On July 25, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule (on display in the Federal Register) titled Advancing Care Coordination through Episode Payment Models (EPMs).

The proposed rule would create mandatory episode payment models for acute myocardial infarction (AMI) and CABG in certain geographical areas (98 metropolitan statistical areas in all) that would be randomly selected for participation.

Similar to the Comprehensive Care for Joint Replacement (CJR) mandatory bundle, hospitals will become the risk-bearing entity for the five-year pilot, which is proposed to start on July 1, 2017 and continue through Dec. 31, 2021. Also included in the proposed rule is a cardiac rehabilitation incentive payment episode. Eligible clinicians participating in the acute myocardial infarction (AMI) and the CABG episodes will have the opportunity to qualify as participants in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) Advanced Alternative Payment Model as well, with a proposed start date in 2018.  

The episode is slated to begin upon inpatient admission to an anchor hospital and will include medical and surgical services for beneficiaries during the hospital stay while also covering the 90-day period post-discharge. The proposed rule includes certain MS-DRG designations included for AMI, percutaneous coronary intervention (PCI), and CABG.  

This proposed rule is a continuation of the movement to a value-based system announced by U.S. Department of Health and Human Services Secretary Sylvia Mathews Burwell in January 2015. The proposed rule does include information on existing programs under the direction of CMS’s Center for Medicare and Medicaid Innovation that would have beneficiary exclusions. In addition to meeting financial targets in the model, quality measure targets are also included for both AMI and CABG.  

While the episode payment models (EPMs) are retrospective payment models, CMS will phase in target prices over the five-year timeline using a combination of historical hospital-specific data and regional data, with adjustment for complexity of treatment. In the initial program year, hospitals will not incur any downside risk, with varying amounts of downside risk occurring during the remainder of the program years. For the cardiac rehabilitation incentive payment, a retrospective payment will be made to hospitals participating, and it will vary based on the volume of services provided.  

Similar to AMI and CABG hospital selection, CMS is proposing to select a targeted group for 90 geographic locations split equally between those areas in the mandatory bundles and those not included. The proposed rule was published in the Aug. 2 edition of the Federal Register, and comments are due by Oct. 3. Additional information on EPMs can be accessed online at https://innovation.cms.gov/initiatives/epm.

About the Author

Rhonda Taller is VBPmonitor’s legislative correspondent. She has over 30 years of experience with health information technology working within the vendor environment with roles in product management, management, government affairs, and strategic consulting. Her expertise is on topics related to CMS reimbursement and quality regulations, value-based reimbursement programs, ICD-10, meaningful use, and health reform. Rhonda has held volunteer positions with HIMSS and WEDI, including appointment to the HIMSS Business Systems/Medical Banking Committee (2010-2012), chairing the HIMSS ICD-10 Task Force (2013-2014), and serving as co-chair of the WEDI ICD-10 Transition Workgroup.

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Monday, 08 August 2016 23:45

Floodgates Open on CPC+ Applications

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The Centers for Medicare & Medicaid Services (CMS) is now accepting applications to participate in the new nationwide primary care model known as Comprehensive Primary Care Plus (CPC+), opening the floodgates for what is presumed to be a significant number of interested providers.

CPC+ is a five-year primary care medical home model beginning in January 2017 that will enable primary care practices to “care for their patients the way they think will deliver the best outcomes and to pay them for achieving results and improving care,” CMS said in a press release published last week. The agency further described the model as “an opportunity for practices of diverse sizes, structures, and ownership who are interested in qualifying for the incentive payment for Advanced Alternative Payment Models through the proposed Quality Payment Program,” estimating that up to 5,000 primary care practices serving an estimated 3.5 million beneficiaries could wind up participating when all is said and done.

A total of 14 participating regions were selected by CMS.

“CPC+ is a multi-payer model – Medicare, state Medicaid agencies, and private insurance companies partner together to support primary care practices – so CMS selected the regions based on payor interest and coverage,” the agency’s press release read. “By aligning Medicare, Medicaid, and private insurance, CPC+ moves the healthcare system away from one-size-fits-all, fee-for-service to a model that supports clinicians delivering the care that best meets the needs of their patients and improves health outcomes.”

