December 4, 2019

Becker’s Healthcare, a leading outlet for business and legal information concerning the healthcare industry, has provided a brief summary of the Inpatient Prospective Payment System (IPPS) Final Rule for 2020 that was released earlier this year by the Centers for Medicare and Medicaid Services (CMS).  The Rule, which addresses Medicare payments made to acute care hospitals, contains significant changes for the 2020 fiscal year (FY).  Becker’s Hospital CFO Report lists eight takeaways from the Rule, which we have distilled down to four major items of interest in our summary below.

Quality Payments to Increase

The Rule provides for a payment increase to those acute care hospitals that (a) report quality data, and (b) are “meaningful users” of electronic health records (EHRs) in 2020.  Specifically, there will be a 3.1 percent increase in Medicare rates in FY 2020 over last year’s rates for hospitals that meet BOTH of the above criteria.

In addition to the above rate change related to quality reporting, the Final Rule includes changes to other payment policies that, when taken together, will boost total IPPS payments to hospitals by nearly $4 billion in fiscal 2020.  This projection by CMS means good news for facilities that have been struggling of late to find that elusive half-full glass.  This is also an indication that the government is committed, at least in part, to the financial health of America’s hospitals.

Cost-Sharing for Hard-Pressed Patients

Becker’s is reporting that CMS will distribute nearly $8.4 billion in Disproportionate Share Hospital (DSH) payments in fiscal 2020.  This reflects an increase of approximately $78 million from 2019 payments.  These payments help to provide at least a modicum of financial assistance to hospitals that provide services to a significant number of indigent or low-income patients.  This increase represents another positive takeaway for hospital CFOs as they look to the coming year.

Payments for New Technology

The Rule increases the maximum add-on payment for new technology (NT), including CAR-T cancer therapy, from 50 percent of estimated costs in fiscal 2019 to 65 percent in FY 2020. In addition, a 75-percent NT add-on payment will be made available for certain antimicrobial technologies.

In a statement published by the American Hospital Association (AHA), Executive Vice President Tom Nickels said the AHA is pleased that CMS increased the add-on payment rate. However, he went on to assert that additional solutions are needed “to address the long-term sustainability of providing these expensive therapies.”

Changes in the Wage Index

For FY 2020, CMS will increase the wage index (WI) for hospitals that have a WI value below the 25th percentile.  The agency will adjust the standardized amounts for all hospitals to make this policy budget neutral.

The Final Rule also finalized changes to the “rural floor” calculation, which requires the WI values for urban hospitals to be no lower than the WI values for rural hospitals in the same state.  Concerning this provision, CMS provided a fact sheet wherein it stated the following:

“It appears that hospitals in a limited number of states have used urban to rural hospital reclassifications to inappropriately influence the rural floor wage index value.  To address the unanticipated effects of rural reclassifications on the rural floor and the resulting wage index disparities created by urban to rural hospital reclassifications, CMS will remove urban to rural hospital reclassifications from the calculation of the rural floor wage index value beginning in FY 2020.”

For additional information on the WI changes, follow the above “fact sheet” link.