Blog, Reimbursement

IPPS Final Rule 2019 – Key Points

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This post contains key changes to the IPPS Final Rule 2019. If you require assistance or have questions about your hospital’s Medicare reimbursement, BESLER’s reimbursement team can help.

For this content plus additional charts and information:

Rates and Spending

Under the 2019 IPPS Final Rule, acute care hospitals that report quality data and are meaningful users of Electronic Health Records (EHR) will receive approximately 1.85 percent increase in Medicare operating rates.

This includes a projected hospital market basket update of 2.9%, reduced by 0.8% productivity adjustment, a 0.5% add back from the Documentation and Coding Adjustment, and the 0.75% reduction adjustment to the update required by the Affordable Care Act (ACA).

Note: the 1.85% increase does not agree to the tables published in the final rule and shown later in this presentation. The tables do not include the 0.5% increase required by section 414 of the MACRA.

CMS is projecting an increase in FY 2019 Medicare spending on inpatient hospital services of approximately $4.8 billion, including an increase in the new technology add-on of $0.2 billion.

Penalties for excess readmissions continue along with a 1% penalty for the worst performing quartile under the Hospital Acquired Condition Reduction Program.

The up and down adjustments under the Hospital Value-Based Purchasing Program continue as well.

Get the FY2019 FR Tables by downloading 2019 IPPS Final Rule: Key Points – get it now, no form required!


As part of the ACA, Medicare disproportionate share (DSH) hospital payments are based on 25% DSH Classic and 75% on the distribution of Uncompensated Care (UCC) funds.

Medicare DSH Supplemental payments increased from $6.7 billion to $8.27 billion in FY 2019.

CMS has increased the UCC Pool with one-time adjustments twice. In 2018 the increase was $800 million and in 2019 $1.4 billion. These increases have significantly contributed to increases in hospitals’ UCC funds.

In FY 2019, CMS will use S-10 data from the FY 2014 and 2015 cost reports along with the insured low-income days data from the FY 2013 cost report to determine the distribution of uncompensated care payments.

Due to public comments emphasizing the importance of ensuring accuracy and consistency, CMS is expecting audits of S-10 information to begin in the fall of 2018.

The 2020 UCC payments will be completely based on S-10 data from 2014, 2015 & 2016.

Get the DSH Supplemental file

UCC Trending

UCC Trending


Promoting Interoperability Programs

CMS made changes to the Promoting Interoperability Programs (formerly known as the Electronic Health Record Incentive Programs) to increase interoperability and flexibility while reducing burden and placing a strong emphasis on measures that require the exchange of health information between providers and patients.

One of the key provisions of this overhaul include finalizing a new performance-based scoring methodology consisting of a smaller set of objectives. This, CMS says, will provide a more flexible, less-burdensome structure, allowing eligible hospitals to place their focus back on patients.

Promotion of standard charges

Hospitals are now required to establish and make public a list of their standard charges.

Effective January 1, 2019, CMS updated its guidelines to require hospitals to make a public, online list of their standard charges and to update this information annually, or more often, as appropriate.

This, CMS says, is to encourage price transparency by improving public accessibility of charge information.

Hospital Quality Reporting Program

CMS added one additional factor, Factor 8, when evaluating measures for removal from the Hospital IQR Program measure set.

CMS removed:

  • Five National Safety Network hospital-acquired infection measures.
  • One chart-abstracted clinical process of care measure.
  • Eighteen previously adopted measures that are “topped out,” do not result in better patient outcomes, or have associated costs that outweigh the benefit of its continued use in the program.
  • Twenty-one duplicate measures across programs. These measures will remain in one of the other four hospital quality programs.

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Two Midnight Policy

No changes were made to the Two-Midnight payment policy. However, it is no longer a requirement that written inpatient admission orders be present in the medical record as a specific condition of Medicare Part A payment. The regulations at 42 CFR 412.3(a) have been revised to accommodate for this change.

Payment Adjustment for Low-Volume Hospitals

The Bipartisan Budget Act of 2018, Section 50204 provides for temporary changes to the low-volume hospital payment adjustment policy. For FYs 2019 through 2022, this provision modifies the qualifying criteria and payment adjustment formula.

