May 13, 2020

On May 11, 2020, the Centers for Medicare and Medicaid Services (CMS) released the Fiscal Year (FY) 2021 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Proposed Rule.  According to the agency, the proposed rule signals the government’s intention of achieving the following objective: “transforming the healthcare delivery system through competition and innovation to provide patients with better value and results.”  The deadline for submitting comments on the proposed rule is July 10, 2020.

By way of background, federal law requires CMS to update payment rates for IPPS hospitals annually.  CMS is proposing to collect a summary of hospitals’ median payer-specific negotiated inpatient service charges for Medicare Advantage organizations and third-party payers. The agency hopes to use this data to “set relative Medicare payment rates for hospital procedures.”  The proposed changes for fiscal 2021 would apply to approximately 3,200 acute care hospitals, affecting discharges occurring on or after October 1, 2020.

On the same day that CMS released the proposed rule, it also published a fact sheet to help hospital executives navigate its many provisions.  The following will act to summarize some of the key elements and excerpts found in that fact sheet.

Encouragement of Innovation

In this proposed rule, CMS presents 24 new applications for new technology add-on payment for FY 2021. Additionally, CMS proposes to continue the new technology add-on payments for 10 of the 18 technologies currently receiving the add-on payment (the remaining 8 technologies will no longer be within their newness period in FY 2021, which includes the Chimeric Antigen Receptor (CAR) T-cell therapies approved for the new technology add-on payment in FY 2019).

CMS is proposing to expand the alternative new technology add-on payment pathway for antimicrobial products designated by FDA as QIDPs to include products approved under FDA’s Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway). Under this proposal, an antimicrobial drug approved under FDA’s LPAD pathway would be considered new and not substantially similar to an existing technology and would not need to demonstrate that it meets the substantial clinical improvement criterion; but rather only the cost criterion.

New MS-DRG for Chimeric Antigen Receptor (CAR) T-cell Therapy

Building on the actions CMS has taken to date for payments for new medical technologies, CMS is proposing to create a new MS-DRG specifically for cases involving CAR T-cell therapies. The new payment group would help to predictably compensate hospitals for their costs in delivering necessary care to Medicare beneficiaries and provide payment flexibility for the future as new CAR T-cell therapies become available.

Payment Rates

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 approximately 3.1 percent. CMS projects the rate increase, together with other proposed changes to IPPS payment policies, will increase IPPS operating payments by approximately 2.5 percent. Proposed changes in uncompensated care payments, new technology add-on payments, and capital payments will decrease IPPS payments by approximately 0.4 percent. Therefore, CMS estimates a total increase in overall IPPS payments of approximately 1.6 percent.

Adjustments

Hospitals may be subject to other payment adjustments under the IPPS, including:

• Penalties for excess readmissions, which reflect an adjustment to a hospital’s performance relative to other hospitals with a similar proportion of patients who are dually eligible for Medicare and full-benefit Medicaid
• Penalty (1 percent) for worst-performing quartile under the Hospital-Acquired Condition

Medicare Uncompensated Care Payments

CMS proposes distributing roughly $7.8 billion in uncompensated care payments in FY 2021, a decrease of approximately $0.5 billion from FY 2020.  In addition, CMS is proposing for all eligible hospitals, except Indian Health Service and Tribal hospitals, to use the most recent available single year of audited Worksheet S-10 data to distribute uncompensated care payments for all subsequent fiscal years.  An increased number of hospitals audited for Worksheet S-10 with future cost reporting years is expected.

Graduate Medical Education Policy

CMS is proposing to expand the existing definition of who is considered a displaced resident (beyond residents who are physically present at the hospital training on the day prior to or the day of hospital or program closure). These proposed policies would provide greater flexibility for the residents to transfer while the hospital operations or residency programs were winding down, and would allow funding to be transferred for certain residents who are not physically at the closing hospital program.

Hospital-Acquired Condition (HAC) Reduction Program

CMS is proposing to automatically adopt applicable periods (i.e., performance periods for measures used in the Program) beginning with the FY 2023 program year and all subsequent program years and update the definition of applicable period at 42 CFR 412.170.  The proposed rule also calls for a refining of validation procedures used by the Program in order to align with the Hospital IQR Program’s validation procedures, which happen concurrently.

Hospital Readmissions Reduction Program (HRRP)

CMS is proposing to automatically adopt applicable periods (i.e., performance periods for measures used in the Program) beginning with the FY 2023 program year and all subsequent program years, and update the definition of applicable period at 42 CFR 412.152 to align with the automatic adoption proposal.

Hospital Value-Based Purchasing (VBP) Program

The Hospital VBP Program adjusts payments to hospitals under the IPPS for inpatient services based on their performance. CMS is providing estimated and newly established performance standards for certain measures for the FY 2023, FY 2024, FY 2025, and FY 2026 program years. CMS is not proposing to add new measures or remove measures from the Hospital VBP Program in the 2021 proposed rule.

