Freed Associates

The FY 2016 Inpatient Prospective Payment System Final Rule Reinforces CMS’ Move from Volume to Value

By Emily Richmond, MPH

On August 17, 2015, the Centers for Medicare and Medicaid Services (CMS) issued its final rule for the Inpatient Prospective Payment System for fiscal year 2016.  The rule serves to reinforce the increasingly swift pace CMS is taking to move towards a value-based payment system. This rule also demonstrates that there will continue to be a lot of moving parts for hospitals and other inpatient facilities to keep track of over the next few years – from changing quality measures to Meaningful Use, it will be important to understand all the applicable payment penalties and reporting programs that apply to your organization.

To help get a jump-start on learning about the new policies that will begin October 1, 2015, Freed has pulled together a list of the key topics to be aware of.

Hospitals will be subject to multiple payment adjustments

  • Payment Increases. Acute care hospitals that report quality data through the Inpatient Quality Reporting program and satisfactorily participate in the EHR Incentive Program will receive a 0.9% increase in Medicare operating rates. Hospitals that do not submit quality data will lose a quarter of the market basket update (2.4%), and hospitals that do not attest for Meaningful Use will lose an additional 0.5% of the market basket update in FY 2016.
  • Hospital-Acquired Conditions Penalties. Under the final rule, hospitals with the poorest performance in reducing Hospital-Acquired Conditions (HACs), specifically those in the bottom 25% of performers, will have their Medicare pay docked by 1.0%. CMS estimates that 19.4% of all hospitals will be penalized with this 1.0% reduction in MS-DRG payments for all traditional Medicare discharges in FY 2016.

Medicare has modified readmission cohorts related to pneumonia

  • Pneumonia Cohort Expansion. In this final rule, CMS has expanded the readmission cohort (and not the mortality cohort) under the Hospital Readmissions Reduction Program to include patients with a principal discharge diagnosis of pneumonia, aspiration pneumonia, and sepsis with a secondary diagnosis of pneumonia present on admission. CMS chose not to include patients with a principal discharge diagnosis of respiratory failure or sepsis if they are coded as having severe sepsis.

  • The revised pneumonia cohort is expected to increase the number of discharges included in the measure by 50%, and to increase the number of hospitals (which will now meet the minimum case threshold of 25 eligible discharges). It is expected that the revised definition will impact the excess readmission rate for some hospitals.

Changes to the Hospital Inpatient Quality Reporting Program (HIQR)

  • New Quality Measures Added. Hospitals are required to report data on quality measures on an annual basis in order to receive the full annual percentage increase in payments. Under the FY 2016 final rule, CMS added seven new quality measures to the HIQR program: three new claims-based measures and one structural measure for the FY 2018 payment determination and subsequent years; and three new claims-based measures for the FY 2019 payment determination and subsequent years.

  • Electronic Quality Measure Reporting. CMS is also requiring hospitals to report a minimum of four electronic clinical quality measures in FY 2016, which determines FY 2018 payment. Hospitals will not be required to report electronic data until the second half of the year. They will have to submit at least one quarter of electronic quality measure data from either Q3 or Q4 of CY 2016 with a submission deadline of February 28, 2017. This data must come from an electronic health record system certified to the 2014 or 2015 Edition and must be submitted using the QRDA Category I format.

Hospital Value-Based Purchasing Program

  • Quality Measure Changes. In the final rule, CMS is adding a care coordination measure to the Hospital Value-Based Purchasing Program beginning with the FY 2018 program year, and a 30-day mortality measure for chronic obstructive pulmonary disease beginning with the FY 2021 program year. CMS is also removing two measures, effective with the FY 2018 program year: the IMM-2: Influenza Immunization and AMI-7a: Fibrinolytic Therapy Received within 30 Minutes of Hospital Arrival measures,

PSS-Exempt Cancer Hospital Quality Reporting Program

  • The Prospective Payment System (PPS) Exempt Cancer Hospital Quality Reporting program (PCHQR), established by the Affordable Care Act, is intended to equip consumers with quality-of-care information to make more informed decisions about healthcare options. It is also intended to encourage hospitals and clinicians to improve the quality of inpatient care provided to Medicare beneficiaries by ensuring that providers are aware of and reporting on best practices for their respective facilities and type of care.

  • Quality Measure Changes. CMS finalizes three new patient safety measures under the PCHQR program. The three new measures are a Clostridium difficile infection outcome measure, Hospital-Onset Methicillin resistant Staphylococcus aureus bacteremia outcome measure, and a measure of Influenza vaccination coverage among healthcare personnel.

The Hospital Inpatient Prospective Payment System final rule for FY 2016 goes into effect on October 1, 2015. With just a few months left until the payment provisions of the rule will be applied, it is important to understand how they will impact your organization and to update any applicable clinical, organizational, or administrative mechanisms. As with many Medicare programs and payment policies, waiting until they are applied is waiting too long – the time to take action is now.