United States: CMS Releases Fiscal Year (FY) 2020 Inpatient Prospective Payment System (IPPS) Final Rule

Miranda A. Franco is a Senior Policy Advisor in our Washington, D.C. office.

On August 2, 2019, the Centers for Medicare and Medicaid Services (CMS) released the Fiscal Year (FY) 2020 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital Prospective Payment System (LTCH) Final Rule. The rule includes the payment update for both types of facilities as well as policies for new technology add-on payments, graduate medical education, and the hospital wage index.

The fact sheet may be found here.

The rule will affect discharges occurring on or after October 1, 2019.  

Changes to Payment Rates

Acute care hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful EHR users will see an increase in operating payment rates of approximately 3.1 percent for FY 2020. That is the most significant update in almost a decade.  Overall, CMS is projecting that inpatient prospective payment system (IPPS) payments will increase by nearly 3.8 billion in FY 2020; this is an approximately 3.0 percent increase from previous levels. This amount includes increased payments for new technologies and changes to uncompensated care payments.

The final rule also includes an update to the long-term acute-care hospital (LTCH) prospective payment system, which will affect about 390 facilities. The final rule is expected to increase total Medicare payments under the LTCH prospective payment system by 1 percent, or $43 million, in FY 2020 when compared with FY 2019.

Change in Wage Index Calculation to Address Disparities

CMS partially finalized its proposals to update its wage index methodology to mitigate disparities between high and low wage index hospitals by increasing the wage index for hospitals that currently have a wage index that falls below the 25th percentile. However, the agency did not finalize its proposal to decrease the wage index for hospitals that currently have a wage index that falls under the 75th percentile. Instead, CMS has chosen to employ an alternate methodology—a budget neutrality adjustment to the standardized amount for each hospital of 0.997987. In other words, now everyone is paying for the update.

CMS did finalize its proposal to remove urban-to-rural hospital reclassifications from the rural floor wage index beginning in FY2020, as well as its plan to decrease a hospital's wage index in FY2020 to 95 percent of the respective hospital's FY2019 final wage index.

CC/MCC Deletions Not Finalized

In the FY 2020 proposed rule, CMS had proposed approximately 1,400 severity classification changes to the complication or comorbidity (CC) group or major complication or comorbidity (MCC) designation of International Classification of Diseases, tenth edition (ICD-10) codes. If finalized, it would have resulted in broad downgrades of cases from higher severity tier (and higher-paying) to lower severity MS-DRGs.

CMS chose to not finalize the CC/MCC changes initially proposed, except for those under the category of resistance to antimicrobial drugs. The Agency cited that most commenters asked for a delay of severity reclassification implementation due to the magnitude of the proposed revisions. The final rule did not specify when these CC/MCC severity changes may be implemented in future years.

DSH Payment Changes

CMS finalized their estimate that eligible Disproportionate Share Hospitals (DSH) will receive an overall increase of approximately $8.48 billion in FY 2020. This reflects an approximate $78 million increase from FY 2019.
In this year's proposed rule, CMS asked for public input on updates to the three factors that are used to determine uncompensated care payment determinations (including on the use of data from single-year 2017 Worksheet S-10 instead of data from 2015):

  • Factor 1: CMS finalized its proposal that Factor 1 for FY2020 will be $12,643,011,209.74, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY2020 ($16,857,348,279.65 minus $4,214,337,069.91)
  • Factor 2: CMS finalized its proposal that Factor 2 for FY2020 is 67.14 percent. The final FY 2020 uncompensated care amount is $12,437,591,742.69 x 0.6714 = $8,350,599,096.04
  • Factor 3: Applied to the product of Factor 1 and Factor 2, Factor 3 is a hospital-specific value used to determine the amount of the uncompensated care payment each eligible hospital will receive
    • CMS finalized several updates to the methodology and considerations for calculating Factor 3, including using data from Worksheet 2-10 from FY2015 cost reports and reconfiguring the 5-step methodology to incorporate the new data source

Changes to the Hospital Readmissions Reduction Program (HRRP)

CMS finalized eight factors CMS would use when deciding whether a measure should be removed from HRRP; updated the definition of "dual eligible"; and, adopted a sub-regulatory process to address potential non-substantive changes to the payment adjustment factor components.