May 13, 2020

On May 11, 2020, the Centers for Medicare and Medicaid Services (CMS) released the Fiscal Year (FY) 2021 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Proposed Rule.  According to the agency, the proposed rule signals the government’s intention of achieving the following objective: “transforming the healthcare delivery system through competition and innovation to provide patients with better value and results.”  The deadline for submitting comments on the proposed rule is July 10, 2020.

By way of background, federal law requires CMS to update payment rates for IPPS hospitals annually.  CMS is proposing to collect a summary of hospitals’ median payer-specific negotiated inpatient service charges for Medicare Advantage organizations and third-party payers. The agency hopes to use this data to “set relative Medicare payment rates for hospital procedures.”  The proposed changes for fiscal 2021 would apply to approximately 3,200 acute care hospitals, affecting discharges occurring on or after October 1, 2020.

On the same day that CMS released the proposed rule, it also published a fact sheet to help hospital executives navigate its many provisions.  The following will act to summarize some of the key elements and excerpts found in that fact sheet.

Encouragement of Innovation

In this proposed rule, CMS presents 24 new applications for new technology add-on payment for FY 2021. Additionally, CMS proposes to continue the new technology add-on payments for 10 of the 18 technologies currently receiving the add-on payment (the remaining 8 technologies will no longer be within their newness period in FY 2021, which includes the Chimeric Antigen Receptor (CAR) T-cell therapies approved for the new technology add-on payment in FY 2019).

CMS is proposing to expand the alternative new technology add-on payment pathway for antimicrobial products designated by FDA as QIDPs to include products approved under FDA’s Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway). Under this proposal, an antimicrobial drug approved under FDA’s LPAD pathway would be considered new and not substantially similar to an existing technology and would not need to demonstrate that it meets the substantial clinical improvement criterion; but rather only the cost criterion.

New MS-DRG for Chimeric Antigen Receptor (CAR) T-cell Therapy

Building on the actions CMS has taken to date for payments for new medical technologies, CMS is proposing to create a new MS-DRG specifically for cases involving CAR T-cell therapies. The new payment group would help to predictably compensate hospitals for their costs in delivering necessary care to Medicare beneficiaries and provide payment flexibility for the future as new CAR T-cell therapies become available.

Payment Rates

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 approximately 3.1 percent. CMS projects the rate increase, together with other proposed changes to IPPS payment policies, will increase IPPS operating payments by approximately 2.5 percent. Proposed changes in uncompensated care payments, new technology add-on payments, and capital payments will decrease IPPS payments by approximately 0.4 percent. Therefore, CMS estimates a total increase in overall IPPS payments of approximately 1.6 percent.

Adjustments

Hospitals may be subject to other payment adjustments under the IPPS, including:

• Penalties for excess readmissions, which reflect an adjustment to a hospital’s performance relative to other hospitals with a similar proportion of patients who are dually eligible for Medicare and full-benefit Medicaid
• Penalty (1 percent) for worst-performing quartile under the Hospital-Acquired Condition

Medicare Uncompensated Care Payments

CMS proposes distributing roughly $7.8 billion in uncompensated care payments in FY 2021, a decrease of approximately $0.5 billion from FY 2020.  In addition, CMS is proposing for all eligible hospitals, except Indian Health Service and Tribal hospitals, to use the most recent available single year of audited Worksheet S-10 data to distribute uncompensated care payments for all subsequent fiscal years.  An increased number of hospitals audited for Worksheet S-10 with future cost reporting years is expected.

Graduate Medical Education Policy

CMS is proposing to expand the existing definition of who is considered a displaced resident (beyond residents who are physically present at the hospital training on the day prior to or the day of hospital or program closure). These proposed policies would provide greater flexibility for the residents to transfer while the hospital operations or residency programs were winding down, and would allow funding to be transferred for certain residents who are not physically at the closing hospital program.

Hospital-Acquired Condition (HAC) Reduction Program

CMS is proposing to automatically adopt applicable periods (i.e., performance periods for measures used in the Program) beginning with the FY 2023 program year and all subsequent program years and update the definition of applicable period at 42 CFR 412.170.  The proposed rule also calls for a refining of validation procedures used by the Program in order to align with the Hospital IQR Program’s validation procedures, which happen concurrently.

Hospital Readmissions Reduction Program (HRRP)

CMS is proposing to automatically adopt applicable periods (i.e., performance periods for measures used in the Program) beginning with the FY 2023 program year and all subsequent program years, and update the definition of applicable period at 42 CFR 412.152 to align with the automatic adoption proposal.

Hospital Value-Based Purchasing (VBP) Program

The Hospital VBP Program adjusts payments to hospitals under the IPPS for inpatient services based on their performance. CMS is providing estimated and newly established performance standards for certain measures for the FY 2023, FY 2024, FY 2025, and FY 2026 program years. CMS is not proposing to add new measures or remove measures from the Hospital VBP Program in the 2021 proposed rule.

To view the full fact sheet, which contains more details on the proposed rule—including information on the Hospital Inpatient Quality Reporting (IQR) Program and the Promoting Interoperability Programs—please click on the following link: https://www.federalregister.gov/public-inspection.

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