Eligible practices in the 14 below selected regions may apply between Aug. 1 and Sept. 15, 2016:

  1. Arkansas: Statewide
  2. Colorado: Statewide
  3. Hawaii: Statewide
  4. Kansas and Missouri: Greater Kansas City
  5. Michigan: Statewide
  6. Montana: Statewide
  7. New Jersey: Statewide
  8. New York: North Hudson-Capital Region
  9. Ohio: Statewide and Northern Kentucky
  10. Oklahoma: Statewide
  11. Oregon: Statewide
  12. Pennsylvania: Greater Philadelphia
  13. Rhode Island: Statewide
  14. Tennessee: Statewide

“As a key part of CPC+, CMS and partner payors are committed to supporting primary care practices of all sizes, including small, independent, and rural practices,” said Dr. Patrick Conway, CMS deputy administrator and chief medical officer. “We see CPC+ as the future of primary care in the U.S. and are pleased to partner with payors across the country that are aligned in this mission to transform our healthcare system. This model allows primary care practices to focus on what they care about most – serving their patients’ needs when and how they choose.”

Building on the Comprehensive Primary Care Initiative  launched in late 2012, CMS noted that CPC+ will benefit patients by helping primary care practices:

  • Support patients with serious or chronic diseases achieve their health goals;
  • Give patients 24-hour access to care and health information;
  • Deliver preventive care;
  • Engage patients and their families in their own care; and
  • Work together with hospitals and other clinicians, including specialists, to provide better-coordinated care.

Practices are being permitted to participate in one of two CPC+ tracks. In Track 1, CMS will pay providers a monthly fee in addition to regular Medicare fee-for-service payments. In Track 2, providers will receive the monthly fee as well as a hybrid of reduced Medicare fee-for-service payments and up-front comprehensive primary care payments to allow greater flexibility in how care is delivered.

Practices in Track 2 will provide more comprehensive services for patients with complex medical and behavioral health needs, including, as appropriate, a systematic assessment of psychosocial needs and an inventory of resources and supports to meet those needs, CMS added.

“To promote high-quality and high-value care, practices in both tracks will also receive prospective performance-based incentive payments that they will either keep or have to pay back to CMS based on their performance on quality and utilization metrics,” the agency’s press release read. “In addition, practices that participate in CPC+ may qualify for the additional incentive payments available for the Advanced Alternative Payment Models in the proposed Quality Payment Program beginning (in) 2019.”

Although the development of the new model wasn’t without its pitfalls, it’s still expected to be plenty popular, Modern Healthcare reported in an article published last week.

Companies offering preferred provider organization and high-deductible plans told … CMS they could not participate in the program because of legal restrictions in many states. Some states have laws that prohibit non-HMO plans from offering capitated or risk-based payments to physicians,” the article read. “CMS (also) saw interest in fewer markets than expected. The model was supposed to launch in up to 20 regions.”

“Still,” the article went on, CMS “likely will have little trouble attracting providers since the care-management fees can be a boon for practices.” Quoting Lynn Barr, chief transformation officer at Caravan Health, Modern Healthcare reported that depending on the number of patients participating, providers can earn an additional $100,000 to $250,000 per year under the model.

Healthcare Dive noted in an article of its own on the topic that the new model – which CMS earlier this year described as its “largest ever” move to change primary care delivery and payment – furthers a fundamental shift in healthcare delivery.

The model furthers the push towards preventive care with a clear focus on primary care practices. According to the Agency for Healthcare Research and Quality … of the 624,434 physicians in the United States who spend the majority of their time in direct patient care, slightly less than one-third are specialists in primary care,” the article read. “So CMS's project could impact a large chunk of practicing providers down the line, depending on results.”

CMS further defined the model as an extension of the landmark Patient Protection and Affordable Care Act (PPACA) of 2009.

“The (PPACA), through the creation of the Center for Medicare and Medicaid Innovation, allows for the testing of innovative payment and service delivery models, such as the CPC+ model, to move our healthcare system toward one that rewards clinicians based on the quality, not quantity, of care they provide patients,” CMS said. “Today’s announcement is part of the Administration’s broader strategy to improve the healthcare system by paying providers for what works, unlocking healthcare data, and finding new ways to coordinate and integrate care to improve quality. This new model supports the Administration’s goal  to have 50 percent of traditional Medicare payments flowing through alternative payment models by 2018 (already, 30 percent of Medicare payments go through alternative models).”

For questions about CPC+ or the application process, click here or email This email address is being protected from spambots. You need JavaScript enabled to view it..

About the Author

Mark Spivey is a national correspondent for VBPmonitor.com. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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Lately I feel as though time is passing by faster than ever – after all, my father always said the older you get, the faster it goes. I believe this is how most of us feel about the healthcare industry right now as well. We are facing changes that are forcing us to look outside the box and get out of our comfort zones. While I believe that we all have the patient’s best interests at heart, we have been functioning in silos – and this is no way to coordinate and impact patient care.

