On Friday, April 24, 2015, CMS released Medicare’s Inpatient Psychiatric Facility (IPF) Prospective Payment System (PPS) proposed rule for FY 2016.  CMS estimates that payments to IPFs under the proposed rule would increase by approximately $80 million (1.6 percent) over FY 2015 estimated payments.  The rule creates an IPF-specific market basket (with an estimated update of 1.9 percent), updates the wage index based on new geographic delineations, adjusts the per diem rate to $745.19, and changes the national urban and rural cost-to-charge ratio (CCR) ceilings to 1.6881 and 1.9041, respectively. The rule also proposes new measures and data submission policies for the IPF Quality Reporting Program. Comments are due by June 23, 2015.  

Under the proposed rule, CMS will create an IPF-specific market basket to replace the Rehabilitation, Psychiatric and Long-Term Care (RPL) market basket. The IPF market basket will be based on FY 2012 cost report data, whereas the RPL market basket is based on 2008 data. CMS announced that the estimated 2.7 percent IPF market basket will be reduced by 0.6 percent for economy-wide productivity (as required by Section 1886(s)(2)(A)(i) of the Social Security Act) and 0.2 percent (as required by Section 1886(s)(2)(A)(ii)), resulting in an estimated market basket update of 1.9 percent. Payments will be further reduced by 0.3 percent, as CMS proposes to update the outlier fixed-dollar loss threshold amount.  In all, payments to IPFs in FY 2016 are estimated to increase over FY 2015 amounts by 1.6 percent. 

The rule will also adopt the new Office of Management and Budget (OMB) Core-Based Statistical Area (CBSA) delineations as they relate to the IPF PPS wage index. The first transition year, beginning October 1, 2015, will blend the wage index for all providers – 50 percent of the FY 2016 IPF wage index with current OMB delineations and 50 percent with the revised OMB delineations.  The new blended wage index will result in 37 IPF providers moving from rural to urban status.  Because this means those 37 providers will lose the 17 percent rural adjustment, CMS proposes to gradually phase-out the rural adjustment for those entities over FYs 2016 and 2017. 

Furthermore, CMS proposes to adjust the IPF per diem rate from $728.31 to $745.19. However, providers that fail to report quality data under the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program will have their per diem rates reduced to $730.56. 

Under the IPF PPS, a hospital receives an outlier payment if its costs exceed a fixed dollar loss threshold amount plus the IPF PPS amount.  IPF-specific CCRs are applied to help make this determination.  Per the proposed rule, the upper threshold CCR for FY 2016 is 1.6881 for urban IPFs and 1.9041 for rural IPFs, both based on the updated CBSA geographic designations.

Lastly, CMS proposes further updates to certain pay-for-reporting requirements of the IPFQR Program.  Under the rule, the program reporting measures will now include tobacco use, alcohol use, metabolic disorders, and maintenance of transition records at discharge or transfer. This brings the total number of IPFQR measures to 16 by FY 2018.  As proposed, IPFs are to report measure data and discharge counts annually, rather than by quarter and patient age.

The proposed rule is expected to be published in the Federal Register on May 1, 2015. A display copy is available here, and the Fact Sheet here.