CMS Publishes Six Proposed Medicare Payment Rules: What It All Means

May 14, 2018

Key themes emerging from the hundreds of pages of proposed Medicare payment and policy rules impacting hospitals and post-acute providers include encouraging price transparency, promoting exchange of healthcare data, and easing the regulatory burden on providers.

The Centers for Medicare & Medicaid Services (CMS) recently released a deluge of proposed Medicare payment updates and policy changes for hospitals and post-acute providers during a 48-hour period.

As Medicare reimbursement continues to evolve into a more patient-outcomes focused payment system, the interplay between both hospitals and post-acute care providers and the reimbursement rules governing their payment becomes more pronounced. Indeed, the agency’s efforts to place “patient-centered care over paperwork” is a common thread that runs through all of the FY 2019 proposed rules regulating the Hospital Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), Inpatient Rehabilitation Facilities (IRF) and Inpatient Psychiatric Facilities (IPF) PPS, Skilled Nursing Facilities (SNF) PPS, and hospice.

To that end, measures to reduce documentation requirements, promote price transparency, and further share healthcare data are being proposed, and are the subject of various Requests for Information and solicitation of stakeholder feedback by CMS.

How well did CMS do? Key highlights of the six proposed rules follow below.

FY 2019 IPPS and LTCH Prospective Payment System Proposed Rule

CMS published the annual policy and payment rate update under the IPPS and LTCH Prospective Payment System (PPS) on May 7, 2018. The proposed rule affects some 3,300 acute care hospitals and 420 LTCHs and applies to discharges occurring on or after October 1, 2018. Comments are due no later than June 25, 2018.

Operating Payment Update

Hospitals that successfully submit quality data in accordance with the Hospital Inpatient Quality Reporting Program and are meaningful electronic health records users in FY 2017 would receive a payment rate increase of 1.75% in FY 2019.

LTCHs would see a payment rate decrease of 0.1% compared to FY 2018 under the continued implementation of the site neutral payment rules applicable to LTCHs.

CMS also proposes to eliminate the “25% threshold policy” adjustment for LTCHs following the expiration of the FY 2018 regulatory moratorium. The elimination of the policy, which had been urged by the industry, is a reflection of CMS’s acknowledgement that its previous implementation of the site-neutral payment methodology in FY 2016 adequately addresses the concern previously targeted by the 25% threshold policy. A one-time permanent adjustment of approximately -0.9% would be imposed on LTCHs to ensure that the policy’s removal is budget neutral.

Uncompensated Care Update

CMS proposes to increase disproportionate share hospital payments by $1.5 billion to $8.25 billion in FY 2019. The increase is notably due to “an updated estimate of the change in the percentage of uninsured individuals since 2014 based on the latest available data,” according to CMS. To determine the distribution of uncompensated care payments, CMS proposes to use Worksheet S-10 data from FY 2014 and FY 2015 cost reports in combination with data on low income days from FY 2013 cost reports.

Interoperability of Electronic Health Records (EHR)

Citing the need to facilitate patient data sharing across various EHR platforms, CMS wants providers to make interoperability improvements to their EHR systems to enhance the flow of information between providers and providers and patients. To that end, CMS has renamed the Meaningful Use Program “Promoting Interoperability (PIP) Programs” and the agency is soliciting stakeholder input on revising the Conditions of Participation to promote electronic data sharing via a Request for Information in the proposed rule.

As part of the overall push for increased interoperability, CMS proposes moving to a new performance-based scoring method with measures in the following four groupings: e-prescribing, health information exchanges, provider to patient exchange, and public health and clinical data exchange. States may be given the option to adopt the scoring method and proposed measures for Medicaid-only eligible hospitals. Measures that do not emphasize interoperability and the electronic exchange of health information will be removed, according to the agency. New measures would also be added for e-prescribing of opioids.

CMS proposes to allow providers to select any continuous 90-day period within each of the calendar years 2019 and 2020 for reporting. The agency also reiterates the requirement that eligible providers use the 2015 Edition of Certified EHR Technology.

Online Posting of Standard Charges

To address the “challenges [that] continue to exist for patients due to insufficient price transparency,” CMS would require providers to post a list of their standard charges on the internet in a machine readable format effective January 1, 2019. The agency’s push for greater pricing transparency aligns it with several state law efforts across the country and growing consumer demand. CMS is soliciting stakeholder feedback on ways to effect greater transparency with regard to helping patients understand what their out-of-pocket costs for hospital services might be and to compare charges for similar services across hospitals. To that end, CMS is seeking public comment on whether “standard charges” should be defined to mean:

…average or median rates for the items on the chargemaster; average or median rates for groups of services commonly billed together (such as for an MS-DRG), as determined by the hospital based on its billing patterns; or the average discount off the chargemaster amount across all payers, either for each item on the chargemaster or for groups of services commonly billed together.

Given the number of payors, the variety of agreements, and uncompensated care issues at many hospitals, the determination of the “standard charge” is a complicated endeavor, and stakeholders should evaluate the proposed definition carefully in light of the potential impact for publication. The agency is seeking comment regarding the enforcement of price transparency requirements, including publicizing complaints about access to price information and/or hospitals that do not comply. Also under consideration is the imposition of civil money penalties on hospitals that fail to make standard charges publically available.