“Care coordination” is a phrase we have been seeing a lot of lately, but what does it really mean? The past several weeks have been crazy in healthcare, with the Centers for Medicare & Medicaid Services (CMS) releasing several policy and payment updates, including:

As I began to read and decipher these updates, it became clear to me that the underlying message is that we must do more with less. Not that I didn’t know this already, as we have been struggling with it for years. But now we must actually begin to report the improvement in care that our patients have been seeing, and we must also show that patients are satisfied, all while reducing costs.

I am grateful for the opportunities I have had recently to attend some very dynamic conferences: the LTPACHIT (Long-Term Post-Acute Care Health IT Summit), the National Association for Healthcare Quality (NAHQ) National Quality Summit, the Agency for Healthcare Research and Quality (AHRQ) Research Conference, the Association of Clinical Documentation Improvement Specialists (ACDIS) Annual Conference, the Healthcare Compliance Association (HCCA) annual conference, the New York Information Management Association (NYHIMA) annual conference, the Radiology Business Management Association (RBMA) Spring Summit, and the American Health Information Management Association (AHIMA) Leadership Conference. Speakers at all of these conferences were passionate in their messages regarding the move to payment for quality and working together (care coordination) to illustrate improving patient outcomes and to ensure financial survival. There is a reality check involved with admitting that we need to be financially successful; otherwise there will not be anyone to provide care to patients who need it.

So my point today is that in my opinion, care coordination is the key to making us all successful. We have to break down walls and begin talking to each other. We have to begin to trust each other. We need to think out of the box.

Much of our focus has been on the inpatient side of care and physician services, but much of the key to successfully managing patients is the care that happens on the post-acute side of care – rehabilitation, skilled nursing, long-term care, assisted living, home health, and hospice. These areas have traditionally taken a back seat to some degree, but it is extremely important that we reach out to them and include them in our discussions and decisions on how we are going to manage all of this. Without them, we will not be successful.

Below are a few items that I think should be on everyone’s population health management to-do list to analyze and establish a plan:

  • Communication – internal and external, with partners and with patients
  • Technology – to help us work smarter and more efficiently
  • Patient care – ensuring we provide care in the right setting and at the right time, being as proactive as we can
  • Data analytics – using our data to improve by identifying high-risk patients with multiple chronic conditions and high costs, as well to identify quality areas we need to focus improvement on
  • Quality data collection and reporting processes – these activities can be scattered within organizations, so we need to ensure continuity in both
  • Payor contract negotiations – as we move into more shared saving s models and APMs (alternative payment models), we need to ensure that we are negotiating smart contracts
  • Pricing and purchasing – to control and reduce costs where we can and reflect accurate costs per beneficiary
  • Leveraging community-based services – to manage patients in the right setting for both quality of care and cost control
  • Physician engagement – we are approaching a physician shortage, so it is important that we engage and support them
  • Patient engagement – we must engage patients to assist them in wanting to participate in their care to be compliant with treatment and care

VBPmonitor will be focusing on bringing you real-life experiences, case studies and best practices from hospitals and health systems, eligible clinicians, accountable care organizations (ACOs), health plans, payors, associations, and more to assist you in your transformation to true population health management.

About the Author

Kim Charland is the editor of VBPmonitor and the senior vice president of clinical innovation with Panacea Healthcare Solutions. Kim has 30 years of experience in health information and reimbursement management for hospitals and physician offices. Kim’s primary role with Panacea is publisher of VBPmonitor.com, which is the company’s newest online monitor and is focused on value-based purchasing and quality. She is also co-host of ICD10monitor.com’s Internet news broadcast Talk-Ten-Tuesdays. In addition, she assists with product development for Panacea’s consulting and software divisions, as well as the MedLearn publishing division. Kim is also recognized as a national speaker who has spoken for numerous organizations.

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On Tuesday, Aug. 2, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule noting that it intends to test bundled payments to hospitals for treatment of heart attacks (myocardial infarction, or MI), coronary artery bypass graph (CABG) surgery, and surgical hip/femur fractures. Similar to the Comprehensive Care for Joint Replacement (CJR) Model that was put into effect this April, this proposal seeks to make hospitals responsible for the costs of all care provided in the 90 days following a hospital discharge for these conditions. The proposal places a significant impact on quality metrics. Quality will have at least two distinct impacts on reimbursement. First, the target price used to determine whether hospitals receive additional money from Medicare or owe money back to the government will be higher for hospitals that meet certain quality metrics. In addition, to be eligible to receive any bonus payment from Medicare, hospitals will need to meet certain quality thresholds, discussed in more detail below.

While the rule is only proposed, and one can’t assume that the July 1, 2017 target date will be met, it seems nearly certain that some form of this policy will be implemented in the very near future.

The surgical hip/femur component is functionally an add-on to the current CJR program, and CMS expects to apply it in all hospitals subject to CJR. 

