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Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

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FY 2016 IPPS Proposed Rule Released

April 24, 2015—The Centers for Medicare and Medicaid Services (CMS) April 17 released the Inpatient Prospective Payment System (IPPS) proposed rule containing changes to the Medicare payment policies and rates under the IPPS and Prospective Payment System (PPS) payment update for fiscal year (FY) 2016. Comments are due by June 16 and CMS expects to issue the final rule by Aug. 1.

The proposed rule includes a projected payment update of 1.1 percent in FY 2015 for acute care hospitals. CMS proposes to update the IPPS market basket by 2.7 percent, but also proposes a 0.8 percent recoupment cut to the standardized amount in FY 2016 to continue implementing the documentation and coding adjustment required by the American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240).

The payment update also reflects a multi-factor productivity adjustment of minus 0.6 percentage points and a 0.2 percentage point reduction required by the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152).

CMS projects that the proposed rate increase along with other proposed payment changes in the rule will decrease IPPS operating payments for all hospitals by approximately 0.3 percent. CMS’ projected impact for major teaching hospitals (hospitals that train 100 or more residents) is also a 0.3 percent operating payment increase.

In the proposed rule, CMS explains that the agency is carefully considering stakeholder feedback and recent Medicare Payment Advisory Committee (MedPAC) recommendations on issues related to short inpatient hospital stays, long outpatient stays with observation services, and the related 0.2 percent IPPS payment adjustment. CMS expects to further discuss these issues in the proposed calendar year (CY) 2016 Hospital Outpatient Prospective Payment system rule

The rule does not propose changes to the graduate medical education (GME) payment regulations.

For planning purposes, CMS seeks comment on policy and operational issues surrounding potential future expansion of the Bundled Payments for Care Improvement Initiative (BPCI).  CMS would use additional rulemaking outside this IPPS rulemaking cycle, if the agency decides to expand any of the models. 

Additionally, CMS is seeking public comments on a range of issues including: breadth and scope of an expansion; episode definitions; models for expansion; roles of organizations and relationships necessary or beneficial to care transformation; setting bundled payment amounts; mitigating risk of high-cost cases; administering bundled payment; data needs; use of health information technology; quality measurement and payment for value; and the transition from Medicare Fee-For-Service payments to bundled payments.

CMS continues to implement changes to Medicare disproportionate share hospital (DSH) payments required by the ACA. Beginning in FY 2014, hospitals started receiving 25 percent of what they would have received under the former statutory formula for Medicare DSH.  The remaining 75 percent of what would have been paid as Medicare DSH was adjusted for decreases in the rate of uninsured individuals under the ACA, and redistributed to hospitals as Uncompensated Care DSH (UC DSH) payments based on each hospital’s relative share of uncompensated care costs calculated using a proxy of low income days. 

CMS’ Office of the Actuary estimates that 75 percent of what would have been paid in Medicare DSH payments for FY 2015 at $10 billion, which is then reduced to reflect the change in the percentage of individuals who are uninsured as estimated by the Congressional Budget Office (CBO) and a statutory factor to determine the amount available for UC DSH payments.

After such a cut to the UC DSH pool, the amount available to be redistributed to hospitals based on their relative share of uncompensated care, is $6.4 billion (a decrease of $1.3 billion from the estimated FY 2015 amount).CMS is again proposing to use low income days (Medicaid days + Medicare SSI days) as a proxy to determine each hospital’s relative share of uncompensated care for purposes of redistributing UC DSH payments. 

CMS is also proposing revisions to the wage index for acute care hospitals and the annual update of the wage data. Additionally, CMS is proposing to extend an additional year the imputed floor policy, which is currently set to expire Sept. 30. 

Regarding the hospital quality pay-for-performance programs, CMS has proposed the following significant changes: an expansion of the pneumonia readmissions measure cohort in the Hospital Readmissions Reduction Program starting FY 2017, the removal of the Clinical Care Process Domain in the Value Based Purchasing (VBP) Program in FY 2018, and an increase in the weighting – to 85 percent – for the Centers for Disease Control infection measures in the Hospital Acquired Conditions Reduction Program (HACRP) starting FY 2017.

CMS has also proposed to assess hospitals on expanded data collection for central line associated blood stream infections (CLABSI) and catheter associated urinary tract infections (CAUTI) measures for HACRP in FY 2018 and intends to propose this change for the VBP Program starting FY 2019.

In regards to the Inpatient Quality Reporting (IQR) Program, CMS has proposed requiring hospitals to submit certain core quality measures electronically for FY 2018 payment determination and is seeking feedback on the collection of “core elements” from an EHR to improve risk adjustment.

Finally, the proposed rule also includes proposals to implement section 1206 of the Pathways for SGR Reform Act, which requires the establishment of an alternative site-neutral payment rate for Medicare inpatient discharges from long term care hospitals (LTCHs) that fail to meet certain statutorily defined criteria, beginning on or after Oct. 1, 2015.

Contact:

Scott Wetzel, M.P.P.
Lead, Quality Reporting
Telephone: 202-828-0495
Email: swetzel@aamc.org

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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.


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For More Information

Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org