – Opioid-Related Adverse Events eCQM.
  • Remove the Claims-Based Hospital-Wide All-Cause Unplanned Readmission measure beginning with the July 1, 2023 through June 30, 2024 reporting period, for the FY 2026 payment determination. This measure would be replaced with a mandatory Hybrid Hospital-Wide Readmission (HWR) measure beginning with July 1, 2023 through June 30, 2024 reporting period, impacting the FY 2026 payment determination. Voluntary reporting status for the Hybrid HWR measure would occur in 2021 and 2022.
  • CMS also seeks comments on the addition of three future measures: Hospital Harm — Pressure Injury eCQM, Hospital Harm — Severe Hypoglycemia eCQM, and Cesarean Birth (PC-02) eCQM.
  • For the CY 2020 reporting period/FY 2022 payment determination and CY 2021 reporting period/FY 2023 payment determination, hospitals must submit one self-selected calendar quarter of discharge data for four self-selected eCQMs in the Hospital IQR Program measure set.
  • For the CY 2022 reporting period/FY 2024 payment determination, hospitals must report one self-selected calendar quarter of data for: (1) three self-selected eCQMs and (2) the proposed Safe Use of Opioids — Concurrent Prescribing eCQM, for a total of four eCQMs.
  • Require EHR technology be certified to all eCQMs available to report for the CY 2020 reporting period/FY 2022 payment determination and subsequent years.

Hospital Value-Based Purchasing (VBP) Program

CMS estimates the amount available in the VBP for FY 2020 is approximately $1.9 billion. CMS is not proposing to add or remove any measures.

Hospital-Acquired Condition (HAC) Reduction Program

CMS proposes clarifications to the HAC program, including adopting a measure removal policy that aligns with the removal factor policies previously adopted in other quality programs. The HAC program has six measures (CAUTI, CDI, CLABSI, colon and abdominal hysterectomy SSI, MRSA bacteremia; CMS PSI 90) and is not proposing to add or remove any measures. Some technical revisions are made, but no substantive changes.

Hospital Readmissions Reduction Program (HRRP)

The HRRP currently includes six applicable conditions/procedures: acute myocardial infarction (AMI), heart failure (HF), pneumonia, elective primary total hip arthroplasty/total knee arthroplasty (THA/TKA), chronic obstructive pulmonary disease (COPD), and coronary artery bypass graft (CABG) surgery. CMS proposes to institute for the HRRP a measure removal policy similar to that put in place last year for other quality programs. Beginning with FY 2021, CMS proposes to update the definition of “dual-eligible” to allow for a one month lookback period in data sourced from the State Medicare Modernization Act (MMA) files to determine dual-eligible status for beneficiaries who die in the month of discharge. CMS also proposes to use the subregulatory process to address any potential future nonsubstantive changes to the payment adjustment factor components.

PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

For hospitals under the PCHQR program, CMS is proposing to:

  • Remove the three pain management questions (Q12-14) in the HCAHPS survey beginning with October 1, 2019 discharges. CMS is seeking comments on future measures that could look at pain management.
  • Remove the External Beam Radiotherapy (EBRT) for Bone Metastases (formerly NQF #1822) measure from the PCHQR program beginning with the FY 2022 program year.
  • Adopt the Surgical Treatment Complications for Localized Prostate Cancer measure for the FY 2022 program year and subsequent years.

LTCH payment, policy changes

Market-basket update

CMS is proposing a 3.2 percent update minus the required productivity factor of 0.5, resulting in a net update of 2.7 percent.

Site neutral rate

Beginning in FY 2016, under the statutory dual-rate LTCH PPS payment system, only certain discharges receive the LTCH PPS standard payment amount with the remaining discharges receiving a lower site neutral payment rate. For several years there has been a transitional blended rate used. This blended rate will end this year. As such, for LTCH discharges impacted by the site neutral payment policy in the cost reporting periods beginning in FY 2020, the site neutral payment rate will fully apply.

LTCH quality program

Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

CMS proposes two measures: Transfer of Health Information to the Provider — Post-Acute Care (PAC) and the Transfer of Health Information to the Patient — Post-Acute Care (PAC). In addition, CMS proposes to update the specifications for the Discharge to Community — Post Acute Care (PAC) LTCH QRP to exclude nursing facility residents from the measure.

Social determinants of health (SDOH)

CMS is proposing to collect and access data about social determinants of health to perform CMS’ responsibilities under the IMPACT Act. Social determinants of health, also known as social risk factors or health related social needs, are the socioeconomic, cultural, and environmental circumstances in which individuals live that impact their health. CMS proposes to collect information on seven proposed SDOH SPADE data elements relating to race, ethnicity, preferred language, interpreter services, health literacy, transportation, and social isolation.

How we can help

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