Fiscal Year 2016 Final Inpatient and Long-term Care Hospital policy and payment changes (CMS-1632-F)
On July 31, 2015 the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update fiscal year (FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS). The final rule, which will apply to approximately 3,400 acute care hospitals and approximately 435 LTCHs, will affect discharges occurring on or after October 1, 2015.
The IPPS pays hospitals for services provided to Medicare beneficiaries using a national base payment rate, adjusted for a number of factors that affect hospitals’ costs, including the patient’s condition and market conditions in the hospital’s geographic area.
The final rule includes policies that continue a commitment to increasingly shift Medicare payments from volume to value. The Administration has set measurable goals and a timeline to move the Medicare program, and the health care system at large, toward paying providers based on the quality, rather than the quantity of care they give patients. The final rule includes policies that advance that vision and of several final rules that reflect a broader Administration-wide strategy to create a health care system that results in better care, smarter spending, and healthier people.
This fact sheet discusses major provisions of the final rule.
Background
CMS pays acute care hospitals (with a few exceptions specified in the law) for inpatient stays under the IPPS and long-term care hospitals under the LTCH PPS. Under these two payment systems, CMS generally sets payment rates prospectively for inpatient stays based on the patient’s diagnosis and severity of illness. A hospital receives a single payment for the case based on the payment classification – MS-DRGs under the IPPS and MS-LTC-DRGs under the LTCH PPS – assigned at discharge.
By law, CMS is required to update payment rates for IPPS hospitals annually, and to account for changes in the costs of goods and services used by these hospitals in treating Medicare patients, as well as for other factors. This is known as the hospital “market basket.”
Changes and Updates in FY 2016 Policies
Changes to Payment Rates under IPPS
The increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of certified electronic health record (EHR) technology is 0.9 percent. This reflects the hospital market basket update of 2.4 percent adjusted by -0.5 percentage points for multi-factor productivity and an additional adjustment of -0.2 percentage points in accordance with the Affordable Care Act; like last year, the rate is further decreased by 0.8 percentage points for a documentation and coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.
Hospitals that do not successfully participate in the Hospital IQR Program and do not submit the required quality data will be subject to a one-fourth reduction of the market basket update. Also, the law requires that the update for any hospital that is not a meaningful user of EHR will be reduced by one-half of the market basket update in FY 2016. Other payment adjustments will include continued penalties for readmissions, a continued -1 percent penalty for hospitals in the worst performing quartile under the Hospital Acquired Condition Reduction Program, and continued bonuses and penalties for hospital-valued based purchasing.
Potential Expansion of Bundled Payments for Care Improvement Initiative
In 2011, CMS launched the Bundled Payments for Care Improvement (BPCI) initiative. The BPCI initiative links payments for multiple services during an episode of care into a bundled payment. BPCI episodes initiate either with an inpatient stay or with post-acute services following a qualifying inpatient stay. CMS is continuing to implement the initiative, which is testing four models of care with hundreds of providers across the country.
In the rule, CMS thanks commenters for their feedback on policy and operational issues surrounding the potential future expansion of this initiative.
Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act of 2012 requires CMS to recover $11 billion by 2017 to fully recoup documentation and coding overpayments related to the transition to the MS-DRGs that began in FY 2008. For FY 2016, CMS is continuing the approach begun in FY 2014 by making another -0.8 percent adjustment.
Long-Term Care Hospital Prospective Payment System Changes
Nationwide, most chronically ill patients are treated in acute care hospitals, but some are admitted to LTCHs. The Pathway for SGR Reform Act of 2013 directed CMS to make significant changes to the payment system for LTCHs. The law directs CMS to establish two different types of LTCH PPS payment rates depending on whether the patient meets certain clinical criteria: the LTCH PPS standard Federal payment rate and a new LTCH PPS site neutral payment rate comparable to the IPPS payment rates. The law provides a two-year transition period for those paid at the site neutral payment rate. During that transition, site neutral payment rate cases are paid based on a 50/50 blend of the LTCH PPS standard Federal payment rate and the LTCH PPS site neutral payment rate. In the final rule, CMS is implementing these statutory requirements.
CMS projects that LTCH PPS payments will decrease by -4.6 percent, or approximately $250 million, based on the final payment rates for FY 2016. This estimated decrease is primarily attributable to the statutory decrease in the payment rates for site neutral payment rate cases that do not meet the clinical criteria to qualify for the standard Federal payment rate. Cases that do qualify for the higher standard Federal payment rate will see an increase in that payment rate of 1.7 percent (based on a market basket update of 2.4 percent adjusted by a multi-factor productivity adjustment of -0.5 percentage point and an additional adjustment of -0.2 percentage point in accordance with the Affordable Care Act).
Medicare Disproportionate Share Hospital (DSH) Payments
Beginning in FY 2014, the Affordable Care Act changed the Medicare DSH payment methodology. Hospitals now receive 25 percent of the amount they previously would have received under the statutory DSH formula. The remainder, equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH, is aggregated nationally, adjusted for decreases in the rate of uninsured individuals and other factors, and then distributed to hospitals based on their relative share of the total amount of uncompensated care. In this rule, CMS is distributing an estimated $6.4 billion in uncompensated care payments in FY 2016, a decrease of $1.2 billion from the estimated FY 2015 amount. This decrease is primarily attributable to continued declines in the number of uninsured individuals since the passage of the Affordable Care Act.
