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Medicare proposed rule for FY 2020 IPPS


Inpatient Prospective Payment System (IPPS)

Federal Register publication date: May 3, 2019
Comments due: June 24, 2019
Effective date: October 1, 2019


Proposed update factors*

Market basket update 3.20%
Economy wide productivity adjustment (0.50%)
Required by legislation  0.50%
    Proposed rate increase factor 3.20%

*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 $4.7 billion in comparison to FY 2019. This is an increase of approximately 3.7% which, in addition to the above proposed rate changes, incorporates changes to payments in uncompensated care, new technology add-ons, and capital payments.

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

  • A provision to increase the wage index for hospitals with a wage index below the 25th percentile. These hospitals’ wage indexes would 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 would be funded by a decrease in wage index for hospitals above the 75th percentile 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 proposed changes, a 5% cap on 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 proposes distributing approximately $8.5 billion in uncompensated care payments to disproportionate share hospitals in FY 2020. This is an increase of approximately $216M over FY 2019. In the proposed rule CMS proposes using a single year (FY 2015) of data from Worksheet S-10 of the Medicare cost report to distribute these funds.  CMS is seeking public comment, due to changes in the reporting instructions that became effective in FY 2017, as to whether to utilize FY 2017 as opposed to FY 2015 Worksheet S-10 data to determine uncompensated care distributions. 

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

IPPS quality reporting program
CMS is proposing for FY 2020 a number of updates to the hospital quality incentive programs. The agency would add three new electronic clinical quality measures to the inpatient quality reporting program including two opioid–related measures and a hybrid hospital-wide all-cause readmission measure.

If you are interested in more information regarding the proposed FY 2020 changes to the IPPS, please contact Connie Ouellette.

The full public inspection document is available here:

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