CMS issues FY 2017 Medicare Acute Care Hospital IPPS and LTCH PPS proposed rule

On April 18, 2016, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to implement Medicare payment policy changes and rates for hospitals under the acute care hospital Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital Prospective Payment System (LTCH PPS). CMS’s proposed rule continues to shift Medicare payments from volume to value-based and is projected to increase Medicare spending on inpatient hospitals to about $539 million for fiscal year (FY) 2017.

The proposed rule would update Medicare payment rates for acute care hospitals under the IPPS and long-term care hospitals under the LTCH PPS for FY 2017. IPPS payments would increase 0.9 percent for acute care hospitals that successfully participate in the Hospital Inpatient Quality Reporting Program and are meaningful users of electronic health records. Hospitals that do not successfully participate in the Hospital Inpatient Quality Reporting Program and do not submit the required quality data would be subject to a one-fourth reduction of the market basket update. LTCH PPS payments would decrease by 6.9 percent.

In addition to setting payment rates for FY 2017, the proposed rule would establish new requirements and update existing policies for several Medicare quality reporting programs, including the Electronic Health Record Incentive Program, the Hospital Value-Based Purchasing Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition Reduction Program. The proposed rule would also implement the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act) by establishing regulations to specify the process for hospitals and critical access hospitals to provide notice to individuals receiving observation services as outpatients for more than 24 hours. The proposed rule would also change direct graduate medical education and indirect medical education payments under the IPPS to urban hospitals with rural track training programs.

The proposed rule will be published in the Federal Register on April 27, 2016 and public comments are due by June 17, 2016.

More information about the proposed rule is available in the CMS Fact Sheet and a more detailed analysis of the proposed rule will be covered on the Health Law Pulse.

*Wendy Wright is admitted only in North Carolina. Her practice is supervised by principals of the firm admitted in the District of Columbia.