Reporting of “Meaningful Measures”

In furtherance of the Meaningful Measures Initiative launched by CMS in 2017, the agency proposes to reduce the number of measures hospitals are required to report across five quality and value-based purchasing programs. As a result, numerous measures have been slated for elimination or “deduplication” (meaning the measure would be retained in one quality and value-based purchasing program rather than across multiple programs, e.g., Hospital Acquired Conditions measures). This action proposes to eliminate  more than two million hours of work saving hospitals $75 million, according to CMS. A Fact Sheet published by CMS details the eliminated measures and the rationale behind their removal.

Inpatient Admission Order Requirements

CMS proposes to revise the inpatient admission order policy by removing language that states a physician order must be present in the medical record and be supported by the physician admission and progress notes, in order for the hospital to be paid for hospital inpatient services under Medicare Part A. This will be welcome relief for hospitals facing audits and overpayment demands based on the physician order requirement. The agency specifically notes, however, that no changes are being proposed with respect to the “Two-Midnight” payment policy.

Physician Certification and Recertification of Claims

In another beneficial proposal, CMS indicates that it will remove the requirement that Part A certification statements contain the detail regarding where in the medical record the required information supporting the certification can be found. Some providers had experienced denials because physicians were signing the certifications without completing the information on where the supporting information was kept. These denials elevated form over substance as the supporting documentation was, as CMS recognizes, “available to the reviewer.” The proposal is a welcome relief to hospitals facing these technical denials for services furnished on behalf of Medicare beneficiaries.

Expansion of Post-Acute Transfer Policy

In accordance with the Bipartisan Budget Act of 2018, hospital patient discharges to hospices will be subject to the existing Medicare post-acute transfer policy. To that end, CMS proposes to make conforming amendments specifying that if a discharge is assigned to one of the MS-DRGs subject to the post-acute care transfer policy and the individual is transferred to hospice care, the discharge would be subject to reduced payment as a transfer case effective for discharges beginning October 1, 2018. Hospices have expressed concern this could delay appropriate transfers/discharges to hospice care.

Separateness and Control Requirements – IPPS-Excluded Satellites

In another example of elevating substance over form, CMS acknowledged that “there is no compelling policy rationale” for treating satellite facilities and hospitals within a hospital “differently on the issue of separateness and control,” and proposes to remove the requirement that IPPS-excluded satellite facilities of an IPPS-excluded hospital comply with the separateness and control requirements, so long as the satellite of the excluded unit is not co-located with an IPPS hospital.

The agency also proposes to allow certain IPPS-excluded hospitals, such as an LTAC, to operate IPPS-excluded psychiatric and/or rehabilitation units under certain circumstances. Previously, CMS had barred the operation of an IPPS excluded psychiatric unit or IPPS excluded rehabilitation unit within another IPPS exempt hospital for reasons based on the their historical TEFRA-based reimbursement methodologies. The proposal would recognize the different payment methodologies for specialized post-acute care providers and grant greater flexibility for IPPS exempt hospitals to develop their programs. However, the specialty Medicare Conditions of Participation must be met for the entire Medicare certified hospital.

GME Affiliation Agreements – New Urban Teaching Hospitals

CMS is proposing to permit new urban hospitals to enter into a Medicare GME Affiliated Group with other new urban hospitals beginning with affiliation agreements entered into for the July 1, 2019, through June 30, 2020, residency training year. New urban hospitals were previously blocked from forming GME Affiliated Groups with other new urban hospitals due to the regulatory requirement that a new urban hospital’s FTE cap cannot be decreased by virtue of entering into a GME Affiliation Group agreement. The requirement was designed to prevent “gaming” by existing hospitals seeking to use a new hospital’s FTE cap to increase the existing hospital’s cap, but presented a road block for GME Affiliated Groups consisting solely of new urban hospitals. This proposed rule would eliminate that roadblock, but it is limited to GME Affiliated Groups consisting solely of new urban hospitals.

New Technology Add-On Payments

In response to numerous inquiries from the public regarding payment of CAR T-cell therapy under IPPS and the reimbursement complications presented by the recent approval of two CAR T therapy drugs by the US Food and Drug Administration, CMS proposes to assign CAR T therapy procedure codes to MS-DRG 016 under the revised title, “Autologous Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy.” Chimeric Antigen Receptor (CAR) T-cell therapy is a cell-based gene therapy in which a patient’s own T-cells are genetically engineered in a laboratory and used to assist in the patient’s treatment to attack certain cancerous cells. The pharmaceutical companies manufacturing the two approved therapeutics have applied for a new-technology add-on due to the significant cost of the therapy. CMS offered the idea of establishing a new MS-DRG for CAR T-cell therapy as an option for payment, although it raised the implications of budget neutrality, which would redistribute costs from less specialized and costly services to offset the new MS-DRG (and eliminate the need for new technology add-on). CMS invites comment to address the appropriate reimbursement for this new therapy.