Changes to the Hospital Value-Based Purchasing (VBP) Program

CMS finalized its proposal that the VBP would use the same data as the HAC Reduction Program to calculate the National Health Safety Network (NHSN) Healthcare-Associated Infection (HAI) measures beginning with CY 2020 data collection, which is when the Hospital IQR Program will cease collecting data on those measures. CMS also finalized that the VBP would rely on the process used by the HAC Reduction Program to validate the NHSN HAI measures to ensure that the measure rates are accurate for use in the Hospital VBP Program.

Changes to the Hospital-Acquired Conditions (HAC) Reduction Program

For the 2020 reporting year, CMS finalized the adoption of 8 measure removal factors (currently used in the Hospital Inpatient Quality Reporting [IQR] Program and Value-Based Purchasing [VBP] Programs). CMS also tweaked the administrative processes for validating data submitted by hospitals to the Centers for Disease Control and Prevention (CDC).

Changes to the Hospital Inpatient Quality Reporting (IQR) Program

CMS finalized its proposal to remove the Claims-Based Hospital-Wide All-Cause Unplanned Readmissionsmeasure. In conjunction, CMS finalized its proposal to require mandatory reporting of the Hybrid Hospital-Wide Readmissions measure, beginning with the FY2026 payment determination
CMS further finalized its proposal to adopt the Safe Use of Opioids—Concurrent Prescribing electronic clinical quality measure (eCQM) starting with the CY2021 reporting period (FY2023 payment determination). CMS did not finalize its proposal to add the Hospital Harm—Opioid-Related Adverse Events eCQM, citing stakeholder concerns about the measure.

CMS further finalized changes to eCQM reporting and electronic health record (EHR) certification. The rule also requires that beginning in FY2024; hospitals must report one-quarter of data for three self-selected eCQMs, and the finalized Safe Use of Opioids—Concurrent Prescribing eCQM
The agency also responded to comments on three potential eCQMs for potential inclusion in future rulemaking: Hospital Harm—Severe Hypoglycemia eCQM, Hospital Harm—Pressure InjuryeCQM, and Cesarean Birth (PC 02) eCQM.

LTCH Quality Reporting Program (QRP)

CMS adopted two new quality measures. CMS also modified the previously adopted Discharge to Community measure to exclude nursing home residents. It also moved the implementation date of future versions of the LTCH CARE Data Set from April to October. The agency adopted data collection and public display periods for various measures and ended the practice of publicizing compliant LTCHs on the LTCH QRP website.

Changes to the Medicare and Medicaid Interoperability Programs

The Medicare and Medicaid EHR Incentive Programs (now known as the Promoting Interoperability Programs) will allow hospitals to report data for any continuous 90-day period in CY 2021.

CMS also finalized changing Query of PDMP measure from a required to an optional measure and available for five bonus points for CY 2020. Accordingly, CMS removed the CY 2020 exclusion for this measure as it would be optional to report. Furthermore, beginning with CY 2019 reporting, CMS finalized converting this measure from a numerator/denominator to a yes/no attestation, in which a "yes" response would indicate that for at least one Schedule II opioid electronically prescribed using CEHRT during the reporting period, the hospital used data from CEHRT to conduct a query of a PDMP for prescription drug history. Beginning with the CY 2020 reporting period, CMS finalized the removal of the Verify Opioid Agreement measure from the PI Program. This measure remains a numerator/denominator optional measure available for five bonus points in CY 2019.

CMS plans to continue to align the CQM reporting requirements for the PI Programs with those for the Hospital IQR Program. Although CMS proposed adopting two new opioid-related electronic clinical quality measures (eCQMs) beginning with the CY 2021 reporting period (FY 2023 payment determination), CMS only finalized Safe Use of Opioids – Concurrent Prescribing. CMS did not finalize Hospital Harm – Opioid-Related Adverse Events. 

CMS finalized its proposal to align the reporting period requirements for PI with IQR. To this end, hospitals will continue to submit one, self-selected calendar quarter of data for four self-selected eCQMs in the PI Program measure set for the CY 2020 reporting period and CY 2021 reporting period. However, for the CY 2022 reporting period (FY 2024 payment determination), hospitals will be required to report one, self-selected calendar quarter of data for four eCQMs where three are self-selected eCQMs, and one is the finalized Safe Use of Opioids – Concurrent Prescribing eCQM. Hospitals that must submit to CMS by attestation where electronic reporting is not feasible will have to report on all CQMs in the PI measure set for the full calendar year (consisting of 4 quarterly data reporting periods). Though, beginning with CY 2023 reporting, CMS finalized its proposal to eliminate attestation as a method for reporting CQMS for Medicare PI Program and instead require all hospitals to submit their CQM data electronically. EHR Technology must continue to be certified to all eCQMs available to report for the CY 2020 reporting period and subsequent years.

