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Hospitals Inspect CMS Proposed MarketBasket Payment Policies for FY 2017

By Susan Dooley

Its out there for the studying. CMS released its newly issued proposed rule to change fiscal year 2017s
Medicare payment policies and rates under the inpatient prospective payment system (IPPS) and the
long-term care hospital (LTCH) prospective payment system (PPS). The proposed rule, which CMS says
would apply to approximately 3,330 acute care hospitals and approximately 430 LTCHs, would affect
discharges occurring on and after October 1, 2016.
CMS will accept comments on the proposed rule until June 16, 2016, when the comment period ends.
The agency will respond to comments and post its IPPS-LTCH PPS final rule by August 1, 2016. You can
download the proposed rule from the Federal Register here. Beware automatically printing the PDF
version: its 1579 pages.

The Coding Institute LLC, 2222 Sedwick Road, Durham, NC 27713, Eenterprise Contact: Sam Nair, Direct: 704 303 8150,

Quick Review IPPS, LTCH, and How CMS Pays

According to the American Hospital Association (AHA), about three-quarters of the nations hospitals are
paid under the inpatient prospective payment system (IPPS). (The remaining one-quarter are Critical
Access Hospitals, which are paid on a cost basis. These institutions are rural hospitals that meet defined
conditions of participation as well as other legal requirements.)
LTCHs are long-term care hospitals that give extended medical and rehabilitative care to people with
complex medical problems who need hospital-level care for longer periods than regular acute-care
hospitals can usually provide. The AHA explains that to qualify as an LTCH for Medicare payment, a
facility must meet Medicares conditions of participation for acute care hospitals and have an average
inpatient length of stay of greater than 25 days.
CMS pays acute care hospitals for inpatients under the IPPS, and it pays long-term care hospitals under
the LTCH prospective payment system (PPS). CMS sets the payment rates based on a patients diagnosis
and severity of illness using the MS-DRG payment classification. Hospitals get a single payment based on
this classification. CMS updates the IPPS annually to account for changes in costs of goods and services
that hospitals use to treat Medicare patients. This payment is called the hospital market basket. CMS
usually updates LTCH payment rates with a separate market basket based on goods and services that
are specific to LTCHs.

Hit the Highlights of the FY 2017 IPPS Changes

CMS estimates that Medicare spending on inpatient services will increase by up to $539 million by FY
2017. CMS proposes to increase operating payment rates by 0.9 percent for general acute care hospitals
under IPPS. But to reap these benefits, hospitals must have met meaningful use requirements for
electronic health record (EHR) use. Hospitals must also have successfully complied with the Hospital
Inpatient Quality Reporting (IQR) Program. The IPPS market basket increase also includes the one-time
boost of 0.6 percent CMS will pay hospitals to make up for revenue lost to the two-midnight rule in the
past three years.
If hospitals failed to submit quality data or successfully participate in the Hospital IQR program, their
market basket update gets cut by a fourth. In addition, hospitals that are not meaningful EHR users face
a three-fourths slash in their market basket update for FY 2017. CMS proposes to cut LTCH payments,
too by 6.9 percent, which is about $355 million in FY 2017.

What About You?

Will your facility be hard hit by IPPS or LTCH cuts? Let us know!

The Coding Institute LLC, 2222 Sedwick Road, Durham, NC 27713, Eenterprise Contact: Sam Nair, Direct: 704 303 8150,

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Contact Us:
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Direct: 704 303 8150

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The Coding Institute LLC, 2222 Sedwick Road, Durham, NC 27713

The Coding Institute LLC, 2222 Sedwick Road, Durham, NC 27713, Eenterprise Contact: Sam Nair, Direct: 704 303 8150,