For the cardiac portion of the proposal, CMS plans to choose 98 metropolitan areas in which almost every hospital will be required to participate in the program. The only exception may be hospitals enrolled in Bundled Payments for Care Improvement (BPCI) Models 2 and 4 for the hip and femur procedures (except major joint, which may be excluded from all three new programs). We don’t yet know the markets where the plan will be tested, and that will not be known until the final rule is published. It is worth noting that when CJR was implemented, the proposal was published in mid-July, with the final rule issued just before Thanksgiving. Assuming the timing here is similar, the final rule for cardiac bundling may come out in late November. Note that there are 60 days to comment on the proposal, which means the comment period won’t close until the start of October. 

To determine whether your hospital may be included in the program, consult the proposed rule, which may be accessed online. Page 50,817 of the rule (page 39 of the PDF) has the first page of the list of metropolitan statistical areas (MSAs) eligible for inclusion. The proposed rule lists the 294 MSAs from which CMS intends to select its 98. Note that the final number may change slightly in the final rule. The last column indicates whether each MSA will be entered in the “lottery” for the program, or whether the MSA is excluded because it did not meet CMS’s criteria. Note that if you are outside of a MSA, you will not be in this program.

The program is expected to last five years. A target price will be established by taking past Medicare payments and discounting them by between 1.5 and 3 percent. The size of the discount is influenced by each hospital’s quality scores, so hospitals with higher quality metrics face a smaller discount. The target is initially two-thirds hospital-specific and one-third regional, but it becomes entirely regional by the fourth year. If the total expenditures are lower than the target, the hospital keeps the difference. If they are higher, the hospital must pay CMS. The target price will include all payments for care CMS deems related to each episode, including physician work, rehab, drugs, and hospital readmissions. 

One important note: CMS’s definition of “related” services is much broader than the definition a layman might use. For example, hospice care is considered “related.” If a patient is discovered to have a terminal cancer shortly after their MI and opts for hospice care, that care is considered “related” to the MI.   

The gains and losses are capped, with no loss possible in the first year and gain capped at 5 percent. Thereafter, the cap on gains and loses increases to 10 percent in the third year, reaching 20 percent in the fourth and fifth years. 

To receive any reconciliation payment, each hospital must meet quality metrics. The plan is to use the following tools, converting scores from each tool into “points:”

For MI: 

  • MORT-30-AMI: Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute Myocardial Infarction (AMI) Hospitalization (NQF #0230);
  • AMI Excess Days: Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction (acute care days include emergency department, observation, and inpatient readmission days); and
    HCAPHS Survey (NQF #0166), linear mean roll-up (HLMR) scores like CJR

For CABG :

  • MORT-30-CABG: Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft Surgery (NQF #2558); and
  • HCAPHS Survey (NQF #0166),

And for SHFFT episodes:

  • THA/TKA Complications: Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (National Quality Forum (NQF #1550);
  • Hospital Consumer Assessment of Healthcare Providers and Systems (HCAPHS)
  • Survey (NQF #0166); and
  • Successful Voluntary Reporting of Patient-Reported Outcomes

While the full quality calculation involves a point system that is relatively complex to describe, perhaps the key point is that the system is set up on a curve. As a result, hospitals that score in the bottom 30 to 40 percent of metrics may find it impossible to receive any additional payment from CMS even if their cost data would support the payment. For example, to receive a reconciliation payment for beating the target price in the CABG program, a hospital must have a quality score of 2.8. That would require the hospital to pursue one of the following three options: it must either a) achieve the 30th percentile on the RSMR Following Graft (CABG) measure; b) achieve the 40th percentile on the HCAHPS; or c) develop improvement that is better than 90 percent of other hospitals in the program. The curve assures that a significant number of hospitals will be ineligible to receive any reconciliation payment. 

Readers familiar with the HCAHPS patient satisfaction tool know that it includes a range of questions covering topics as diverse as bathroom cleanliness, nurse response time to call buttons, and pain management. In other words, there is a possibility that a dirty bathroom can cost a hospital its entire reconciliation payment under the program.

As with CJR, hospitals will be allowed to share the gains and losses with other organizations, but those organizations are not required to agree to accept risk. The other organizations may also opt to accept upside potential but reject any downside risk. In other words, hospitals have the risk, but somewhat limited ability to control it. Physicians who enter into gainsharing arrangements with hospitals need to understand that the gainsharing payment will be contingent on the metrics described above, despite the fact that the physician will have limited control over them.

Included in the proposal is a plan to test an increase in the payment for cardiac rehabilitation (CR). CMS believes that cardiac rehab is very effective, but underused. To incentivize an increase in utilization, hospitals in 45 regions in the bundled program and 45 regions outside the bundle program will get an extra $25 for each of the first 11 CR visits, and $175 for the 12th and all subsequent visits.

