CMS Releases FY 2020 IPPS Proposed Rule

On April 23, 2019, the Centers for Medicare and Medicaid Services (CMS) released the Inpatient Prospective Payment System (IPPS) proposed rule for fiscal year (FY) 2020. The proposed update includes changes that will affect all hospitals, with particular benefit to hospitals in rural areas at the expense of hospitals in large metropolitan centers. The proposed changes, if finalized, also would substantially benefit developers of new technologies and would potentially improve beneficiary access to those technologies.

A CMS factsheet on the proposed rule is available here. Comments are due on June 24, 2019.

Key Takeaways

  • CMS projects that total Medicare spending on inpatient hospital services, including capital, will increase by about $4.7 billion in FY 2020.
  • CMS proposes to address payment disparities between rural and urban facilities through changes to the Medicare wage index.
  • To help improve beneficiary access to emerging technology, CMS sets out a number of proposals to revise policies related to new technology add-on payments and increase payment rates (maximum new technology add-on payment increased from $186,500 to $242,450).
  • The proposed rule includes a number of changes to the IPPS quality programs, including changes to measures and reporting requirements, with an eye towards burden reduction.
  • For the Medicare and Medicaid Interoperability Programs, CMS will continue a minimum 90-day reporting period. CMS proposes new measures and seeks comments on improving the use of electronic health records (EHRs), among other topics.

CMS Proposes to Increase Inpatient Hospital Rates by 3.2% in FY 2020

CMS proposes to increase inpatient hospital rates by 3.2% in FY 2020 compared to FY 2019, for hospitals that are meaningful users of EHRs and submit quality measure data.

CMS projects that the rate increase, together with other proposed changes to IPPS payment policies, will increase IPPS operating payments by approximately 3.5% overall. When combined with proposed changes in uncompensated care payments, new technology add-on payments, low-volume hospital payments and capital payments, which are expected to increase payments by an additional 0.2%, CMS estimates a total increase in IPPS payments of approximately 3.7%.

CMS projects that total Medicare spending on inpatient hospital services, including capital, will increase by about $4.7 billion in FY 2020. The proposed changes would apply to approximately 3,300 acute care hospitals and affect discharges occurring on or after October 1, 2019.

CMS Proposes $8.5 Billion in Uncompensated Care Payments

CMS distributes a prospectively determined amount of uncompensated care payments to Medicare disproportionate share hospitals based on their relative share of uncompensated care nationally. In this rule, CMS proposes to distribute roughly $8.5 billion in uncompensated care payments in FY 2020, an increase of approximately $216 million from FY 2019.

CMS is also seeking comments on a number of proposals related to how the agency collects data to calculate uncompensated care payments.

Streamlined Process and Increased Reimbursement for Some New Technology Add-On Payments

Under the new technology add-on payment (NTAP) program, CMS provides additional payment for breakthrough technologies in the inpatient hospital environment. New technologies meeting specific cost thresholds and demonstrating substantial clinical improvement over existing services qualify for an add-on payment under this program.

With the intent to support and improve beneficiary access to new technology, the 2020 IPPS proposed rule includes a number of policies streamlining and facilitating access to the add-on payments.

  • Proposed NTAP Alternative Pathway for Devices: Under this proposal, medical devices that receive US Food and Drug Administration (FDA) marketing authorization and are part of an FDA expedited program for medical devices (e., Breakthrough Devices Program) would have a lower bar to be eligible for an add-on payment. Under this proposal, the medical device would only need to meet the cost criterion to receive the add-on payment (and not the substantial clinical improvement criterion). This change would begin with applications received for NTAPs for FY 2021.
  • Proposed Calculation of NTAP: Currently, Medicare pays a marginal cost factor of 50% of the estimated costs of the case in excess of the full diagnosis-related group payment, up to a maximum of 50% of the costs of the technology. Because of increasing costs of new medical technologies, CMS is concerned that 50% may not be adequate. CMS proposes to increase the add-on payment beginning in FY 2020 from 50% to 65%. As a result, the maximum add-on payment in the proposed rule would increase from $186,500 to $242,450 for CAR T-cell therapy.
  • Request for Information on the NTAP Substantial Clinical Improvement Criterion: Stakeholders have indicated that they would like to better understand how CMS evaluates new technology applications for add-on payments, and would like the agency to provide greater predictability about which applications will meet the criterion for substantial clinical improvement. CMS is considering potential revisions to the substantial clinical improvement criterion under the IPPS NTAP policy and the hospital outpatient transitional pass-through payment policy for devices. CMS seeks comments on the type of additional detail and guidance that would be useful to the public and NTAP applicants for NTAPs would find useful. These comments will be used to inform future rulemaking.
  • Applications for NTAPs for FY 2020: CMS addresses applications for NTAPs under the IPPS by presenting its evaluation and analysis of the applications. In this proposed rule, CMS presents 17 new applications for FY 2020 NATPs, and proposes to continue the NTAPs for 10 of the 13 technologies currently receiving the add-on payment (the remaining three technologies will no longer be within their newness period in FY 2020 and therefore lose their add-on).