Today, the Trump Administration proposed changes to further the agency’s priority to transform the healthcare delivery system through competition and innovation while providing patients with better value and results. The proposed rule would update Medicare payment policies for hospitals under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) for fiscal year 2020 and advances two key CMS priorities, “Rethinking Rural Health” and “Unleashing Innovation,” by proposing historic changes to the way Medicare pays hospitals.
“One in five Americans are living in rural areas and the hospitals that serve them are the backbone of our nation’s healthcare system,” said CMS Administrator Seema Verma. “Rural Americans face many obstacles as the result of our fragmented healthcare system, including living in communities with disproportionally higher poverty rates, more chronic conditions, and more uninsured or under insured individuals. The Trump Administration is committed to addressing inequities in healthcare, which is why we are proposing historic Medicare payment changes that will help bring stability to rural hospitals and improve patients’ access to quality healthcare.”
The inpatient hospital wage index specifies how inpatient payment rates are adjusted to account for local differences in wages that hospitals face in their respective labor markets. It is intended to measure differences in hospital wage rates across geographic regions and is updated annually based on wage data reported by hospitals. Hospitals located in areas with wages less than the national average receive a lower Medicare payment rate than hospitals located in areas with wages higher than the national average. For example, a hospital in a rural community could receive a Medicare payment of about $4,000 for treating a beneficiary admitted for pneumonia while a hospital in a high wage area (like many urban communities) could receive a Medicare payment of nearly $6,000 for the same case, due to differences in their wage index.
In last year’s proposed rule, CMS invited comments on changes to the Medicare inpatient hospital wage index. Many responses reflected a common concern that the current wage index system makes the disparities between high and low wage index hospitals worse. High wage index hospitals, by virtue of higher Medicare payments, can afford to pay their staff more, allowing the hospitals to continue operating as high wage index hospitals. Conversely, low wage index hospitals often cannot afford to pay wages that would allow them to climb to a higher wage index. Over time, this creates a downward spiral that increases the disparity in payments between high wage index hospitals and low wage index hospitals, and payment for rural hospitals and other low wage index hospitals declines.
To address these disparities, CMS is proposing to increase the wage index of low wage index hospitals. This change would ensure that people living in rural areas have access to high quality, affordable healthcare. CMS is considering several ways to implement this change, and the agency looks forward to comments on the different approaches.
The Trump Administration is also announcing proposals that would ensure Medicare beneficiaries have access to a world-class healthcare system by unleashing innovation in medical technology and removing potential barriers to innovation and competition in order to expedite access to novel medical technology.
“Transformative technologies are coming to the private market, but Medicare’s antiquated payment systems have not contemplated these technologies,” said Verma. “I am particularly concerned about cases that have been reported to the agency in which Medicare’s inadequate payment has led hospitals to curtail access to needed therapies. We must continually update our policies in response to the rapid pace of advancement in medical science.”
Federal healthcare organizations, such as CMS, have spent billions of dollars over the years trying to bridge the gap between medical data and quality patient care with interoperability requirements and data integration, the mesh used to try and bridge the gap. Many government rules have been written to address the type of mesh needed and many EHR companies have claimed to meet these government requirements and claim the throne of the ultimate mesh maker.
However, hospitals and clinics found the mesh contained many holes, such as enabling hospitals to customize EHRs, but only if the EHR customers purchased the EHR systems for the manufacturers for millions of dollars that hospitals could ill afford. Also issues such as proprietary connectivity to their own brands that left the hospitals’ other EHR systems to serve as dead-end data silos. Rules and solutions came and went, but few had any teeth until now.
Anyone for A Slice Of PI?
To end the lack of interoperability morass and data duplication, the Department of Health and Human Services (HHS) issued 1,883 pages of proposed changes to Medicare and Medicaid. The changes rename the Merit-Based Incentive Payment System (MIPS) Advancing Care Information performance category to Promoting Interoperability (PI).