This rule is only proposed. However, it is clear that CMS is committed to implementing some or most of it. If you are a hospital in one of the included MSAs, you will want to understand the implications and should seriously consider offering comments on the rule before the deadline at 5 p.m. on Oct. 3. It can be particularly efficient for hospitals to band together and use a trade group or jointly hire one lawyer to offer comments.

About the Author

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and is a member of the RACmonitor editorial board.

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Wednesday, 03 August 2016 00:29

Final 2017 IPPS Rule Released

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The Centers for Medicare & Medicaid Services (CMS) yesterday released the final rule to update the fiscal year (FY) 2017 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS). The final rule will impact discharges occurring on or after October 1, 2016 and continues to focus on the move from paying for volume of services to paying for increased quality of care and patient satisfaction while reducing costs.

VBPmonitor be covering in more detail how this will actually impact hospitals once we have a chance to read the entire rule, but we wanted to at least get CMS’s fact sheet out:

Changes and Updates in FY 2017 Policies

Changes to Payment Rates under IPPSThe final 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 0.95 percent. This reflects the projected hospital market basket update of 2.7 percent adjusted by -0.3 percentage point for multi-factor productivity and an additional adjustment of -0.75 percentage point in accordance with the Affordable Care Act. This also reflects a 1.5 percentage point reduction for documentation and coding required by the American Taxpayer Relief Act of 2012 and an increase of approximately 0.8 percentage points to remove the adjustment to offset the estimated costs of the Two Midnight policy and address its effects in FYs 2014, 2015, and 2016.

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 any hospital that is not a meaningful EHR user will be subject to a three-fourths reduction of the market basket update in FY 2017.

CMS projects that the rate increase, together with other final changes to IPPS payment policies, will increase IPPS operating payments by approximately 1.0 percent and that changes in uncompensated care payments will decrease IPPS operating payments by 0.4 percent.  Other continued additional payment adjustments will include: a 1.0 percent reduction for hospitals in the lowest performing quartile under the Hospital Acquired Condition Reduction Program; payment adjustments for excess readmissions under the Hospital Readmissions Reduction Program; and incentive payments and reductions under the Hospital-Value Based Purchasing Program.  In sum, CMS projects that total Medicare spending on inpatient hospital services, including capital, will increase by about $746 million in FY 2017.

This projected increase in spending includes an estimated $350,000 increase in FY 2017 payments to hospitals located in Puerto Rico under the final policy to make IPPS payments for capital-related costs based solely on the national capital Federal rate (rather than the current blend of the national capital Federal rate and Puerto Rico-specific capital rate), consistent with the recent statutory change in the payment methodology for operating IPPS payments to those hospitals.

IPPS Rate Adjustments for Documentation and Coding and Two Midnight Policy
In the FY 2017 IPPS final rule, CMS is finalizing two adjustments in addition to its annual rate update for inpatient hospital payments. 

First, CMS is finalizing the last year of recoupment adjustments required by the American Taxpayer Relief Act of 2012 (ATRA). Section 631 of ATRA requires CMS to recover $11 billion by FY 2017 to fully recoup documentation and coding overpayments related to the transition to the MS-DRGs that began in FY 2008. For FYs 2014, 2015, and 2016, CMS implemented a series of cumulative -0.8 percent adjustments.  For FY 2017, CMS calculates that $5.05 billion of the $11 billion requirement remains to be addressed.  Therefore, CMS is finalizing a -1.5 percent adjustment to complete the statutorily-specified recoupment. 

Second, CMS is taking action regarding the -0.2 percent adjustment it implemented in the FY 2014 IPPS/LTCH PPS final rule to account for an estimated increase in Medicare expenditures due to the Two Midnight Policy.  Specifically, in the FY 2014 IPPS/LTCH PPS final rule, CMS estimated that this policy would increase expenditures and accordingly made an adjustment of

-0.2 percent to the payment rates.  CMS believes the assumptions underlying the -0.2 percent adjustment were reasonable at the time they were made.  Additionally, CMS does not generally believe it is appropriate in a prospective payment system to retrospectively adjust rates.  However, in light of recent review and the unique circumstances surrounding this adjustment, for FY 2017, CMS is permanently removing this adjustment and also its effects for FYs 2014, 2015, and 2016 by adjusting the FY 2017 payment rates.  This will increase FY 2017 payments by approximately 0.8 percent.


