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FY2019 IPPS Final Rule Summary [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by David Korn and Bob Mahoney from BESLER’s Reimbursement Integrity team to discuss the most significant changes resulting from the FY2019 IPPS Final Rule.

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Click here to read our key takeaways from the FY2019 IPPS Final Rule and to download your copy.FY2019 IPPS Final Rule

Read a transcript of this podcast.

Highlights of this episode include:

  • Discussion of the imputed rural floor expiration
  • Changes to Medicare inpatient reimbursement
  • Uncompensated care pool
  • Low volume payments
  • And more….

Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast. The 2019 fiscal year IPPS final rule has published. And perhaps, by now, you’ve even had a chance to take a look at what some of the key changes are in that rule.

But to help us look at that a little bit more closely and understand how they might affect hospitals in this coming year, I’m joined by Dave Korn and Bob Mahoney from our Reimbursement Services Team here at BESLER.

Gentlemen, welcome to the program.

Bob Mahoney: Thank you.

Mike: So Bob, let me go to you first. One of the things that occurred in the final rule was the elimination of the imputed rural floor payment program. And that’s something that we’ve dealt with a lot at BESLER and is certainly near and dear to our heart in the state of New Jersey. Can you talk to us about the significance of that?

Bob: Yeah, Mike. I’d like to because it’s one of the more significant things that changed in the final rule. And it affects mainly three states—New Jersey, Rhode Island, and Delaware.

And basically, those states in the rural floor, in CMS’ determination, New Jersey, Rhode Island and Delaware did not have any rural areas. And the rural floor had increased these hospitals, so they couldn’t be paid lower than any rural hospitals in the country.

And now, with that going away, further money is now spread across the wage index because it’s budget neutral it will enhance all 50 states.

So, there are 10 hospitals in New Jersey, 9 in Rhode Island and 3 in Delaware that will no more receive an increase to their wage index starting October 1st 2018. And that will have a significant impact on their Medicare payments.

Mike: Indeed! That’s something that we’ve certainly kept an eye for a long time. And it’s going to be a big change in the coming year.

Dave, let me go to you. Can you talk about some of the high-level updates to the Medicare inpatient payments rate in the final rule?

Dave Korn: Sure! Well, first of all, effective October 1 of this year, hospitals that report quality data and are meaningful users for electronic health records, they’ll receive approximately a 1.8% increase in their Medicare operating rates.

And what makes that up is there’s a market basket update of 2.9%. And that’s going to be reduced by 0.8% productivity adjustment. And then, there’s also a 0.5% add back from the documentation and coding adjustment that was previously taken away from hospitals.

And then, there’s also a 0.75% reduction that’s required by the Affordable Care Act.

Now, one thing I mentioned, one thing to note is that the 1.8% increase, if you look at the tables that were published in the final rule, they don’t add up to the 1.8%. And the reason is because the tables did not include the 0.5% increase that’s required from the documentation and coding adjustment that was part of MACRA.

Now, because of the rate increase, CMS is projecting an increase of Medicare spending on inpatient hospitals by about $4.8 billion in fiscal year 2019. Part of that increase, a big part of that increase, is an increase of $1.4 billion for DSH. And then, there’s also a $0.2 billion for new technology add-ons.

Now, though the increases will go into effect—I mean the penalties that have been in existence like for excessive readmissions, the 1% penalty for worst performing quartile in the hospital acquired conditions, and then also the value-based purchasing that will continue to have its up’s and down’s.

But I think, at least, overall, the fact that a lot of hospitals should get an increase in their rates is some good news for a change.

Mike: Yeah, I’m sure that will be very well-received, Dave.

Bob, can you talk to us about some of the DSH changes in the final rule?

Bob: Yeah, certainly. And then, as Dave just mentioned, the uncompensated care pool is increased $1.4 billion which will increase hospitals’ funds.

[And as part of the ACA, Medicare disproportionate share hospitals qualify a pay based on 25% of DSH classic and 75% of that uncompensated care pool].

Now, one of the big changes in 2019 is that CMS is going to begin to use the S-10 data. A lot of people have been talking about it. It’s become much more important to schedule in the cost report, the S10. And they’re going to use the S-10 data for 2019 from 2014 and 2015 cost reports, and also, uninsured low income data from 2013 to distribute the uncompensated care payments.

In 2020, they plan on relying completely based on S10 data. And that’s a significant change that certain hospitals have to be aware of. So payments are going up, but the reporting is changing some.

That’s something to keep an eye on as we look into 2019. Thank you.

Dave: And also, something else that was in the final rule that I don’t know if very many people caught it, because they’re using the S-10, CMS is expecting to begin audits on S-10 information in the fall of this year.

So, that’s something to look forward to I guess.

Bob: That’s great. Thanks Dave. That’s a great point.

Mike: One more thing to be audited, right?

Dave: Yeah, exactly.

Mike: Bob, the next one’s for you as well. There was a change to the name of the electronic health record incentive program. But there are also some changes to the program itself. Can you talk about that?

Bob: Yeah, I mean a major change to the electronic health record program is they changed the name of it to the Promoting Interoperability Program. And what it’s going to do is place more of an emphasis on patient care. And that’s a good thing.

And one of the key provisions of the older rule, [it’s finalized a performance-based scoring methodology which is a slower set of adjustments] of assessment and objectives that were used in the past. So this will be less burdensome to the hospitals and promote more patient care.

