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CMS Releases IPPS 2018 Final Rule

Medicare payments to hospitals under the inpatient prospective payment system (IPPS) will increase by about $2.4 billion in fiscal year (FY) 2018 under final rule CMS issued August 2. The increase is less than the $3.1 billion anticipated under the proposed rule released in April. The rule will take effect October 1.


In its final rule, CMS wrote that it “relieves regulatory burdens for providers; supports the patient-doctor relationship in healthcare; and promotes transparency, flexibility, and innovation in the delivery of care.” (Fiscal Year (FY) 2018 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Prospective Payment System Final Rule (CMS-1677-F), CMS, August 2, 2017)


Some of the key points of the final rule include:


IPPS Payments: operating rates for inpatient stays in general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of electronic health records (EHRs) will increase by about 1.2 percent in FY 2018.


Uncompensated Care: the rule will distribute roughly $6.8 billion in uncompensated care payments in FY 2018, up about $800 million from FY 2017.


  • Actual hospital uncompensated care costs from Worksheet S-10 of the Medicare cost report will be included to determine uncompensated care payments. This has drawn criticism from stakeholders including the American Hospital Association (AHA) which had urged CMS to delay the use of S-10 data in calculating DSH payments by one year to further educate hospitals about how to accurately and consistently complete the form, and to implement a stop-loss policy and audit process.


Hospital Readmissions: The final rule also took steps to add socioeconomic status adjustments to the Hospital Readmissions Reduction Program. CMS will assess readmission penalties based on a hospital’s performance relative to other hospitals with similar proportions of patients who are dually eligible for Medicare and Medicaid.


Shortened EHR Reporting Period: the final rule shortens the EHR reporting periods for new and returning participants attesting to CMS or their state Medicaid agency from a full year to any continuous 90-day period.


Rural Community Development Program: the final rule modified CMS’s proposals for the Rural Community Demonstration Program to allow hospitals already participating in the program to continue to receive their “reasonable cost” payments without a gap in payments.


Long-term Care Hospitals: Based in part on the changes included in the final rule, overall payments to long-term care hospitals (LTCHs) will decrease by $110 million in FY18. CMS increased LTCH payments by 1 percent, as required by the Medicare Access and CHIP Reauthorization Act of 2015. However, LTCH PPS payments will decrease by approximately 2.4 percent overall in large part because of the continued phase-in of the dual payment rate system.


No Changes to Rate Cut


An AHA executive said the association was disappointed that CMS decided not to restore payments that were reduced in last year’s “excess cut to reimbursement rates for hospital services,” part of $11 billion in payment reductions as required by the American Taxpayer Relief Act of 2012. AHA said in its comment letter that the 1.5-percentage-point cut to hospital IPPS payments in FY17 was much larger than planned.


“While a reduction to the hospital update factor was mandated by law in 2012, CMS ignored Congress’s intent by imposing a cut that was nearly two times what Congress specified,” the executive said. (“Medicare Finalizes Controversial Method of Uncompensated Care Payment,” HFMA Weekly, August 4, 2017)


Sources: “Final Rule Boosts Medicare Payments to IPPS Hospitals by $2.4 Billion,” AHLA Weekly, August 4, 2017 and “Medicare Finalizes Controversial Method of Uncompensated Care Payment,” HFMA Weekly, August 4, 2017, CMS Fact Sheet and CMS Final Rule.


To read the IPPS 2018 final rule, click here.



To read the fact sheet, click here.




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