IME Formula

The Indirect Medical Education (IME) Payment Adjustment Factor remains 1.35 for 2020; however, CMS estimates that the use of this factor in FY 2020 under IPPS will increase payments to teaching hospitals by 5.5 percent for every 10 percent increase in the resident-to-bed ratio.

Changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

CMS finalized its proposal to remove three pain management questions from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey beginning in FY2020. The agency additionally finalized its proposal to adopt one new measure and remove one existing measure from the program.

Payment Methodologies for CAR-T Therapies

For FY 2020, CAR-T cell therapies will continue to use the current MS-DRG. CMS had received a request to create a new MS-DRG for procedures involving CAR-T therapies, but the agency has declined to do so, saying they will not modify the DRG assignment for FY 2020.

CMS notes that they solicited comments in the proposed rule on possible ways to update or change reimbursement for CAR-T; many comments were received in response. The Agency says that after reviewing the comments in response to the rule, CMS continues to believe that given the newness of CAR-T and their continued consideration of new approaches to encourage value-based care and lower drug prices, it would be "premature to adopt structural changes to our existing payment mechanisms."

Increase to New Technology Add-On Payments (NTAP)

CMS' NTAP allows for an additional payment for medical services or technologies found to be 1) new; 2) disproportionately costly to the existing MS-DRG, and 3) a substantial clinical improvement. This additional payment is equal to the lesser of:

  • 50 percent of the cost of the new technology or service, or
  • 50 percent of the amount by which the costs of the case exceed the DRG payment.

CMS received feedback from stakeholders that the 50 percent add-on does not adequately reflect the cost of some extremely-high-cost therapies (e.g., CAR-T therapy). Therefore, for FY 2020, CMS finalized their proposal to increase this percentage increase threshold to 65 percent in both of the above cases. The two current CAR-T therapies that are NTAP eligible, Kymriah, and Yescarta, will receive this increased payment.

In response to stakeholder comments on antimicrobial resistance, CMS is finalizing its proposal and additionally raising the threshold for qualified infectious disease products (QIDPs, as defined by the FDA to 75 percent.

Request for Comments on NTAP Substantial Clinical Improvement

CMS noted that, over the years, there have been multiple requests for clarification as to what constitutes a substantial clinical improvement for both NTAP and outpatient pass-through payments, and sought comments on the type of additional information and guidance that would be helpful. CMS thanked the commenters and stated that their comments would serve as the basis for future rulemaking.

New Technology Add on Payment (NTAP) Applications for FY 2020

CMS solicited comments on the newness, cost, and clinical improvement of 18 additional NTAP applications for FY 2020. Of these, one applicant withdrew its application prior to the issuance of the proposed rule, three were withdrawn before the final rule, and one application did not meet the July 1 deadline. Additionally, four NTAP applications were denied for FY 2020.  An additional nine applications were approved for FY 2020.

  • AZEDRA® (Ultratrace® iobenguane Iodine-131) Solution for obenguane avid malignant and/or recurrent and/or unresectable pheochromocytoma and paraganglioma (Progenics Pharmaceuticals)
  • CABLIVI® (caplacizumab-yhdp) humanized bivalent nanobody to inhibit microclot formation with acquired thrombotic thrombocytopenic purpura (aTTP) (Sanofi)
  • ELZONRIS" (tagraxofusp, SL-401) targeted therapy for the treatment of blastic plasmacytoid dendritic cell neoplasm (Stemline Therapeutics)
  • Erdafitinib second-line treatment for locally advanced or metastatic urothelial carcinoma (Johnson & Johnson/Janssen Oncology)
  • ERLEADA" (Apalutamide) androgen receptor inhibitor for non-metastatic castration-resistant prostate cancer (Johnson & Johnson/Janssen Products)
  • SPRAVATO (Esketamine) nasal spray for treatment-resistant depression (Johnson & Johnson/Janssen Pharmaceuticals)
  • XOSPATA for relapsed or refractory acute myeloid leukemia (AML) with a FMS-like tyrosine kinase 3 (FLT3) mutation (Astellas Pharma)
  • JAKAFI" (Ruxolitinib) oral kinase inhibitor (Incyte Corporation)
  • T2Bacteria® Panel (T2 Bacteria Test Panel) to aid in the diagnosis of bacteremia (T2 Biosystems)

CMS will also continue NTAP payment for ten technologies currently receiving it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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