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2020 IPPS Final Rule
Key Points
The 2020 Hospital Inpatient Prospective Payment System (IPPS) Final
Rule has been issued and changes are on the way that c...
The Medicare Hospital Inpatient Prospective Payment System (IPPS) rates are required by law
to be updated annually.
The or...
• Rates and Spending
• FY2019 FR Tables
• DSH Payments
• DSH Data
• Wage Index
• Low Wage Index Hospitals
• Rural Floor Ca...
Rates and Spending
Under the final rule, acute care hospitals that report
quality data and are meaningful users of Electro...
Rates and Spending
CMS is projecting an increase in Medicare
spending on inpatient hospital services in FY 2020
of approxi...
TABLE 1A. NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS; LABOR/NONLABOR
(68.3 PERCENT LABOR SHARE/31.7 PERCENT NONLABOR...
TABLE 1B. NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR
(62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHA...
TABLE 1C. ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR HOSPITALS IN PUERTO RICO, LABOR/NONLABOR (NATIONAL: 62 PERCENT LABOR...
DSH Payments
Medicare disproportionate share hospital payments are
now based on 25% DSH Empirical formula (Medicaid
Eligib...
DSH Data
This presents a problem because less than 20% of the facilities reporting S-10 were audited for FY 2015.
The data...
CMS has moved forward with three wage index
adjustments that were first proposed this year in
an attempt to re-align the w...
The goal of this change is to increase
the wage index of the lowest 25th
percentile hospitals, so that they have
the abili...
Rural Floor Calculation Methodology
CMS is removing hospitals that reclassed from urban to rural from
the calculation of t...
CMS has made an attempt to soften the impact
of these changes on the facilities that are
negatively impacted.
We expect th...
New Technology Add-On Payment
Pathway for Devices
CMS finalized an alternative new
technology add-on payment pathway
for m...
Hospital Acquired Conditions
Reduction Program
• Specify the dates to collect data used to calculate
hospital performance ...
BESLER combines best-in-class healthcare finance expertise with
proprietary technology to help hospitals recover more reve...
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2020 Inpatient Prospective Payment System (IPPS) Final Rule Summary - BESLER

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The 2020 Hospital Inpatient Prospective Payment System (IPPS) Final Rule has been issued and changes are on the way that can affect your organization’s Medicare reimbursement.

As part of our commitment to help protect and enhance your Medicare revenue, we’ve developed this expert analysis of the FY 2020 IPPS Final Rule to quickly give you insight into the most important changes.

Published in: Healthcare
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2020 Inpatient Prospective Payment System (IPPS) Final Rule Summary - BESLER

  1. 1. 2020 IPPS Final Rule Key Points
  2. 2. The 2020 Hospital Inpatient Prospective Payment System (IPPS) Final Rule has been issued and changes are on the way that can affect your organization’s Medicare reimbursement. As part of our commitment to help protect and enhance your Medicare revenue, we’ve developed this expert analysis of the FY 2020 IPPS Final Rule to quickly give you insight into the most important changes. BESLER remains your trusted advisor and we look forward to helping you identify areas of revenue opportunity for your facility. Jonathan Besler President & CEO
  3. 3. The Medicare Hospital Inpatient Prospective Payment System (IPPS) rates are required by law to be updated annually. The original goal of IPPS was to incentivize hospitals to operate efficiently, while compensating hospitals for the cost of providing high quality health care to Medicare beneficiaries. This report contains key changes to the FY2020 IPPS Final Rule.
  4. 4. • Rates and Spending • FY2019 FR Tables • DSH Payments • DSH Data • Wage Index • Low Wage Index Hospitals • Rural Floor Calculation Methodology • Transition Cap on Wage Index Adjustment Factor • New Technology Add-On Payments • Hospital Acquired Conditions Reduction Program Contents
  5. 5. 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.
  6. 6. Rates and Spending 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.
  7. 7. TABLE 1A. NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS; LABOR/NONLABOR (68.3 PERCENT LABOR SHARE/31.7 PERCENT NONLABOR SHARE IF WAGE INDEX GREATER THAN 1) Hospital Submitted Quality Data and is a Meaningful EHR User (Update = 2.6 Percent) Hospital Submitted Quality Data and is NOT a Meaningful EHR User (Update = -0.35 Percent) Hospital Did NOT Submit Quality Data and is a Meaningful EHR User (Update = 1.85 Percent) Hospital Did NOT Submit Quality Data and is NOT a Meaningful EHR User (Update = - .4 Percent) Labor-related Nonlabor-related Labor-related Nonlabor-related Labor-related Nonlabor-related Labor-related Nonlabor-related $3,962.17 $1,838.96 $3,875.28 $1,798.63 $3,933.21 $1,825.52 $3,846.32 $1,785.19 FY2020 FR Tables
  8. 8. TABLE 1B. NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE IF WAGE INDEX LESS THAN OR EQUAL TO 1) Hospital Submitted Quality Data and is a Meaningful EHR User (Update = 2.6 Percent) Hospital Submitted Quality Data and is NOT a Meaningful EHR User (Update = -0.35 Percent) Hospital Did NOT Submit Quality Data and is a Meaningful EHR User (Update = 1.85 Percent) Hospital Did NOT Submit Quality Data and is NOT a Meaningful EHR User (Update = -1.55 Percent) Labor-related Nonlabor-related Labor-related Nonlabor-related Labor-related Nonlabor-related Labor-related Nonlabor-related $3,596.70 $2,204.43 $3,517.82 $2,156.09 $3,570.41 $2,188.32 $3,491.54 $2,139.97 FY2020 FR Tables
  9. 9. TABLE 1C. ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR HOSPITALS IN PUERTO RICO, LABOR/NONLABOR (NATIONAL: 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE BECAUSE WAGE INDEX IS LESS THAN OR EQUAL TO 1) Rates if Wage Index Greater Than 1 Rates if Wage Index Less Than or Equal to 1 Labor Nonlabor Labor Nonlabor National1 Not Applicable Not Applicable $3,596.70 $2,204.43 1For FY 2020, there are no CBSAs in Puerto Rico with a national wage index greater than 1. TABLE 1D. - CAPITAL STANDARD FEDERAL PAYMENT RATE Rate National $462.61 TABLE 1E- LTCH PPS STANDARD FEDERAL RATE Full Update (2.5 Percent) Reduced Update* (.5 Percent) Standard Federal Rate* $42,677.64 $41,844.90 * For LTCHs that fail to submit quality reporting data for FY 2020 in accordance with the LTCH Quality Reporting Program (LTCH QRP), the annual update is reduced by 2.0 percentage points as required by section 1886(m)(5) of the Act. FY2020 FR Tables
  10. 10. DSH Payments 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.
  11. 11. DSH Data 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. 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.
  12. 12. 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. Wage Index
  13. 13. 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. • 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. Low Wage Index Hospitals
  14. 14. 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.
  15. 15. 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 . 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. Transition Cap on Wage Index Adjustment Factor
  16. 16. 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.
  17. 17. Hospital Acquired Conditions Reduction Program • 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). CMS made three changes to existing Hospital Acquired Conditions Reduction Program
  18. 18. BESLER combines best-in-class healthcare finance expertise with proprietary technology to help hospitals recover more revenue. Our reimbursement and recovery solutions have delivered more than $4 billion of additional revenue to hundreds of hospitals across the United States. We serve as advocates for hospitals, so that they, in turn, can better advance the health and well-being of their patients. Transfer DRG Revenue Recovery IME Revenue Recovery Reimbursement Revenue Integrity 3 Independence Way, Suite 201 Princeton, New Jersey 08540 1.877.4BESLER www.besler.com

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