FY 2019 IRF, IPF, SNF, and Hospice Proposed Rules

CMS published proposed rules for IRF, IPF, SNF, and hospice payments for FY 2019 on May 8, 2018. Comments on all four rules are due no later than June 26, 2018.

IRF Proposed Rule

IRFs would see an overall payment increase of 0.9% or $75 million in FY 2019. The proposed increase would be identical to the one that was finalized for FY 2018.

To reduce the amount of required paperwork in the IRF setting, CMS proposes to remove the Functional Independence Measure (FIM™) instrument and associated Function Modifiers from the IRF patient assessment instrument (IRF-PAI) effective for discharges on or after October 1, 2019.

The agency is also soliciting comments on removing the face-to-face requirement for rehabilitation physician visits as well as expanding the use of non-physician practitioners (i.e., nurse practitioners and physician assistants) in meeting the IRF coverage requirements. Inasmuch as physician face-to-face requirements in other Medicare benefits—such as home health, DMEPOS, and hospice—have bedeviled those providers and suppliers, often because busy independent physicians have been challenged by documentation associated with the face-to-face encounters, this may be welcome relief for IRFs and physicians treating patients in IRFs.

With respect to the IRF Quality Reporting Program (QRP), CMS proposes to add a new quality measure removal factor and remove NHSN MRSA and seasonal flu vaccination from the IRF QRP measure set, effective October 1, 2018.

As in the IPPS/LTCH proposed rule, CMS includes a Request for Information on sharing of healthcare data and promoting interoperability in the proposed IRF rule.

IPF Proposed Rule

IPFs would receive a net payment increase of 0.98%, or $50 million, for FY 2019.

Beginning with the FY 2020 payment determination, and continuing for subsequent years, CMS is proposing to remove eight Inpatient Psychiatric Facility Quality Reporting Program measures.

As with the other proposed rules discussed herein, CMS includes a Request for Information on solutions for achieving interoperability in the IPF proposed rule.

SNF Proposed Rule

The Bipartisan Budget Act of 2018 established a special rule for FY 2019 that requires the market basket percentage, after the application of the productivity adjustment, to be 2.4% for SNF PPS. As a result, SNF PPS payments would increase by 2.4%, or $850 million, in FY 2019 as compared to FY 2018. This may be welcome relief for many SNFs that operate with extremely thin or negative margins.

CMS proposes to revamp the existing SNF case mix classification system (RUG-IV) with a new “Patient-Driven Payment Model” (PDPM), effective October 1, 2019. Developed as a payment model that “derives payment classifications almost exclusively from verifiable resident characteristics,” the PDPM proposes to separately identify and adjust five different case-mix components for the varied needs and characteristics of a resident’s care. These would then be combined with the non-case mix component to form the full SNF PPS per diem rate for that resident, according to the agency. CMS estimates that the PDPM will result in $2 billion in savings to SNFs over 10 years.

Another factor being proposed by CMS would evaluate a potential measure for removal from the SNF Quality Reporting Program (SNF QRP) measure set, taking into account whether the costs associated with the measure outweigh the benefits of its continued use in the program.

Beginning in CY 2020, CMS proposes to make public data on four SNF-QRP assessment-based measures and increase the number of years of data used in calculating the Medicare Spending Per Beneficiary and Discharge to Community measures from one to two years of data for purposes of public display. Such actions would increase “the number of SNFs with enough data adequate for public reporting,” according to CMS.

Proposed changes to the SNF Value-based Purchasing (VBP) program would include updated performance and baseline periods for subsequent program years, a SNF VBP scoring adjustment for low volume SNFs, and an extraordinary circumstances exception policy. Notably, the agency is “not proposing any changes to the programs’ measures at this time.”

Hospice Proposed Rule

Hospices would receive an increase of 1.8%, or $340 million, in payments for FY 2019, which exceeds the 1% increase received in FY 2018. The aggregate cap that limits the overall payment that is made annually to hospices will also increase 1.8%, or $29,205.44 for cap year 2019.

CMS proposes to implement recognition of physician assistants as attending physicians for hospice beneficiaries as required under the Bipartisan Budget Act of 2018. However, physician assistants are still not permitted to certify or recertify a beneficiary’s terminal prognosis, as the statute limits such certifications of terminal illness to physicians (MDs or DOs).

In an effort to simplify and enhance the use of the Hospice Compare data, CMS proposes to convert the seven component measures display to an expandable/collapsible format such that the component measures would no longer be viewable once the composite measure is displayed. CMS’s rollout last year of the Hospice Compare data had its challenges. This change may enhance the review of Hospice Compare data.

CMS proposes to adopt an additional factor to consider when evaluating measures for removal from the Hospice Quality Reporting Program measure set that takes into account whether the costs associated with a measure outweigh the benefits of its continued use in the program.

With respect to data for the Hospice Item Sent (HIS), CMS recommends that hospices have 4.5 months after the end of each calendar year quarter to review/correct HIS data that will be publically reported, effective January 1, 2019.

Building on the agency’s push for greater interoperability, CMS includes a Request for Information on exchanging healthcare data in the proposed hospice rule.


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