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5 Quality and Payment Changes CMS is Proposing for 2017

   April 27, 2016

In its annual rulemaking proposal aiming to shift hospitals toward a value-based model, Medicare recommends several changes, including one that the American Hospital Association says could undermine efforts to reduce readmissions.

When the Centers for Medicare & Medicaid Services released its proposed rule for the hospital inpatient prospective payment system (IPPS) last week, the American Hospital Association joined a chorus of industry leaders praising the agency's decision to drop the two-midnight rule payment cuts hospitals have endured since 2013.

Not only will CMS discontinue the 0.2% two-midnight rule payment reduction, it will also reimburse hospitals for the cuts with a 0.6% temporary payment increase in 2017. Senior policy associate director for AHA, Priya Bathija, says CMS's proposal is a hard-fought victory.

"This change, in combination with the changes to the outpatient final rule, really is a win for hospitals and Medicare beneficiaries," she says. When determining a patient's status, "hospitals should rely on physician judgment, not a time benchmark."

The AHA challenged the two-midnight rule in federal court along with four state hospital associations (the Greater New York Hospital Association, the Hospital Association of New York State, the New Jersey Hospital Association and the Hospital and Health System Association of Pennsylvania) and four hospital systems (Banner Health, Einstein Healthcare Network, Wake Forest University Baptist Medical Center, and Mount Sinai Hospital).

Bathija says the court still has to determine if CMS met the burden of justifying the 0.2% cuts in the first place. The AHA says CMS has not.

More Payment Adjustments

Another key payment change that Bathija says will impact hospital reimbursement is CMS's plan to increase the amount it has been collecting for coding and documentation overpayments.

Since 2014, CMS has taken 0.8% from hospitals to recoup $11 billion in overages that began in 2008. Fiscal year 2017 is the last year the agency has to finish recovering the overpayments, but CMS says it's short by $5.08 billion. To make up for the shortfall, the agency wants to take 1.5% from hospitals, nearly double the amount it took in previous years.

"We urge CMS to reduce the amount of this cut," Bathija says. "This cut is much larger than we think Congress anticipated."

The AHA also says some of the CMS quality measures meant to improve patient outcomes and quality are unfairly punishing some hospitals. The penalties hospitals incur for excessive readmissions have pressured hospital leaders to develop new protocols, but some factors are out of a hospital's control, according to Akin Demehin, AHA senior associate director.

Related: Readmissions Penalties Still Don't Account for Patient Demographics

"There is a growing body of literature that shows a link between socioeconomic conditions and readmission," Demehin says. "We think a socioeconomic adjustment would level the playing field and make it fairer."

The AHA had hoped that CMS would recommend adjusting readmission penalties for hospitals that serve a large number of disadvantaged patients. A report in January by the National Academy of Medicine report heightened awareness of the issue. The report identified five social risk factors that can impact outcome and quality measures, including hospital readmissions.

Related: 1 in 4 Readmissions Avoidable, Researchers Say

"Penalty or not, hospitals are focused on readmissions," says Akin. "A lot of the work we've seen across the country relates to transitions in care and making sure discharge instructions are clear. You're seeing hospitals do that across the board, but even those doing an exceptional job are still finding themselves getting penalties."


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Jacqueline Fellows is a contributing writer at HealthLeaders Media.

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