A Guide to Regulation and Legislation Regulatory Advisor 2020 Final Rule

CLA’s Regulatory Advisor offers a concise summary of the final rule and highlights key changes to the wage index, new technology payments and quality, and interoperability programs.

Navigating health reform

CMS Releases Final IPPS/LTCH Rule for 2020

  • Jennifer Boese
  • 8/13/2019

On August 2, 2019, the Centers for Medicare & Medicaid Services (CMS) released the 2020 final Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) rule. The following includes a high level overview of key provisions in the rule (CMS-17164-F).

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 finalized a 3.0 percent update with a -0.4 percent multifactor productivity adjustment for a net marketbasket update of 2.6 percent. In addition, there is a 0.5 increase for documentation and coding (as mandated under a previous law), which results in a total update percentage of 3.1 percent.

Wage index

CMS finalized a significant change to the wage index to positively help hospitals in the lowest quartile. CMS will increase the wage index for hospitals with a wage index value below the 25th percentile wage index. For these hospitals, CMS will increase 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 the final rule for fiscal year (FY) 2020, the 25th percentile wage index value across all hospitals is 0.8457. CMS makes the policy 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 continues to state the change will be budget-neutral. Instead of reducing the top quartile of wage index hospitals, CMS finalized a budget neutrality adjustment of 0.998838 to the national standardized amount for all hospitals.

CMS recognizes there will be impacts from wage index changes, and finalized a five percent cap in FY 2020 on any decrease in a hospital’s wage index from the hospital’s final wage index in FY 2019. In other words, a hospital’s final wage index for FY 2020 will not be less than 95 percent of its final wage index for FY 2019. No cap will apply in 2021. In a corollary policy change, CMS specifically cites the problems with urban to rural reclassifications and how those impact the rural floor, stating in the proposed rule: “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 finalized removing urban to rural reclassifications in the calculation for the rural floor under the wage index. 

New technology add-on payments

CMS finalized several 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 finalizing 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 finalized 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), an alternative inpatient new technology add-on payment pathway facilitates access to this technology for Medicare beneficiaries
  • CMS states that after consideration of public comments and concerns related to antimicrobial resistance and its serious impact on Medicare beneficiaries and public health overall, the agency is finalizing an alternative inpatient new technology add-on for Qualified Infectious Disease Products (QIDPs). Instead of 65 percent add-on payment, QIDPs will receive 75 percent.
  • 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.
  • For FY2020, add-on payments will be made for 18 technologies and payments will be continued for nine more, including a CAR T-cell therapy.

CAR-T-cell therapy

CMS finalized 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.

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 finalized that for FY 2020, Factor 1 will total roughly $12.437 billion, and that Factor 2 for FY 2020 will be 67.14 percent. As such, the FY 2020 uncompensated care amount translates into roughly $8.435 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 finalized using only Worksheet S-10 data from FY 2015 cost reports to calculate Factor 3 in the FY 2020 methodology.

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

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

Based on stakeholder feedback and reviewing statutory authority, CMS finalized modifying 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. 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 did not 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.

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 finalized its revised 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 finalized that the electronic health records (EHR) reporting period be a minimum of a continuous 90-day period.

Measures changes

CMS will:

  • 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 finalized changing this from a numerator and denominator to 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 one opioid-related CQM, beginning with reporting period in CY 2021: Safe Use of Opioids — Concurrent Prescribing eCQM. (CMS did not finalize adding a second opioid-related measure, Hospital Harm — Opioid-Related Adverse Events eCQM — as had been proposed.)

IPPS quality programs, measures

Significant regulatory changes were implemented under the 2019 final IPPS rule to better align measures across programs and reduce regulatory burdens. While not as exhaustive as last year’s changes, CMS does finalize some changes for 2020

Hospital Inpatient Quality Reporting (IQR) Program

CMS finalized the following measures changes to the IQR program, including:

  • Add one opioid-related electronic clinical quality measures (eCQMs) to the IQR eCQM measure set, beginning with the CY 2021 reporting period/FY 2023 payment determination: Safe Use of Opioids — Concurrent Prescribing eCQM. (CMS did not finalize adding a second opioid-related measure, Hospital Harm – Opioid-Related Adverse Events eCQM — as had been proposed.)
  • 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 was 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.
  • 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 newly finalized 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 did not add or remove any measures.

Hospital-Acquired Condition (HAC) Reduction Program

CMS finalized various 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).

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 finalized instituting a measure removal policy for the HRRP similar to that put in place last year for other quality programs. Beginning with FY 2021, CMS finalized an updated 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 finalized use of 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 finalized:

  • Removal of the three pain management questions (Q12-14) in the HCAHPS survey beginning with October 1, 2019 discharges. 
  • Removal of the External Beam Radiotherapy (EBRT) for Bone Metastases (formerly NQF #1822) measure from the PCHQR program beginning with the FY 2022 program year.
  • Adoption of 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 2.9 percent update minus the required productivity factor of 0.4, resulting in a net update of 2.5 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 finalized 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 updated 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)

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 finalized the collection of information on seven SDOH SPADE data elements relating to race, ethnicity, preferred language, interpreter services, health literacy, transportation, and social isolation.

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