IPPS Reverses Two-Midnight Rule Pay Cut

Medicare Compliance Watch, August 4, 2016

The Inpatient Prospective Payment System final rule increases payments to hospitals in the Inpatient Quality Reporting Program by 0.95% and reverses the proposed payment reduction instituted along with the two-midnight rule.

This article first appeared August 3, 2016 on the Medicare Compliance Watch website

CMS released the fiscal year (FY) 2017 IPPS final rule yesterday. CMS made changes to several quality initiatives and reversed the agency's 0.2% payment reduction instituted along with the 2-midnight rule in the FY 2014 rule. 

Payment rates will increase by 0.95% in FY 2017 compared to FY 2016 for hospitals participating in the Inpatient Quality Reporting (IQR) Program and meaningful EHR use, according to the rule.

"This also reflects a 1.5 percentage point reduction for documentation and coding required by the American Taxpayer Relief Act of 2012 and an increase of approximately 0.8 percentage points to remove the adjustment to offset the estimated costs of the two-midnight policy and address its effects in FYs 2014, 2015, and 2016," said CMS.

In the rule, CMS created two adjustments to reverse the effects of the 0.2% cut it instituted along with the 2-midnight rule, which has been the source of an ongoing legal challenge by the American Hospital Association and other parties.

CMS made a permanent adjustment of approximately 0.2% to remove the cut for FYs 2017 and onward, and a temporary adjustment of 0.6% to address the retroactive impacts of this cut for FYs 2014, 2015 and 2016, CMS states.

CMS finalized five changes to the Hospital-Acquired Conditions Reduction Program in this rule, as well as updates to the IQR program, changes to the Hospital Readmissions Reduction Program, and updates to the Hospital Value-Based Purchasing Program.

Listening to commenter feedback, CMS reduced requirements for reporting electronic clinical quality measures (eCQM) as part of the IQR program. Originally, CMS proposed requiring hospitals to submit data on all 15 eCQMs, but finalized a policy requiring hospitals to report four quarters of data on an annual basis for eight of the available eCQMs.

As part of the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act, CMS created the Medicare Outpatient Observation Notice (MOON). 

The MOON is a CMS-developed standardized notice hospitals are required to give to Medicare patients receiving observation services as an outpatient for more than 24 hours no later than 36 hours after observation services are initiated. Hospitals must give a verbal explanation of the MOON to patients and obtain a signature to acknowledge receipt and understanding of the notice.

"The standardized notice, the MOON, is going through the Paperwork Reduction Act process, thus affording the public an opportunity to comment on the MOON. The 30-day public comment period begins when the final rule is published," said CMS.

The entirety of the final rule is available in PDF format on the Federal Register, and is expected to be officially published by CMS on Monday, August 22. CMS says the rule applies to approximately 3,330 acute care hospitals and approximately 430 long-term care hospitals, and will affect discharges occurring on or after October 1, 2016.

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