The Centers for Medicare & Medicaid Services (CMS) recently issued its proposed rule updating fiscal year (FY) 2018 payment policies and rates under the Medicare inpatient prospective payment system (IPPS). As highlighted below, the proposed rule aims to reduce regulatory burdens for providers and to promote transparency and flexibility in the delivery of care. Comments on the proposed rule are due June 13, 2017. Once finalized, the updated IPPS will apply to all discharges on or after October 1, 2017.

Update to Prospective Payment Rate and Uncompensated Care Payments

Overall, CMS estimates the proposed rule will increase IPPS operating payments by approximately 1.7 percent in FY 2018. CMS also proposed changes to uncompensated care payments resulting in an additional 1.2 percent increase. The agency plans to distribute close to $7 billion in uncompensated care payments, a $1 billion increase from the previous year. This increase results from CMS’s proposal to change its data source for calculating the uninsured rate, by utilizing its National Health Expenditures Account (NHEA) data as opposed to the Congressional Budget Office data. Agency officials believe the NHEA is a more complete data source and estimate that this change will reflect a decrease in the uninsured rate.

Quality Reporting and Incentive Programs

Even as CMS ramps up the Quality Payment Program and initiatives under the Medicare Access and CHIP Reauthorization Act (MACRA), the agency continues using the IPPS rule to introduce new proposals for its legacy quality programs. Most notably, as part of ensuring overall quality of care and patient health, CMS is requesting comment on how to account for social risk factors such as income, education, race and ethnicity, employment, disability, community resources, and social support. CMS wants public input on which social factors are most appropriate to consider, how to statistically account for them and how to operationalize a strategy to include these measures in various programs.

Hospital Value-Based Purchasing (VBP) Program

CMS continues making adjustments to the domain methodology for hospitals receiving a score in fewer than four domains, and has proposed that hospitals in FY 2019 have at least two measure scores in the Safety domain and at least one measure score in the Efficiency and Cost Reduction domains. According to the agency, these changes will “include the greatest number of hospitals in the Hospital VBP Program possible while ensuring the need for TPSs to be sufficiently reliable.” In addition to proposing measures for future program years, CMS will remove one of its long-standing safety measures, the current PSI-90 measure. Given the complexities associated with the ICD-9 and ICD-10 transition, the agency seeks to remove the current PSI-90 measure from the Hospital VBP Program beginning with the FY 2019 program year. A modified version of the measure is planned for FY 2023.

Hospital-Acquired Condition (HAC) Reduction Program

For the FY 2020 HAC Reduction Program, CMS proposes to utilize claims data from July 1, 2016, through June 30, 2017, to calculate the performance results for Domain 1 (Patient Safety and Adverse Events Composite), and from January 1, 2017, through December 31, 2018, to calculate performance results for Domain 2 (National Health and Safety Network measures). The agency is also seeking public feedback on outcomes and patient-safety performance measures. In order to further align with other quality reporting Extraordinary Circumstance Exception policies, CMS proposes to modify the HAC policy effective for requests received in FY 2018 (on or after October 1, 2017).

Hospital Inpatient Quality Reporting (IQR) Program

The proposed rule reduces the number of required electronic quality measures for reporting from eight to six to alleviate some of the burdens associated with successful submission. For the FY 2019 payment determination, hospitals may self-select the quarters they use for reporting this data. For the FY 2020 payment determination, hospitals will use the data from the first three quarters of calendar year 2018. Proposed refinements by CMS to the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey pain management questions will “focus on the hospital’s communications with patients about the patients’ pain during the hospital stay” beginning in FY 2020.

Hospital Readmissions Reduction Program

In order to meet the statutory mandates of the 21st Century Cures Act, changes to the excess readmissions adjustment factor will occur for patients eligible for both Medicare and Medicaid. CMS plans to implement a methodology that groups hospitals into five peer groups. Essentially, by grouping the hospitals in a manner relative to their federal payment similarities, CMS officials believe that performance will in turn account for the patient population and socioeconomic adjustment. Consistent with its definition of “applicable period,” the agency proposes to calculate the excess readmissions ratio and payment adjustment using data from July 1, 2013, through June 30, 2016.

Other Proposals

CMS seeks public comment on two areas vexing to the healthcare industry. The first deals with how the current scope and restrictions on physician-owned hospitals affect healthcare delivery. The second focuses on reducing burdens for providers and patients, improving quality while decreasing costs, and “mak[ing] the health care system more effective, simple and accessible.” Targeting regulatory simplification, the proposed rule is soliciting ideas for payment system redesign, streamlined reporting, improved monitoring and documentation, and enhanced mechanisms for feedback.

In response to stakeholder input and to lower the administrative burden on providers, the proposed rule makes the 96-hour certification requirement for Critical Access Hospitals (CAHs) a low priority for medical record reviews conducted on or after October 1, 2017, unless CMS or its contractors find evidence of fraud, abuse or waste.

Lastly, in keeping with the agency’s goal to increase transparency in healthcare, CMS proposes that accrediting organizations make a facility’s survey reports and any associated plans of correction for the most recent three years publicly available on the accrediting organization’s website within 90 days after this information is made available to the facility.