Beginning in FY 2023 and subsequent years, the qualifying criteria and payment adjustment revert to the requirements in effect for FYs 2005 through 2010.

For FFY 2019, to qualify, the hospital must be more than fifteen road miles from another hospital and have less than 3,800 total discharges during the fiscal year. A continuous linear sliding scale ranging from an additional 25% payment for low-volume hospitals with 500 or fewer discharges to a 0% additional payment for hospitals with more than 3,800 discharges.

For qualifying hospitals with fewer than 3,800 discharges but more than 500 discharges, the low-volume payment adjustment would be calculated by subtracting from 25% the proportion of payments associated with the discharges in excess of 500.

Hospital Value-Based Purchasing Program

In an effort to reduce duplicate measures, CMS has removed four measures.

  • Effective with the FY 2021 program year, CMS will remove one safety measure (PC-01) from the Hospital VBP and HAC Reduction Program.
  • AMI Payment, HF Payment and PN Payment will be removed from the Hospital VBP Program.
  • The PSI 90 measure will be removed from VBP in FY 2019, but it will be retained in the HAC Reduction Program.

CMS has changed the domain name from Clinical Care to Clinical Counts starting in the FY 2020 program year.

Hospital Acquired Conditions Reduction Program

CMS made three changes to existing Hospital Acquired Conditions Reduction Program policies in the FY 2019 final rule.

  • The time period will utilize specific dates to calculate hospital performance for the FY 2021 HAC Reduction Program.
  • Beginning CY 2020, CMS will incorporate an administrative process to receive and validate hospital submitted data to the Centers for Disease Control and Prevention (CDC) of National Healthcare Safety Network (NHSN) Healthcare-associated Infection (HAI).
  • All measures will be equally weighted in a hospital’s program score.

Hospital Readmissions Reduction Program

There were two changes in to the Hospital Readmissions Reduction Program.

  • Establish the applicable period for the FY 2019, FY 2020, and FY 2021 program years.
  • At 42 CFR 412.152, CMS codified the previously finalized definitions of dual-eligible, proportion of dual-eligible patients, and applicable period for dual-eligibility.

For FY 2019, CMS finalized the methodology for calculating aggregate payments for excess readmissions.

Imputed rural floor expiration

The imputed rural floor policy is expiring on September 30, 2018.

CMS has decided not to extend the policy for FY 2019 stating it “creates a disadvantage to hospitals in States with rural hospitals but no urban hospitals receiving the rural floor.”

The imputed rural floor will also no longer be a factor in the national budget neutrality adjustment.

Without the imputed rural floor, ten New Jersey hospitals, nine Rhode Island hospitals, and three Delaware hospitals will no longer receive an increase to their wage index.

Revisions of the Supporting Documentation Required for Submission of an Acceptable Medicare Cost Report

  • Medicare Bad Debt Reimbursement – must submit a detailed Bad Debt listing that matches the reported bad debt amounts.
  • DSH Payment Adjustment – must submit detailed listing of the Medicaid eligible days that corresponds with the Medicaid eligible days used on the cost report.
  • Charity Care and Uninsured Discounts – must submit a detailed listing of charity care and/or uninsured discounts that corresponds to the amounts claimed on the cost report.
  • Home Office Allocations – must submit a Home Office Cost statement that corresponds with the amounts allocated from the home office to the provider’s cost report when the provider’s fiscal year end corresponds with the fiscal year end of the home office. When they have differing fiscal year ends, “the provider’s home office costs for a portion of the cost reporting period (as reflected in the Home Office Cost Statement) must correspond to a portion of the amount reported in the provider’s cost report”.
  • Cost Reimbursement Questionnaire – now that the Form CMS–339 has been incorporated into all Medicare Cost Report forms (CMS–216 was the final remaining cost report form without it), the regulation no longer states that a cost report will be rejected for not including Form CMS-339.

WHITE PAPER: The Value of an Independent Cost Report Review

Slideshare: 2019 inpatient prospective payment system final rule key points

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