And that’s really a good thing for CMS to do for the clinical staff. It’s less paper work. They believe that once everybody’s going to the electronic healthcare record, it’s working, now they can have more time with the patient and less time worrying about the paperwork. It’s a good thing.

Mike: Yeah, it makes a lot of sense.

Dave, one thing that is new—and I think it’s very much in line with the trends that you see out in the marketplace—hospitals are now required to post their standard charges. Can you talk to us about what that means and what deadlines are associated with that?

Dave: Sure! Well, basically, it’s effective January 1st of 2019. CMS is requiring hospitals to make a public online list of their standard charges. And the hospitals also have to update that annually—or more often if appropriate.

So I guess if during the year, you have a change in your charge structure, then you will be required to go out and update the online charge listing.

Now, the reason CMS is doing it is they, over the years, have always been trying to be more price transparent for consumers. This will help with the price transparency, but also improving access to charge information from hospitals.

Mike: Thanks Dave.

Bob, any changes to the two-midnight rule? I know that’s something that’s been floating around for several years now.

Bob: There were no changes to the two-midnight rule payment policy. But in following along with the interoperability program we have discussed earlier, CMS is no longer requiring a written inpatient admission present in the medical record for the two-midnight policy. And that’s, once again, where the electronic record is taking over and CMS is once again putting the focus on patient care.

So, it’s a good thing that no changes were made to the two-midnight payment policy, more of an emphasis on patient care and less paperwork again. That’s a positive.

Mike: I would agree.

Dave, it appears there are some significant changes to the low volume hospitals payment adjustments. Can you explain those to us?

Dave: Well, yeah, the low volume payments, that has been—it seems to have been going back and forth over the last few years. But what the final rule did is it established for fiscal years 2019 through 2022, it modifies the qualifying criteria and also the payment formulas that is used.

So, beginning in 2019, in order for a hospital to qualify, they must be more than 15 road miles from another hospital and have less than 3800 total discharges. Now, that will get you to qualify.

Now, the way the payment is going to work is the payment is going to be built on a sliding scale which will range from where you can receive an additional 25% payment for hospitals with 500 or fewer discharges. And then, if you have greater than the 3800 discharges, you’ll receive no additional payment.

Now, if you’re a hospital that falls in between the 3800 discharges and the 500 discharges, there’ll be a calculation where you’ll subtract from the max which is that 25% the proration of the payments associated with the discharges in excess of 500.

So it’s just basically a sliding scale with 25% being the max for 500 or fewer. And then, the proportion, as you move up to the 3800 discharges, that additional payment will be calculated that way.

Mike: Thanks Dave.

Bob, can you go through some f the changes related to cost report submissions?

Bob: Certainly, Mike. A lot of these changes, most hospitals had been doing and should be doing with their submission. But it would seem that CMS looks for more and more detail.

And once it’s tied in with the S10, it’s going to become a more and more significant worksheet in the cost report.

So, if you’re looking for Medicare bad debt reimbursement, you should be submitting a Medicare detailed bad debt listing that matches the amount. The same if you’re getting a DSH payment reduction, you’re getting Medicaid eligible days, you should be sending a listing on those eligible days.

The other thing is also now, with the S10, your charity care and uninsured you want to send a listing of your charity care patients that you’re reporting on the S-10. You want to submit that with the cost report. And it’s going to make your life easier down the road when they audit it. If it ties to your cost report when you submit it, they’re not going to come back.

Also, as systems grow across the country—home office is becoming a bigger and bigger piece of the cost report. Now, they want you to submit a home office statement that ties in to their report that they’re using on the A-8

Dave, I don’t know if you have anything to add to that, on the home office.

Dave: Yeah, with the home office, it’s because a lot of hospitals, their year-end wouldn’t necessarily coincide with the year-end of the home office. So what CMS is requiring, if they have the same year end, then a copy of the home office report that ties to the hospital cost report for the home office amounts must match.

Now, if they have different year-ends, then the home office cost for the portion of the cost reporting period that matches the home office cost report, that piece must match.

So hospitals are going to be required to not only file a copy of their home office report with the MAC who is the servicing MAC for the home office, but also if the hospitals have different MACs, then a copy of the home office report is going to need to go to the servicing MAC for the facilities as well.

So, that’s just another thing that they’re trying to do. Like Bob mentioned on the other aspects of the requirements for the submission of the cost report, they’re just trying to gather more information upfront. These are things that most hospitals or all hospitals had to supply anyway. They’re just making sure they get it upfront now. They’re wanting to get them upfront now in order to—I’m assuming to speed the process of settling the cost report, try to speed that process along.

Bob: Great! Thanks Dave.

And one other thing. In the cost reports, it was like a questionnaire, and it was form CMS-339. And that has now been totally incorporated into the cost report software. So you no longer have to be submit the CMS-339.

So, that’s ess information that is not submitted as a separate form anymore. So that’s going forward.

Mike: Well, Bob and Dave, thanks for the great discussion today. If you would like a copy of our full analysis of the 2019 IPPS Final Rule, just head over to, click on the button that says Blog at the top of the website, scroll down and you will find that there. Please go ahead and download your copy or take a look at the Slideshare deck that’s there.

Bob and Dave, thanks so much for joining me today on the Hospital Finance Podcast.

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