2018 Inpatient PPS Final Rule Released

August 11, 2017

On August 2, 2017, The Centers for Medicare & Medicaid Services (CMS) issued the Fiscal Year (FY) 2018 Medicare Hospital Inpatient Prospective Payment System (IPPS) Final Rule that updates payment and policies for hospital discharges from hospitals from October 1, 2017 to September 30, 2018.

The rule increases operating payment rates under the IPPS by about 1.3 percent, with an additional 0.7 percent available in uncompensated care payments. Other payment adjustments include penalties for excessive readmissions, continuing the one-percent penalty for facilities in the bottom quartile of the Hospital Acquired Condition Reduction Program, and payment increases and decreases under the Hospital Value-Based Purchasing Program. Overall, CMS estimates Medicare spending for inpatient services will rise by about $2.4 billion in FY 2018.

Those estimated increases factor in (i) a -0.6 adjustment that removes the one-time adjustment from FY 2017 intended, according to CMS, to address the effect of the 0.2 percent two midnight rate cut, (ii) a +0.46 percentage adjustment from the 21st Century Cures Act, and (iii) a -0.75 percent adjustment required by the Affordable Care Act (ACA).

The rule also includes ACA-mandated Medicare Disproportionate Share Hospital adjustments that reflect changes in the rate of uninsurance and CMS’s finalized proposal to incorporate data from its National Health Expenditure Accounts into these estimates. As a result, Medicare Disproportionate Share Hospital (DSH) uncompensated care payments in FY 2018 will increase approximately $800 million from the FY 2017 amount. CMS also finalizes a three-year transition, beginning in FY 2018, to using Worksheet S-10 data to determine the amounts and distribution of uncompensated care payments. In response to concerns from WHA and others, CMS indicated it will continue to work with stakeholders to address issues related to the accuracy and consistency of the S-10 data through provider education and refinement of the instructions for the Worksheet S-10. Additionally, CMS will provide hospitals with an opportunity to resubmit certain Worksheet S-10 data to their Medicare administrative contractors by September 30, 2017.

For 2018, CMS finalized modifications to the Electronic Health Records (EHR) Incentive Program. Hospitals and critical access hospitals will have the option to report modified stage 2 for the 2018 reporting period. CMS also finalized a reduction in the 2018 EHR reporting period from the full year to a minimum of any continuous 90-day period during the calendar year. Additionally, CMS finalized a reduction in the electronic clinical quality measure reporting requirement for the 2017 Hospital Inpatient Quality Reporting program. Hospitals will be required to report on at least four self-selected electronic clinical quality measures (eCQMs) for a reporting period of one self-selected quarter of CQM data in CY 2017. 

CMS also modified its proposals related to the Rural Community Demonstration Program so hospitals already participating in the program will receive their reasonable cost payments continuously without a gap in payments.

There are many additional issues addressed in the rule, and WHA has resources on its website to help members understand these important Medicare payment rules. WHA provides detailed rule summaries and hospital-specific analysis on the financial impact of these ever-changing rules.

All completed prospective payment system (PPS) rule summaries can be found on the WHA website under Medicare.

The hospital-specific fiscal analysis of the Medicare PPS payment rules are posted on the WHA member portal at http://members.wha.org/Home.aspx.

This story originally appeared in the August 11, 2017 edition of WHA Newsletter