Medicare Uncompensated Care Payments
CMS distributes a prospectively determined payment amount to Medicare disproportionate share hospitals based on their relative share of uncompensated care nationally.  As required by the Affordable Care Act, this amount is equal to an estimate of 75 percent of what otherwise would have been paid as Medicare disproportionate share hospital payments prior to the Affordable Care Act, adjusted for decreases in the rate of uninsured individuals and other factors. In this rule, CMS is distributing almost $6 billion in uncompensated care payments in FY 2017, a decrease of approximately $400 million from the FY 2016 amount.

For FY 2017, CMS is finalizing a policy of continuing to distribute these funds using a proxy for uncompensated care based on insured low income days, which include inpatient days for patients eligible for Medicaid and inpatient days for patients entitled to Medicare and Supplemental Security Income (SSI).  CMS is also finalizing two changes to this methodology.  First, CMS will use data from three cost reporting periods instead of one cost reporting period to limit major fluctuations in uncompensated care payments from year-to-year. Second, CMS will apply a proxy to estimate Medicare SSI inpatient days for Puerto Rico hospitals since residents of Puerto Rico are not eligible for SSI benefits.

CMS proposed to begin incorporating uncompensated care cost data from Worksheet S-10 of the Medicare cost report in the methodology for distributing these funds starting in FY 2018.  In light of public comment, we are not finalizing this proposal. Instead, our intent is to engage in future rulemaking and begin to incorporate Worksheet S-10 data into the computation of Factor 3 no later than FY 2021.  We intend to make certain modifications and clarifications to the cost report instructions for Worksheet S-10, as well as implement review protocol for the Medicare Administrative Contractors (MACs) to use in reviewing Worksheet S-10. 

CMS-1632-F & IFC –Finalization of the Extension of the MDH Program and Low-Volume Hospital Adjustment Provided by the MACRA
On August 17, 2015, CMS issued an interim final rule with comment period (IFC) implementing the extension of the temporary changes to the criteria and payment adjustment for low-volume hospitals and the Medicare-dependent hospital (MDH) program for discharges occurring from April 1, 2015 through September 30, 2017, as provided by sections 204 and 205 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) of 2015 (Pub. L. 114-10). Under these extensions, a hospital can qualify as a low-volume hospital if it is located more than 15 road miles from another hospital and has fewer than 1,600 Medicare discharges, and special payment protections are retained for Medicare-dependent, small rural hospitals. We are finalizing this IFC in the FY 2017 IPPS/LTCH PPS final rule.

Notification Procedures for Outpatients Receiving Observation Services
Enacted August 6, 2015, the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act) requires hospitals and Critical Access Hospitals (CAH) to provide notification to individuals receiving observation services as outpatients for more than 24 hours explaining the status of the individual as an outpatient, not an inpatient, and the implications of such status. 

  • Hospitals and CAHs are required to furnish a new proposed CMS-developed standardized notice, the Medicare Outpatient Observation Notice (MOON), to a Medicare beneficiary who has been receiving observation services as an outpatient for more than 24 hours. Under the final rule, hospitals and CAHs may deliver the MOON to individuals receiving observation services as an outpatient before such individuals have received more than 24 hours of observation services.  The notice must be provided no later than 36 hours after observation services are initiated or, if sooner, upon release;
  • The MOON will inform more than one million beneficiaries annually of the reason(s) they are an outpatient receiving observation services and the implications of such status with regard to Medicare cost sharing and coverage for post-hospitalization skilled nursing facility (SNF) services; and 
  • An oral explanation of the MOON must be provided, ideally in conjunction with the delivery of the notice, and a signature must be obtained from the individual, or a person acting on such individual’s behalf, to acknowledge receipt.  In cases where such individual or person refuses to sign the MOON, the staff member of the hospital or CAH providing the notice must sign the notice to certify that notification was presented.

The standardized notice, the MOON, is going through the Paperwork Reduction Act process, thus affording the public an opportunity to comment on the MOON.  The 30-day public comment period begins when the final rule is published.


Hospital-Acquired Condition (HAC) Reduction Program
The HAC Reduction Program creates an incentive for hospitals to reduce the incidence of hospital-acquired conditions by requiring the Secretary to make an adjustment to payments to hospitals that are in the worst performing quartile for hospital-acquired conditions. In the FY 2017 IPPS/LTCH PPS final rule, CMS is making five changes to existing HAC Reduction Program policies:

  1. Establishing National Healthcare Safety Network (NHSN) CDC Healthcare Associated Infections (HAI) data submission requirements for newly opened hospitals;
  2. Clarifying data requirements for Domain 1 scoring;
  3. Establishing performance periods for the FY 2018 and FY 2019 HAC Reduction Program;
  4. Adopting the refined PSI 90: Patient Safety for Selected Indicators Composite Measure (NQF # 0531); and
  5. Changing the Program scoring methodology from the current decile-based scoring to a continuous scoring methodology. 

