In August 2014 IPPS, CMS implemented a .2% reduction in IPPS rates for federal fiscal year (“FY”) 2014, and has carried that .2% reduction forward in FYs 2015 and 2016. CMS claimed that this .2% reduction was necessary to offset a projected net increase in IPPS cases occasioned by CMS’s “Two Midnight” rule, also adopted in the FY 2014 IPPS rulemaking.

Hundreds of hospitals have sued CMS over the .2% reduction, and their cases have been consolidated before one federal district court judge in Shands Jacksonville Medical Center v. Burwell (“Shands”). Recently, the court in Shands ruled that CMS had failed to provide mandatory notice of, and an opportunity to comment on, the key information the agency had used to rationalize its assumption of a net increase in IPPS cases – specifically, the data and details underlying the CMS’s actuarial assumptions. The court ordered CMS to provide notice of such data and details and an opportunity to comment thereon. The judge warned that the .2% reduction might be vacated if the agency failed to give “meaningful consideration” to the comments and also reserved consideration of various challenges that the reduction was substantively invalid.

On December 1, 2015, CMS published the notice as directed by the Shands court, soliciting comments by February 2, 2016. The major hospital associations submitted comments presenting robust critiques of CMS’s modeling and illustrating further grounds for challenge to CMS’s .2% reduction. When properly considered, the data shows an anticipated net decrease in IPPS cases and – contrary to CMS’s offsetting IPPS rate decrease – arguably justifies raising IPPS rates. The court gave CMS until March 18, 2016, to publish a final notice addressing the comments.

Today, March 18, HHS published a notice in the Federal Register stating that it has requested an extension of the deadline until April 27, 2016, to publish its final notice responding to the comments: https://www.gpo.gov/fdsys/pkg/FR-2016-03-18/pdf/2016-06297.pdf