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CMS Releases FY 2021 IPPS Proposed Rule

May 15, 2020

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CONTACTS
Andrew Amari, Hospital Policy and Regulatory Specialist
Mary Mullaney, Director, Hospital Payment Policies
Phoebe Ramsey, Sr. Regulatory Analyst, Quality & Payment Policy

The Centers for Medicare & Medicaid Services (CMS) released on May 11 the Inpatient Prospective Payment System (IPPS) proposed rule that contains changes to Medicare payment policies and IPPS rates for fiscal year (FY) 2021. The AAMC will provide comments on the proposed rule, which are due July 10, 2020, at 5 p.m. ET.

CMS has proposed to expand its definition of a “displaced resident” in response to the AAMC’s outreach efforts to CMS requesting flexibility regarding hospital GME caps for residents that transfer to other teaching hospitals in the event of a hospital or program closure. If finalized, a resident would be considered “displaced” for Medicare temporary full-time equivalent resident cap transfer purposes beginning on the day a hospital announces publicly that it is closing and/or that it is closing a residency program. Residents would not be required to be at the hospital on the day before or the day of the hospital or program closure. Currently, a resident is only considered “displaced” if they are physically present at the hospital on the day before or the day of the hospital or program closure.

Payment Provisions

Market Basket Update. CMS proposes a 3.1% increase to operating payment rates for acute care hospitals that both successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record users. The update reflects the projected hospital market basket update of 3.0% reduced by a 0.4 percentage point productivity adjustment and a proposed positive 0.5 percentage point adjustment required by legislation.

Uncompensated Care Payments. CMS projects it will distribute approximately $7.8 billion to disproportionate share hospitals in Medicare uncompensated care payments in fiscal year (FY) 2021, roughly $500 million less than in FY 2020. The agency proposes to use FY 2017 Worksheet S-10 data to determine the distribution of uncompensated care payments to all hospitals for FY 2021, except Indian Health Service (IHS) and tribal hospitals and Puerto Rico hospitals, which would use low-income insured days for FY 2021 instead of Worksheet S-10 data. Beyond FY 2021, all eligible hospitals would use the most recent available single year of audited Worksheet S-10 data.

Price Transparency. CMS plans to require hospitals to report the median payer-specific negotiated charge by Medicare Severity-Diagnosis Related Group (MS-DRG) for Medicare Advantage organizations and all third-party payers for cost reports ending on or after January 1, 2021. The payer-specific negotiated charges hospitals use to calculate these medians would be the payer-specific negotiated charges for service packages that hospitals are required to make public under the requirement finalized in the Hospital Price Transparency final rule [see Washington Highlights, Nov. 14]. CMS noted that the reported information may be used in the future to change the methodology for calculating the IPPS MS-DRG relative weights to reflect relative market-based pricing. 

Chimeric Antigen Receptor (CAR) T-cell Therapies. CMS seeks to create a new MS-DRG  for CAR T-cell Immunotherapy. Under the proposal, CMS would not include clinical trial claims that do not include the cost of the CAR T-cell therapy when calculating the average cost used to determine the relative weight for this DRG to more accurately reflect the costs of the CAR T-Cell therapy drug. Additionally, CMS proposes to discontinue new technology add-on payments for two CAR T-cell therapies, Kymriah and Yescarta, for FY 2021 because the three-year anniversary date of the entry of the technology onto the U.S. market will occur in the first half of FY 2021, ending their newness period.

Hospital Wage Index. CMS proposes to continue its FY 2020 policy that increases the wage index values for certain hospitals with low wage index values (bottom quartile of all hospital wage indices).  As proposed, the policy would continue to be applied in a budget-neutral manner through a reduction to the standardized amount.

Quality Provisions

Overall Hospital Quality Star Ratings. CMS previously announced it would update the Star Rating methodology in this rulemaking cycle, but due to the COVID-19 public health emergency, CMS did not propose any updates in the rule. CMS plans to address the topic in future rulemaking.

Hospital Value-Based Purchasing Program. CMS provides estimated and newly established performance standards for certain measures for FY 2023, FY 2024, FY 2025, and FY 2026 program years.

Hospital Readmissions Reduction Program. CMS proposes to automatically adopt applicable performance periods beginning with FY 2023 payment determinations, unless otherwise specified.

Hospital Inpatient Quality Reporting (IQR) Program. CMS seeks to progressively increase electronic clinical quality measure (eCQM) reporting by increasing the number of quarters hospitals are required to report over three years, beginning with a reporting increase in 2021 to two quarters, an increase to three quarters in 2022, and an increase to four quarters in 2023 and subsequent years.

CMS also proposes to publicly report eCQM performance data beginning with calendar year (CY) 2021 reporting, which would be published on the Hospital Compare website in fall 2022.

Finally, CMS plans to update validation processes, including reducing the number of hospitals selected for validation and combining processes for chart-abstracted measures and eCQMs.

Hospital-Acquired Conditions (HAC) Reduction Program.  CMS proposes to refine the HAC Reduction Program validation procedures to align with the IQR Program’s validation procedures.   The agency also proposes to automatically adopt applicable performance periods beginning with FY 2023 payment determinations, unless otherwise specified.

Medicare Promoting Interoperability Program (“Meaningful Use”). CMS proposes to maintain the Electronic Prescribing “Query of Prescription Drug Monitoring Program” measure as optional in CY 2021 with a reporting period of a minimum of any continuous 90-day period for CY 2022 reporting. CMS also plans to adopt policies to align eCQM reporting with IQR proposals. Finally, CMS seeks to update regulatory citations for Office of National Coordinator certification criteria based on recently finalized 21st Century Cures Act rulemaking.

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