The Centers for Medicare & Medicaid Services (CMS) has published its proposed rule updating the Medicare acute inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) for fiscal year (FY) 2019. The proposed rule also includes a request for information (RFI) on ways CMS can enhance interoperability in the health care system, along with a comment solicitation on ways to improve price transparency. The agency will accept comments on the proposed rule and RFI through June 25, 2018. The following are highlights of the sweeping regulation.

1.75% Increase in Medicare Acute Hospital Rates. CMS projects that total IPPS payments will increase by about $4.1 billion in FY 2019 compared to FY 2018 levels under the proposed rule. The IPPS national standardized amount would increase by 1.75%, based on a projected 2.8% market basket update that is reduced by a 0.8% multifactor productivity adjustment; further reduced by 0.75% as mandated by the Affordable Care Act (ACA); and increased by 0.5% as required by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). CMS also proposes to boost uncompensated care payments, capital payments, and low-volume hospital payments.

Quality Measures and Quality-Related Payment Adjustments. Updates to acute hospitals are subject to several quality-related adjustments. Potential updates to standardized amounts for FY 2019 under the proposed rule range from a high of 1.255% for a hospital that submits Hospital Inpatient Quality Reporting (IQR) Program data and is a meaningful Electronic Health Record (EHR) user, to a low of -1.55% for a hospital that does not submit quality data and is not a meaningful EHR user. Specific hospital payments can be impacted by various other factors, including penalties for excess readmissions under the Hospital Readmissions Reduction Program (HRRP), poor performance under the Hospital-Acquired Condition (HAC) Reduction Program, and adjustments under the Hospital Value-Based Purchasing (VBP) Program. For instance, CMS estimates that 2,610 hospitals will have their base operating DRG payments reduced under the HRRP by a total of approximately $566 million in FY 2019.

CMS proposes numerous changes to hospital quality and value programs to reduce the burden on hospitals and to align with the Administration’s “Meaningful Measures” initiative. For instance, CMS seeks to “de-duplicate” measures that are currently reported in multiple quality programs and remove various measures that are “topped out,” no longer relevant, or where the burden of data collection outweighs the benefits to quality of care.

Other IPPS Policies. The proposed rule also addresses, among many other things: proposed changes to MS-DRG classifications; new technology add-on payment applications; and limits on payment increases for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis. In addition, CMS invites feedback on alternative approaches to paying for expensive new CAR T-cell therapy drugs, observing that given budget neutrality rules, the agency is “concerned with the redistributive effects away from core hospital services over time toward specialized hospitals and how that may affect payment for these core services.” Furthermore, CMS proposes easing certain hospital documentation requirements and regulatory burdens, including changes to regulations governing satellite facilities and excluded units of hospitals, and revisions to admission order documentation requirements.

LTCH Policy. With regard to LTCHs, CMS projects that the proposed rule would result in an overall 0.1% decrease in LTCH PPS payments in FY 2019. The proposed standard federal rate for FY 2019 is $41,482.98 (compared to $41,415.11 in FY 2018). This rate reflects a 1.15% annual update, a proposed area wage level budget neutrality factor of 0.999713, and a proposed one-time permanent budget neutrality adjustment of 0.990535 in connection with the agency’s proposal to eliminate the “25 Percent Rule” in a budget-neutral manner (discussed below). The annual update for any LTCH that does not submit required data under the LTCH Quality Reporting Program is reduced by 2 percentage points. The proposed fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $30,639, and the proposed fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $27,545.

Under the 25% rule, an LTCH is allowed to admit up to 25% of its patients from a single general acute care hospital; an LTCH faces a significant Medicare reimbursement reduction for patients admitted past the 25% threshold (with certain exceptions). There have been several statutory and regulatory delays in implementation of this policy; most recently, CMS delayed full implementation of the 25% threshold policy through FY 2018. In the FY 2019 proposed rule, CMS proposes to eliminate the 25-percent threshold policy entirely, in a budget neutral manner. Alternatively, CMS invites comments regarding whether the agency should adopt an additional 1-year delay in implementation with a budget neutrality adjustment, or whether the 25-percent threshold policy should be retained in FY 2019 and subsequent years.

Promoting Interoperability and Price Transparency. CMS solicits public comments on the possible establishment of CMS patient health and safety requirements for hospitals and other Medicare-and Medicaid-participating providers and suppliers for interoperable EHR and systems for electronic health care information exchange, along with ways to address barriers that prevent patients from being able to access and control their medical records. CMS also is changing the name of the Medicare and Medicaid EHR Incentive Programs to the Promoting Interoperability Programs to emphasize the electronic exchange of health information between providers and patients.

With regard to price transparency, effective January 1, 2019 CMS is requiring hospitals to make available a list of their current standard charges via the internet in a machine readable format and to update this information at least annually. CMS also seeks comments on a number of actions it could take to help patients understand their potential financial liability for hospital services and to compare charges for similar services across hospitals.