Blog, Reimbursement

IPPS Final Rule 2020 – Key Points

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2020 IPPS Final Rule Key Points

This post contains key changes to the IPPS Final Rule 2020. If you require assistance or have questions about your hospital’s Medicare reimbursement, BESLER’s reimbursement team can help.
If you have any questions, please contact Jeff Wolf: or (609) 445-2203.

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Podcast Listen to BESLER’s Jaycee Lin provide analysis on the 2020 IPPS Final Rule

Rates and Spending

Under the final rule, acute care hospitals that report quality data and are meaningful users of Electronic Health Records (EHR) will receive a 3.1 percent increase in Medicare operating rates.

This includes a projected hospital market basket update of 3.0%, reduced by 0.4% productivity adjustment, a 0.5% add back from legislation.

CMS is projecting an increase in Medicare spending on inpatient hospital services in FY 2020 of approximately $3.4 billion, including an increase in new technology add-ons of $0.2 billion.

Overall Medicare estimates the spending on inpatient hospital services will increase by a total of $3.8 billion, which equates to roughly a 3% increase over FY 2019.

Get the FY2020 FR Tables by downloading 2020 IPPS Final Rule: Key Points – get it now, no form required!


Medicare disproportionate share hospital payments are now based on 25% DSH Empirical formula (Medicaid Eligible Days) and 75% based on the distribution of Uncompensated Care (UCC) funds.

Medicare DSH Supplemental payments increased from $8.27 billion to $8.4 billion in FY 2020.

In FY 2020 CMS will use S-10 data from the FY 2015 cost reports to determine the distribution of uncompensated care payments.

Due to public comments emphasizing the importance of ensuring accuracy and consistency, CMS is conducting audits of FYE 2017 S-10 information to begin in the fall of 2019.

This presents a problem because less than 20% of the facilities reporting S-10 were audited for FY 2015.

The data that is used will have a disparity between the audited facilities and the un-audited facilities.  CMS is directing the MACs to audit 2017, and we will need to watch the audit volume and see if CMS elects to skip 2016 in favor of 2017 “Audited S-10” for the 2021 IPPS Final Rule.  In addition there was little community feedback from the audit process about items that should be done differently based on the audit findings.

Wage Index

CMS has moved forward with three wage index adjustments that were first proposed this year in an attempt to re-align the wage index adjustment factors for IPPS payments.

These changes adjust the disparity of low wage index hospitals, rural floor calculation methodology, and the one year transition cap on the wage index factor adjustments.

Low wage index hospitals

Low wage index hospitals will receive an additional wage index bump of 50% of the difference between the individual hospitals’ wage index and the wage index across all hospitals.

This adjustment is currently set for four years.  CMS is using budget neutrality to ensure that this program will not increase total Medicare spending.

The goal of this change is to increase the wage index of the lowest 25th percentile hospitals, so that they have the ability and funding to increase their employee compensation in line with the industry.

Rural floor calculation methodology

CMS is removing hospitals that reclassed from urban to rural from the calculation of the rural floor wage index value.

In some cases, the reclassification of one large urban hospital to rural status caused the rural floor to increase for ALL facilities in a respective state. Given this impact, CMS’ change is not surprising.

There will still be substantial advantages for urban providers to perform the rural designation reclass. Each provider will need to assess their needs and monitor their wage rates to ensure that they are appropriate so they can determine if the urban/rural geographic reclass is right for them.

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Transition cap on wage index adjustment factor

CMS is imposing a 5% cap on any decrease to the wage index adjustment factor for any hospital that sees a negative impact on their wage index from 2019 to 2020.

CMS received significant responses to their wage index changes. Most of the comments centered around the negative impact to facilities resulting from the changes.

CMS has made an attempt to soften the impact of these changes on the facilities that are negatively impacted.

We expect this type of language to continue in future IPPS rules for two to three years .

New technology add-on payment pathway for devices

CMS finalized an alternative new technology add-on payment pathway for medical devices that receive FDA marketing authorization and are part of the Breakthrough Devices Program.

New technology devices will receive additional payments in FY 2021 for devices with applications received for new technology add on payments in FFY 2020.

Hospital Acquired Conditions Reduction Program

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

  • Specify the dates to collect data used to calculate hospital performance for the FY 2022 HAC Reduction Program;
  • Adopt eight removal factors CMS would use when deciding whether a measure should be removed from the HAC Reduction Program; and
  • Clarify administrative processes for validating National Healthcare Safety Network (NHSN) Healthcare-associated Infection (HAI) data submitted by hospitals to the Centers for Disease Control and Prevention (CDC).

Slideshare: 2020 inpatient prospective payment system final rule key points

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