Health Information Management

News: IPPS proposed rule released

CDI Strategies, April 30, 2015

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CMS released its fiscal year (FY) 2016 IPPS proposed rule, and announced changes to MS-DRGs and their relative weights, the market basket update, and the expansion of its value-based payment quality measures.

New to this rule, however, is the integration of ICD-10-CM/PCS—adding more insurance against the delay of the code set’s scheduled October 1 implementation, says James S. Kennedy, MD, CCS, CDIP, president of CDIMD–Physician Champions in Smyrna, TN.

Additionally, CMS made significant improvements to the ICD-10 MS-DRGs for hip revisions and added new MS-DRGs for percutaneous intracardiac (PCI) procedures.

Here’s a list of what you need to know about the IPPS rule.

  • Hospital payments: The proposed increase in operating payment rates to hospitals is 1.1%. According to CMS, "hospitals that do not successfully participate in the Hospital Inpatient Quality Reporting Program and do not submit the required quality data will be subject to a one-fourth reduction of the market basket update." Further, the organization says it "projects that the rate increase, together with other proposed changes to IPPS payment policies, will increase IPPS operating payments by approximately 0.3%."
  • Bundled payments for inpatient care: CMS is asking for comments regarding its potential implementation of bundled payments for inpatient care, which is required by the Patient Protection and Affordable Care Act to be announced no later than January 1, 2016. However, the agency does not outline how it proposes to implement these payments, says Kennedy.

“Bundled payments, in my opinion, will be the most dramatic policy implementation since DRG’s introduction in 1984, given that physicians and post-acute care providers will now be accountable to DRG-based budgets that they have not been previously held to,” Kennedy says. “If there’s any one portion of this rule that physician and facility providers should read, understand, analyze, and comment on, bundled payments are it.”

  • 2-midnight rule: The 2-midnight rule remains unchanged. However, The Medicare Access and CHIP Reauthorization Act of 2015 further extended probe and educate audits of the 2-midnight rule to September 30, 2015. CMS will continue to review short inpatient hospital stays, long outpatient stays with observation services, and the related -0.2% IPPS payment adjustment. It plans to include information in the calendar year 2016 OPPS proposed rule regarding these services.
  • Hospital Readmissions Reduction Program: CMS proposes a refinement to the pneumonia readmission measure to expand the measure cohort and the formal adoption of an extraordinary circumstance exception policy. Provider education and more specific documentation about patient circumstances will be required, especially with ICD-10 implementation.
  • Hospital Value-Based Purchasing Program (HVBP): CMS suggested a number of changes to the HVBP program, which adjusts payments to hospitals for inpatient services based on their performance on an announced set of measures. The agency is proposing continued updates and expanding the number of measures used. For example, adopting 3-Item Care Transition Measure for FY 2018, and implementing Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive Pulmonary Disease Hospitalization beginning in FY 2021. The agency continues to emphasize patient safety and patient satisfaction measures.
  • Hospital acquired conditions (HAC): The proposed rule indicates that 19.4% of hospitals are anticipated to be penalized with a 1% reduction in MS-DRG payments for all traditional Medicare discharges in FY 2016 due to HAC Reduction Program performance. CMS is increasing the weight for hospital associated infections from 75% to 85%. PSI 90 continues to undergo National Quality Forum maintenance review, and CMS is considering adding three new measures.
  • Hospital inpatient quality reporting program: CMS recommended adding eight new measures, including five clinical, episode-based payment measures, one patient safety measure, and two coordination-of-care-measures, in FY 2018.

Throughout the proposed rule, CMS asks for input from the hospital community. Comments are due by June 16, 2015, to the addresses outlined in the rule. They may be submitted electronically or in hard copy. The agency will respond to all comments in the final rule, which is expected on August 1, 2015.

Visit the home page for the FY 2016 IPPS proposed rule for more information.

Editor’s Note: This article is based on information from the CMS proposed rule webpage, and a variety of ACDIS and HCPro resources, including: 



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