On July 31, 2009, the Centers for Medicare & Medicaid Services (CMS) released its final fiscal year (FY) 2010 Medicare policies and payment rates for acute inpatient prospective payment system (IPPS) hospitals. The rule reflects a 2.1% market basket update, derived using a rebased and revised market basket. In order to receive the full market basket update, hospitals must successfully participate in the Hospital Quality Data for Annual Payment Update (RHQDAPU) program; hospitals that do not participate in the quality reporting program will get the update less 2 percentage points. In a significant change from the proposed rule, CMS has decided not to implement a negative 1.9% across-the-board budget neutrality adjustment to compensate for higher aggregate payments resulting from changes in hospital coding practices associated with the new Medicare Severity Diagnosis-Related Groups (MS-DRGs) patient classification system that do not, in CMS' view, reflect increases in patient acuity. Based on public comments, CMS has decided not to make the adjustment in FY 2010 without complete data on FY 2009 spending, but the agency will consider phasing in future adjustments over an extended period beginning in FY 2011 depending on further data analysis. CMS also is not making any policy changes related to MS-DRG relative weights in FY 2010. Among other things, the final rule also: adds four new measures for reporting under the RHQDAPU program; increases the outlier threshold to $23,140 (compared to $24,240 in the proposed rule), provides teaching hospitals with the full capital indirect medical education adjustment in FY 2010 (instead of finalizing CMS’s proposal to phase out the adjustment); establishes a 68.8% labor-related share for FY 2010; adjusts payment for disproportionate share hospitals, modifies regulations regarding the waiver of Emergency Medical Treatment and Labor Act (EMTALA) sanctions during an emergency; continues implementation of wage index adjustments; clarifies the definition of a new medical residency training program; implements a number of revisions to critical access hospital policies; and finalizes MS-DRG reassignments for certain orthopedic procedures. The final rule also provides an update on the status of five applications for new technology add-on payments discussed in the proposed rule, three of which were subsequently withdrawn. CMS approved the Spiration® IBV® Valve System for new technology payment of up to $3,437.50 per case because the technology represents a new treatment option for patients with prolonged air leaks following certain lung surgeries and may prevent some patients from having to undergo another invasive lung surgery to resolve the air leak. CMS did not approve the LipiScan™ Coronary Imaging System for new technology add-on payment because CMS determined there was not sufficient available evidence to demonstrate that the technology represents a substantial clinical improvement relative to existing technologies. As discussed below, the IPPS rule also includes changes to the long-term care hospital (LTCH) payment policies. The rule is scheduled to be published in the Federal Register on August 27, 2009, and it generally is effective October 1, 2009.