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Proposed rule for FFY 2019 hospital IPPS


On April 24, 2018, the Center for Medicare and Medicaid Services (CMS) issued the annual Hospital IPPS Proposed Rule for Federal Fiscal Year (FFY) 2019 beginning October 1, 2018. The rule was published in the Federal Register on May 7, 2018 and comments were due to CMS by June 25, 2018.

The proposed rule estimates a $4.1 billion increase in spending and a total IPPS payment increase of 3.4%. This amount is derived from a combination of factors including the proposed payment rate increase, changes in uncompensated care payments, capital payments, and changes to low-volume hospital payments.

In addition to payment updates, CMS proclaims the items addressed in the proposed rule are designed to improve pricing transparency, drive electronic medical record interoperability, and reduce the reporting burden for hospitals so providers can spend more time focused on patient care. Key aspects of the 1,883 page rule are summarized as follows:

Update Factors

The proposed increase to operating payments is approximately 1.75% for FFY 2019. The following table depicts the trend in the update factors from FFY 2016 to the proposed rates for FFY 2019:

Proposed Increase to Operating Payment Rates Under IPPS*
FFY 2016
FFY 2017
FFY 2018
FFY 2019
Market basket








Required by




ACA required




2 midnight



Increase in





*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.

Uncompensated Care

CMS proposes to distribute approximately $8.25 billion in uncompensated care payments for FFY 2019, an increase of $1.5 billion over the prior year. CMS proposed utilizing data from WKST S-10 of the Medicare Cost Report as a component of each hospital’s allocation calculation. The uncompensated care allocations for FFY 2019 would be based on a combination of fiscal year 2013 Medicaid and SSI days, and fiscal years 2014 and 2015 Medicare Worksheet S-10 Uncompensated Care Cost data.

Pricing Transparency

As part of the proposed rule, CMS intends to update the guidelines that require hospitals to establish and make public a list of their standard charges. By making this change, CMS attempts to further promote healthcare consumerism and build momentum for pricing transparency. With focus in this area, CMS acknowledges the disconnect between pricing and cost continues to be an issue in the industry.

In addition, CMS issued a Request For Information (RFI): “We are seeking information from the public regarding barriers preventing providers from informing patients of their out of pocket costs; what can be done to better inform patients of these obligations; and what role providers should play in this initiative.” This initiative takes on the unique and longstanding challenge of the healthcare industry: To communicate costs to patients upfront as opposed to weeks or months after the service was performed.

Reducing the Reporting Burden of Quality Measures

CMS reviewed the quality measure requirements hospitals report and determined many of the measures were duplicative or uninformative as “the overwhelming majority of providers performed highly on them.”

In an effort to significantly reduce the administrative burden on providers, CMS seeks to reduce the overall number of quality reporting measures. “These proposals will remove a total of 18 measures from the quality programs and will de-duplicate another 21 measures, while adopting 1 claims-based readmissions measure.” In addition, the rule recommends measures to cut back on documentation requirements reducing an estimated 2 million hours spent filing paper work and potentially reducing administrative denials.

Interoperability and Meaningful Use

The Meaningful Use EHR program began in 2011 when hospitals were first able to demonstrate achievement of Stage 1. Since then, most organizations took advantage of the program and implemented electronic medical record systems that qualified for incentives. However, the exchange of information continues to be a challenge as the systems implemented lack the versatility to communicate with one another.

CMS is now overhauling the system to “focus on interoperability, improve flexibility, relieve burden and place emphasis on measures that require the electronic exchange of health information between providers and patients.”

As a result, CMS is renaming the program: “Promoting Interoperability”. Changes to the program involve hospitals self-selecting a calendar quarter in calendar year 2019 to report at least 4 self-selected Electronic Clinical Quality Measures (eCQMs). CMS intends to reduce the eCQMs from 16 to 8 during the 2020 reporting period to continue to reduce the administrative burden on hospitals and providers. CMS issued an RFI seeking proposals to further enhance flexibility specific to Interoperability.

The proposed rule is available here.

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