Hospital Readmissions Reduction Program (HRRP)
The Hospital Readmission Reduction Program (HRRP) requires a reduction to a hospital’s base operating DRG payment to account for excess readmissions associated with selected applicable conditions. For FY 2017 and subsequent years, the reduction is based on a hospital’s risk-adjusted readmission rate during a three-year period for acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), total hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery bypass graft (CABG) (pursuant to previous rulemaking). To align with other quality reporting programs and allow the posting of data as soon as possible, CMS is updating the public reporting policy so that excess readmission rates will be posted to the Hospital Compare website as soon as feasible following the hospitals’ preview period.

Medicare and Medicaid EHR Incentive Programs
This rule also includes the requirements for eligible hospitals and CAHs reporting clinical quality measures (CQMs) for the Medicare and Medicaid EHR Incentive Programs. CMS finalized modifications to some of the CQM reporting and submission requirements, including the proposed removal of certain CQMs to align with the Hospital IQR Program.

Hospital Inpatient Quality Reporting (IQR) Program
The Hospital IQR Program is a pay-for-reporting program established by the Medicare Prescription Drug, Improvement, and Modernization Act. In the FY 2017 IPPS/LTCH PPS final rule, CMS is finalizing the addition of four new claims-based measures for the FY 2019 payment determination and subsequent years (three clinical episode-based payment measures and one communication and coordination-of-care measure). CMS is also finalizing the removal of 15 measures for the FY 2019 payment determination and subsequent years.  Of these 15 measures, 13 are electronic clinical quality measures (eCQMs), two of which CMS is also removing in their chart-abstracted form, and two others are structural measures.  CMS is also finalizing the refinement of two previously adopted measures beginning with the FY 2018 payment determination. 

In addition, CMS is finalizing a number of changes in relation to eCQMs:

  1. Requiring hospitals to report four quarters of data on an annual basis for eight of the available eCQMs included in the Hospital IQR Program measure set for the FY 2019 and FY 2020 payment determinations in order to align with the Medicare and Medicaid EHR Incentive Programs.  This is a modification from the proposal, which proposed to require hospitals to submit on all available eCQMs (15 eCQMs) in the Hospital IQR Program;
  2. Requiring several related technical eCQM submission requirements beginning with the FY 2019 payment determination; and
  3. Expanding the current validation process to include the validation of eCQM data beginning in the spring of CY 2018 for the FY 2020 payment determination.

Lastly, CMS is finalizing an update to its Extraordinary Circumstances Extensions/Exemptions (ECE) policy by:

  1. Extending the ECE request deadline for non-eCQM circumstances from 30 to 90 calendar days following an extraordinary circumstance; and
  2. Establishing a separate submission deadline of April 1 following the end of the reporting calendar year for ECEs related to eCQMs.

Hospital Value-Based Purchasing (VBP) Program
Established by the Affordable Care Act, the Hospital VBP Program adjusts payments to hospitals for inpatient services based on their performance on an announced set of measures. In the FY 2017 IPPS/LTCH final rule, CMS is finalizing updates to the Hospital VBP Program requirements and the expansion of the Hospital VBP Program measure set. Specifically, the rule finalizes expanding the number of hospital units to which two National Healthcare Safety Network measures apply beginning with the FY 2019 program year. In addition, CMS is finalizing expansion of the cohort used to calculate the 30-day pneumonia mortality measure beginning with the FY 2021 program year. CMS is also finalizing the addition of two condition-specific payment measures (one for acute myocardial infarction and one for heart failure) beginning with the FY 2021 program year and a 30-day mortality measure following CABG surgery beginning with the FY 2022 program year. The rule also finalizes changes to the policy that governs whether a hospital will be excluded from the program if it is cited for deficiencies that pose immediate jeopardy to the health and safety of patients.

PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
The PCHQR Program collects and publishes data on an announced set of quality measures.  In the FY 2017 IPPS/LTCH PPS final rule, CMS is finalizing one new measure for this program.  Specifically, CMS is adding a measure of Admissions and Emergency Department Visits for Patients Receiving Outpatient Chemotherapy.  In addition to this measure, CMS is expanding the patient cohort of the previously finalized Radiation Dose Limits to Normal Tissues for Patients Receiving 3D Conformal Radiation Therapy measure.  The new cohort will include breast and rectal cancer patients in addition to the previous cohort of lung and pancreatic cancer patients.

