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Medicare final rule for FY 2020 IPPS


Inpatient Prospective Payment System (IPPS)

Release date: August 2, 2019
Federal Register publication date: August 16, 2019
Effective date: October 1, 2019

Major provisions

Update factors* Proposed Final
Market basket update 3.20% 3.00%
Economy wide productivity adjustment (0.50%) (0.40%)
Required by legislation  0.50% 0.50%
   Increase factor 3.20% 3.10%

*Based on general acute care hospitals paid under IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users.

CMS estimates that FY 2020 total IPPS payments will increase by $3.8 billion in comparison to FY 2019. This is an increase of approximately 3.0% which, in addition to the above proposed rate changes, incorporates changes to payments in uncompensated care, new technology add-ons and capital payments.

Wage index disparities
Under the theme of “Rethinking Rural Health”, the FY 2020 final rule contains provisions to reduce disparities between high and low wage index hospitals. Finalized changes include:

  • A provision to increase the wage index for hospitals with a wage index below the 25th percentile. These hospitals’ wage indexes will be increased by half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value across all hospitals. Effective for at least 4 years beginning in FY 2020, these increases will be funded through a budget neutrality adjustment to the standardized amount that is applied across all IPPS hospitals—rather than a decrease to the wage index for hospitals above the 75% as proposed—in order to maintain budget neutrality. 
  • Modifications to the “rural floor”: CMS will remove urban to rural hospital reclassifications from the calculation of the rural floor wage index value in order to mitigate the inappropriate influence of urban to rural reclassifications on the rural floor wage index value.
  • In order to mitigate payment decreases resulting from the adopted changes, a 5% cap will be applied to any decrease in a hospital’s wage index from its final wage index for FY 2019. That is, a hospital’s final wage index for FY 2020 would not be less than 95% of its final wage index for FY 2019.

Medicare uncompensated care
CMS will distribute approximately $8.4 billion in uncompensated care payments to disproportionate share hospitals in FY 2020. This is an increase of approximately $78M over FY 2019. CMS will utilize a single year (FY 2015) of data from Worksheet S-10 of the Medicare cost report to distribute these funds. 

New technology add-on payment
As proposed, CMS will increase the marginal rate of the new technology add-on payment, including CAR-T therapies, from 50% to 65%.

IPPS Quality Reporting Program
As proposed CMS will implement for FY 2020 a number of updates to the hospital quality incentive programs. The agency will add three new electronic clinical quality measures to the inpatient quality reporting program, two opioid–related measures and a hybrid hospital-wide all-cause readmission measure.
If you are interested in more information regarding the FY 2020 changes to the IPPS, please contact Andy Majka.

Source: Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Long-Term Care Hospital Prospective Payment System and Policy Changes and FY 2020 Rates; Quality Reporting Requirements for Specific Providers; Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals (Federal Register, Doc. 2019-16762 / Friday, August 2, 2019).

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