On May 11, 2020, CMS released the Medicare Program’s 2021 Acute Care Hospital Inpatient Prospective Payment Systems (“IPPS”) proposed rule. Scheduled to be published in the May 29, 2020 Federal Register, the proposed rule announces upcoming changes to the IPPS operating and capital rates as required by the statutory provisions of the Affordable Care Act (“ACA”).
In recognition of the impact of the COVID-19 public health emergency, CMS has limited its annual rulemaking required by statute to focus primarily on essential policies.
Overall, Medicare anticipates total spending for inpatient hospital services, including capital, will increase by 1.6%, or $2.07 billion in FFY 2021.
Medicare Base PPS Payment Rates
Medicare’s proposed market basket for FFY 2021 is a 3.0% increase for inflation; however, the following statutory adjustments will lower the net market basket increase to 2.5%:
Productivity adjustment mandated by the ACA of -0.4%
American Taxpayer Relief Act of 2012 documentation and coding adjustment of 0.5%
Outlier and Other Adjustments of -0.6%
CMS proposes to apply a budget neutrality adjustment of .998580 to the standardized amounts to ensure estimated payments to hospitals that see a decline in their wage index for FY 2021, under the proposed wage index transition, would be equal to the estimated payments without the proposed transition.
We caveat that factors such as wage index changes, geographic reclassifications, case mix changes and increases in outlier thresholds will influence the final payments made to an individual hospital.
Outlier Threshold
The proposed regulations set the high cost outlier threshold effective October 1, 2020 to $30,006, an increase from the FFY 2020 rate of $26,473. This adjustment is to ensure the FFY 2021 outlier payment calculations will remain at 5.1% of the total Medicare MS-DRG payments.
Federal Capital Rate
The projected FFY 2021 Federal capital rate of $468.36 is slightly higher than the FFY 2020 rate of $462.33, prior to the application of the geographical adjustment factors and hospital case mix.
Uncompensated Care and Disproportionate Share
CMS will continue to apply the same methodology to Disproportionate Share (“DSH”) hospitals for uncompensated care payments as in previous years, with 25% based on the original DSH method and 75% on the uncompensated care data in accordance with the ACA. In the FFY 2021 proposed rule, CMS anticipates allocating $7.8 billion for Uncompensated Care payments in FFY 2021, a decrease of $534 million from the FFY 2020 pool. CMS will base the allocation using a single year of uncompensated care costs found on the FY 2017 Medicare cost report Worksheet S-10 to distribute the funds. CMS proposes to continue to use data regarding low-income insured days Medicaid days for FY 2013 and FY 2018 SSI days to determine the amount of uncompensated care payments to Puerto Rico hospitals and Indian Health Service and Tribal hospitals for one more year.
Ongoing Worksheet S-10 audits will impact the distribution of the UCC pool dollars, such that a hospital may be eligible to receive more or less than in a prior year.
New Technology
CMS would like to ensure Medicare beneficiaries have access to world-class healthcare and potentially life-saving diagnostics by unleashing innovation in medical technology.
In FY 2021, CMS is proposing to add new technology add-on payments for certain antimicrobials in light of recent concerns regarding the pandemic, and to emphasize the continued importance this issue represents for both Medicare beneficiaries and public health overall. In CMS’s proposed rule, 24 new applications for new technology add-ons were presented. Three technologies were submitted as new medical devices as part of the FDA’s Breakthrough Device Program. Six technologies were submitted as a product that received FDA Qualified Infectious Disease Product designation, while the remaining 15 technologies were submitted under the traditional new technology add-on payment criteria.
Quality Initiatives
CMS continues to adopt numerous changes for quality initiatives for hospitals to report quality data in order to receive the full annual percentage increase in Medicare payments. In the proposed IPPS rule, CMS continues to refine quality initiatives, adding and removing measures for FFY 2021 and subsequent years.
Hospital Acquired Condition Program (“HAC”) – CMS proposes the following policies: (1) Automatically adopt applicable periods or performance periods with the FY 2023 program year and all subsequent program years; (2) refine validation procedures used by Medicare in order to align with the Hospital IQR Program’s validation procedures.
Hospital Inpatient Quality Reporting Program (“IQR”) – This program reduces payment to hospitals that fail to meet program requirements. In the proposed rule for FFY 2021, CMS plans to: (1) make changes to the hospitals reporting of electronic clinical quality measures (eCQMs) by increasing the number of quarters of data reported from one self-selected quarter to four quarters over a three-year period, and beginning public display of the data reported; (2) make changes to the validation process by reducing the number of hospitals selected for validation from up to 800 to up to 400; (3) require the use of electronic submission for chart abstracted measures; and (4) by aligning the data submission quarter, the hospital selection and the scoring processes by providing one combined score for the validation of chart-abstracted measures and eCQMs.
Hospital Readmission Reduction Program (“HRRP”) – This program reduces the hospital base operating DRG payment to account for excess readmissions. The reduction is based on the hospital’s risk-adjusted readmission rate during a 3-year period for the six claim-based outcome measures. For FFY 2021, CMS proposes to automatically adopt applicable performance periods beginning with the FY 2023 program year and all subsequent program years.