Electronic Health Record Incentive Programs and Quality Reporting
This final rule also includes the requirements for eligible hospitals and critical access hospitals participating in electronic reporting of clinical quality measures (CQMs) for the EHR Incentive Programs and the Hospital IQR Program. CMS is finalizing modifications to some of the proposed policies regarding CQM reporting and submission requirements to align the CQM reporting period for electronic reporting for both programs, to specify the options for the Editions of certified EHR technology providers may use, and to establish requirements for the version of electronic specifications (eCQMs) a provider must use for electronic submission of quality reporting data.
Hospital Inpatient Quality Reporting (IQR) Program
In the final rule, CMS is updating the measures used in the Hospital IQR Program. CMS will add a total of seven new measures: three new claims-based measures and one structural measure for the FY 2018 payment determination and subsequent years; and three new claims-based measures for the FY 2019 payment determination and subsequent years. For the FY 2018 payment determination and subsequent years, CMS also proposes to remove nine measures, two of which are suspended, as well as refine two previously adopted measures to expand measure cohorts.
In addition, CMS is finalizing changes in relation to eCQMs. CMS is extending its policy that hospitals not required to also chart-abstract and submit STK-01 if they submit the STK-02, STK-03, STK-04, STK-05, STK-06, STK-08, and STK-10 as electronic clinical quality measures for the CY 2015/FY 2017 payment determination. Also, CMS is finalizing modifications of its proposals and will require hospitals to submit four of 28 available eCQMs of their choice beginning in CY 2016 for the FY 2018 payment determination. Additionally, hospitals will be required to submit one quarter (either Q3 or Q4) of electronic data in CY 2016 by February 28, 2017.
Hospital Value-Based Purchasing (VBP) Program
Established by the Affordable Care Act, the Hospital VBP Program adjusts payments to hospitals for inpatient services based on their performance on a set of measures. In the final rule, CMS is finalizing updates to the Hospital VBP Program and expanding the number of measures. Specifically, the rule adds a care coordination measure beginning with the FY 2018 program year and a 30-day mortality measure for chronic obstructive pulmonary disease beginning with the FY 2021 program year. CMS will also remove two measures, effective with the FY 2018 program year. Additionally, the rule signals future policy changes that will affect certain National Health Safety Network measures beginning with the FY 2019 program year.
Hospital-Acquired Conditions (HAC) Reduction Program
In the FY 2016 IPPS/LTCH PPS Final Rule, CMS is finalizing: (1) the dates of the time period used to calculate hospital performance, (2) an expanded population for two measures that are already included in the program, (3) an adjustment to the relative contribution of each domain to the Total HAC Score, (4) an adjustment to the relative contribution of each measure within Domain 2, and (5) an extraordinary circumstance exception policy.
Hospital Readmissions Reduction Program
In the FY 2016 IPPS/LTCH PPS Final Rule, CMS is finalizing a refinement of the pneumonia readmission measure that expands the measure cohort. This finalized measure is a modification from what was proposed. CMS is also finalizing the formal adoption of an extraordinary circumstance exception policy.
CMS is also continuing to monitor the impact of socioeconomic status on provider results in our quality programs, and is working with the National Quality Forum as they undertake a two-year trial to test sociodemographic factor risk adjustment. The Office of the Assistant Secretary for Planning and Evaluation is currently researching the impact of sociodemographic status as directed by the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act), and CMS will closely examine the findings presented in their reports to Congress and related Secretarial recommendations at such time as they are available.
Long Term Care Hospital Quality Reporting Program (LTCH QRP)
Beginning in FY 2014, the applicable annual update for any LTCH that did not submit the required data to CMS is subject to a 2 percentage point reduction. The IMPACT Act requires the specification of quality measures for the LTCH QRP, including such areas as skin integrity, functional status measures, such as mobility and self-care, as well as incidence of major falls.
In order to satisfy the cross-setting requirements of the IMPACT Act, CMS is adding one new functional status quality measure (an Application of Percent of LTCH Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function (NQF #2631; recommended for NQF endorsement)), as well as two previously finalized quality measures (Percent of Residents or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) and an Application of Percent of Residents Experiencing One or More Falls with Major Injury (Long Stay) (NQF #0674)). CMS is additionally adopting the previously finalized All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from LTCHs (NQF #2512), in order to establish the newly NQF-endorsed status of this measure. Finally, CMS is finalizing a policy to begin to publically report quality data by fall 2016 on a CMS website, such as Hospital Compare.
PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
Established by the Affordable Care Act, the PCHQR program collects and publishes data on an announced set of quality measures. In the final rule, CMS is finalizing three new patient safety measures under this program. Specifically, the rule finalizes adding a Clostridium difficile (C. difficile) infection outcome measure, a Hospital-Onset Methicillin-resistant Staphylococcus aureus (MRSA) bacteremia outcome measure, and a measure of Influenza vaccination coverage among healthcare personnel. CMS is also finalizing removing six Surgical Care Improvement Project (SCIP) measures and publicly displaying six additional PCHQR measures.
The final rule will publish in the Federal Register on August 17, 2015 and can be downloaded from the Federal Register at https://www.federalregister.gov/public-inspection. Comments are due September 29, 2015 and the rule is effective October 1, 2015.
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