Inpatient Psychiatric Facility Quality Reporting Quality Reporting (IPFQR) Program
The IPFQR Program is a pay-for-reporting program established by the Affordable Care Act. In the final rule, CMS is finalizing a technical update to the previously finalized measure, Screening for Metabolic Disorder.  CMS is also finalizing the addition of two new measures to the program beginning with the FY 2019 payment determination: (1) Thirty-day All-Cause Readmission Following Psychiatric Hospitalization in an IPF, which is a measure calculated from administrative claims data; and (2) SUB-3: Alcohol & Other Drug Use Disorder Treatment Provided or Offered at Discharge and the subset measure SUB-3a: Alcohol & Other Drug Use Disorder Treatment at Discharge (NQF #1664).  SUB-3/3a is a chart-abstracted measure that complements the previously adopted substance abuse measures in the IPFQR Program.

In addition, CMS is finalizing a policy to include the SUB-3/SUB-3a measure in the list of measures covered by the global sample for the FY 2019 payment determination and subsequent years.  The agency is also finalizing that it will make the data for the IPFQR Program available as soon as possible and announce both the date of public display of the program’s data and the 30 day preview period via sub regulatory methods.  CMS is also finalizing that we will no longer specify how long before public display the preview period will be; this timeframe was previously finalized as 12 weeks.  For the FY 2017 payment determination only, CMS is finalizing that, if it is technically feasible to display the data in December 2016, the Agency would provide data to IPFs for a two-week preview period that would start on October 1, 2016.  Moreover, CMS is finalizing that, for the FY 2017 payment determination only, if CMS is able to display the data in December 2016, the Agency would ensure that IPFs have approximately 30 days for review by providing IPFs with their data as early as mid-September.


Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) Changes
In this final rule, CMS is updating the LTCH PPS standard Federal payment rate by 1.75 percent for FY 2017 for LTCHs that successfully participate in the LTCH Quality Reporting Program (LTCH QRP).  This update is based on the most recent estimate of the revised and rebased LTCH PPS market basket (which is being adopted in this final rule) of 2.8 percent adjusted by ‑0.3 percentage point for multi-factor productivity and an additional adjustment of ‑0.75 percentage point in accordance with the Affordable Care Act.  CMS is also continuing to implement the changes required by The Pathway for SGR Reform Act of 2013 that establish two different types of LTCH PPS payment rates depending on whether the patient meets certain clinical criteria. As a result of the continued phase-in of these changes, CMS projects that LTCH PPS payments will decrease by 7.1 percent, or approximately $363 million in FY 2017 CMS. Cases that qualify for the higher standard LTCH PPS payment rate under the revised system will see an increase in payments of 0.7 percent in FY 2017. In addition, CMS is streamlining its regulations regarding the 25 percent threshold policy, which is a payment adjustment made when the number of cases an LTCH admits from a single hospital exceeds a specified threshold (generally 25 percent).

Along with the FY 2017 IPPS/LTCH PPS final rule, CMS finalized an IFC to implement section 231 of the Consolidated Appropriations Act, 2016 that established a temporary exception from the site neutral payment rate for certain severe wound care discharges from certain LTCHs. 

Long-Term Care Hospital (LTCH) Quality Reporting Program (QRP)
Beginning in FY 2014, the applicable annual update for any LTCH that did not submit the required data to CMS is reduced by two percentage points. The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) requires the continued specification of quality measures for the LTCH QRP, as well as resource use and other measures.

In order to satisfy the requirements of the IMPACT Act, CMS is finalizing one new assessment-based quality measure, and three claims-based measures for inclusion in the LTCH QRP: 

  1. Discharge to Community – Post Acute Care (PAC) LTCH QRP (claims-based); 
  2. Medicare Spending Per Beneficiary (MSPB) – PAC LTCH QRP (claims-based);
  3. Potentially Preventable 30 Day Post-Discharge Readmission Measure for LTCHs (claims-based); and
  4. Drug Regimen Review Conducted with Follow-Up for Identified Issues (assessment-based). 

CMS is finalizing the addition of four new measures to LTCH QRP public reporting for fall 2017.  We are additionally clarifying the previously finalized procedures for provider review and correction of performance data in advance of LTCH QRP public reporting, in order to ensure we are aligned with the Hospital IQR Program’s policies and practices.

The final rule is available on the Federal Register here.

About the Author

Kim Charland is the editor of VBPmonitor and the senior vice president of clinical innovation with Panacea Healthcare Solutions. Kim has 30 years of experience in health information and reimbursement management for hospitals and physician offices. Kim’s primary role with Panacea is publisher of VBPmonitor.com, which is the company’s newest online monitor and is focused on value-based purchasing and quality. She is also co-host of ICD10monitor.com’s Internet news broadcast Talk-Ten-Tuesdays. In addition, she assists with product development for Panacea’s consulting and software divisions, as well as the MedLearn publishing division. Kim is also recognized as a national speaker and has spoken for numerous organizations.

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