Hospital Value Based Purchasing Program (“VBP”) – CMS is not proposing to add or remove from this program at this time. CMS estimates the total dollars available for payments during FY 2021 is approximately $1.9 billion
Medicare and Medicaid Promoting Interoperability Program
CMS continues to make changes to the program to reduce the burden on providers who comply with program requirements. The Interoperability Program was established to empower patients with control of their healthcare data.
CMS is proposing the following: (1) an EHR reporting period for a minimum of any continuous 90-day period in CY 2022 for new and returning participants; (2) to maintain the Electronic Prescribing Objective Query of Prescription Drug Monitoring Program (PDMP) measure as optional and worth 5 bonus points in CY 2021; (3) modify the name of the Support Electronic Referral Loop by Receiving and Incorporating Health Information measure; (4) to increase the number of quarters for which hospitals are required to report eCQM data from one self-selected calendar quarter to four calendar quarters of data over a three-year period.
CMS also plans to continue to align the eCQM reporting requirements with similar requirements under the Hospital Inpatient Quality Program.
Wage Index
In FFY 2021, CMS is finalizing changes to the wage index calculation to improve the accuracy and to correct the disparities between high and low wage index hospitals. CMS will continue to transition the wage index for those hospitals with a wage index below the 25th percentile. The wage index for these hospitals increase by half the difference between applicable wage index value and the 25th percentile wage index across all hospitals.
For the FY 2021 wage index, CMS plans on implementing revised Office of Management and Budget (OMB) delineations, which includes moving 34 counties previously considered urban areas to rural. Recognizing that rural areas have a lower wage index than urban areas, CMS proposes to apply a 5% cap for hospitals that may experience a decline in their final wage index from the prior year. CMS also proposes to move 47 counties from rural to urban.
Inpatient Psychiatric Facilities (“IPF”)
On April 10, 2020 CMS issued the FFY 2021 proposed rule for inpatient Psychiatric facilities. In the proposed rule, Medicare payments are expected to increase by 2.4%, or $100 million in FFY 2021. The proposed increase in the market basket of 3.0% adjusted by the productivity adjustment of -0.4% will result in a Federal per diem base rate for FFY 2021 of $817.59, an increase over the FFY 2020 per diem of $798.55. The proposed rule sets the FFY 2021 fixed dollar threshold to $16,520, an increase from the FFY 2020 rate of $14,960. This adjustment maintains the estimated outlier payments of 2% of the total IPF PPS payments.
CMS is not proposing any changes to the quality reporting program for FFY 2021.
Long Term Acute Care (“LTCH”)
CMS proposes an update to the LTCH standard payment rate of 2.5%, to $43,849.25 for those facilities who submit quality data, an increase over the FY 2020 standard payment rate of $42,677.64. With the end of the statutory transition, site neutral payment rates required under the Pathway for SGR Reform Act of 2013 will no longer be paid at the blended payment rate. Medicare anticipates total spending for LTCH services will decrease $36 million in FFY 2021 resulting in an overall reduction of 0.9%.
Inpatient Rehabilitation Facilities (“IRF”)
The proposed rule for IRFs reflect an increase of 2.5% in the IRF PPS rates. Based on a market-basket increase of 2.9%, reduced by a 0.4% multifactor productivity adjustment, Medicare payments are estimated to increase $270 million in FFY 2021.
CMS proposes to allow non-physician practitioners to perform any of the IRF covered services and documentation performed by a rehab physician, provided they are within the non-physician scope of practice.
CMS is also proposing to no longer require a post-admission physician evaluation within the first 24-hours of the rehab patient’s admission.
Skilled Nursing Facilities (“SNF”)
In the proposed rules, the FFY 2021 SNF payment rates will increase by a 2.3% market basket factor or $784 million. CMS continues to monitor the impact of the Patient-Driven Payment Model (“PDPM”) implemented on October 1, 2019. The PDPM system focuses on a patient’s condition and care needs, rather than the amount of care provided in order to determine payment. The PDPM utilizes ICD-10 codes to classify SNF patients into certain payment groups and CMS is encouraging providers to provide feedback on the ICD-10 mappings so they continue to improve and refine the payment methodology.
CMS will accept comments on the proposed rule by the following dates:
Inpatient Psych and Skilled Nursing Facilities – June 9, 2020
Inpatient Rehab Facilities – June 15, 2020
IPPS and Long Term Care Hospitals – July 10, 2020
SunStone Consulting offers comprehensive Reimbursement, Revenue Integrity and Recovery Solutions specifically geared to assisting providers manage the ever-changing regulatory environment. For more information about the FFY 2021 proposed Rule or any questions regarding our solutions, please contact Jim O’Connell, Senior Principal, at jimoconnell@sunstoneconsulting.com or Linda Randall, Manager at lindarandall@sunstoneconsulting.com