CMS announced the change as part of a proposed rule that will transform the EHR Incentive Programs commonly known as meaningful use under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS). The proposed policies are part of the MyHealthEData initiative, which prioritizes patient health data access and interoperability improvements.
But this time the name change wasn’t just that. For the first time a new CMS rule specifically requires providers to share data to participate in the life blood of hospital reimbursement—Medicare and Medicaid. The rule also floats the idea of revising Medicare and Medicaid co-pays to require hospitals to share patient records electronically with other hospitals, community providers and patients — a clear-cut demand for interoperability.
PI also reduces hospital interoperability requirements from 16 to six, revamping the program to a points-based scoring system and is requiring that hospitals make patients’ EHRs available to them on the day they leave the hospital beginning in 2019.
Does Your EHR Have the Right Stuff?
While this news from CMS appears to be a step in the right direction to solve a problem that has plagued the healthcare industry for many years, it must first be made a reality by those ultimately responsible for its implementation—hospital HIT organizations. The days of data obstruction and silo logic must end with a focus on new EHR markets built on interoperability.
Interoperability requires multiple layers to demonstrate an EHR system can be accessed. Meanwhile, every EHR system claims to support some form of interoperability, ranging from web interfaces to API protocols or to the lowest and highest cost HL7. However, healthcare systems will have to demonstrate their operability to CMS to abide by PI and therefore allow access of their EHR systems. Hospitals and clinics can encounter many challenges with this, such as HIPAA compliance and support for their infrastructure for open secure access, requiring an HIE and the funds to support data synchronization and IT support.
On Apr. 17, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a proposed 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 proposed rule, which would apply to approximately 3,400 acute care hospitals and approximately 435 LTCHs, would affect discharges occurring on or after Oct.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 to the hospital’s geographic area.
The proposed rule proposes 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 healthcare system at large, toward paying providers based on the quality, rather than the quantity of care they give patients.
This fact sheet discusses major provisions of the proposed rule.
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.” LTCHs are paid according to a separate market basket based on LTCH-specific goods and services.
Changes and Updates in FY 2016 Policies
Proposed Changes to Payment Rates under IPPS
The proposed 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 are meaningful electronic health record (EHR) users is 1.1 percent. This reflects the projected hospital market basket update of 2.7 percent adjusted by -0.6 percentage point for multi-factor productivity and an additional adjustment of -0.2 percentage point in accordance with the Affordable Care Act; like last year, the rate is further decreased by a proposed 0.8 percent 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 EHR user will be reduced by one-half of the market basket update in FY 2016.
Guest post by Ken Perez, vice president of healthcare policy, Omnicell.
On April 30, 2014, the Centers for Medicare & Medicaid Services issued its proposed rule for the Inpatient Prospective Payment System (IPPS), which pays about 3,400 acute care hospitals, and the Long-term Care Hospital Prospective Payment System (LTCH PPS), which pays about 435 LTCHs.
The issuance of this proposed rule is a significant event, as it discloses CMS’s intent regarding the average change (increase or decrease) to the IPPS reimbursement rate, what one might call an “annual inflation adjustment.”
While CMS projects that the payment rate update to general acute care hospitals will be 1.3 percent in FY 2015—which on the face of it doesn’t look too bad—it’s important to understand how CMS arrived at that figure, what is the projected overall impact on hospital payments because of other regulatory changes, and how the proposed update compares with the recommendation of the nonpartisan Medicare Payment Advisory Commission (MedPAC).
How did CMS arrive at the 1.3 percent update (adjustment)?
CMS started with a proposed annual market basket update (inflation projection) from research firm IHS of 2.7 percent. That starting point was then reduced, per the Affordable Care Act, by a multi-factor productivity adjustment of 0.4 percent and a specified reduction to the market basket update of 0.2 percent, yielding 2.1 percent. Then CMS reduced it by a documentation and coding recoupment adjustment (basically to correct for past, unintended documentation and coding over payments) of 0.8 percent, resulting in a net update of 1.3 percent.