United States: CMS Releases FY 2021 Inpatient Prospective Payment System (IPPS) Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) released on May 11, 2020, the Fiscal Year (FY) 2021 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Prospective Payment System (PPS) Proposed Rule, which will affect discharges occurring on or after Oct. 1, 2020. A CMS factsheet is available here.

The proposal comes as total Medicare spending on inpatient hospital services is expected to increase by about $2.07 billion in FY 2021. For the LTCH PPS, CMS projects payments to decrease by 0.9 percent or $36 million, reflecting the continued phase-in of the revised LTCH payment system.

Other possible policy changes include CMS' proposal to collect a summary of data that hospitals are required to report under the administration's 2019 price transparency rule, including median payer-specific negotiated charges. The agency also is seeking feedback on using the data to inform Medicare reimbursement rates for hospital procedures.

In addition, the proposed rule includes a new Medicare Severity-Diagnosis Related Group (MS-DRG) for chimeric antigen receptor (CAR) T-cell therapy and expanding the alternative new technology add-on payment (NTAP) pathway for certain antimicrobial products.

Comments on the proposed rule are due July 10, 2020. A final rule is expected about Aug. 1, 2020.

Below are several of the proposed rule's most noteworthy components.

Proposed Changes to Payment Rates Under IPPS

CMS predicts that overall payment under Medicare's IPPS will increase by approximately $2.07 billion in FY 2021, relative to payments made in FY 2020. This reflects the projected rate increase as well as changes to payments based on proposed changes to uncompensated care payments and NTAP.

CMS estimates that the market basket increase will be 3.0 percent. This number is further adjusted by a multifactor productivity adjustment, as well as whether a hospital submits quality data.

Proposed Changes to Payment Rates under LTCH PPS

CMS sees LTCH PPS payments falling by approximately 0.9 percent or $36 million, which reflects the continued statutory implementation of the revised LTCH PPS. For FY 2021, discharges paid using the standard LTCH payment rate are expected to increase by 2.1 percent after accounting for the proposed annual standard federal rate update for FY 2021 of 2.5 percent, an expected decrease in outlier payments and other factors.

Medicare DSH Payments

For FY 2021, CMS estimates total Medicare Disproportionate Share Hospital (DSH) payments will be $11.6 billion, or $1.1 billion less than FY 2020. Of these payments, $7.8 billion will be uncompensated care (UC) payments, or $500 million less than UC payments in FY 2020.

UC Proposal to Use FY 2017 S-10 Data for DSH Payments

Based on the Medicare statute, hospitals can receive DSH payments that are 25 percent of the amount they previously would have received under law and an additional payment for the DSH hospital's proportion of UC determined as the product of three factors.

CMS projects that UC payments for FY 2021 will decrease by approximately $534 million as compared to FY 2020. CMS proposes to continue to use uninsured estimates produced by CMS' Office of the Actuary (OACT) in the calculation of Factor 2.

Additionally, CMS proposes to use a single year of data on uncompensated care costs from Worksheet S-10 of the FY 2017 cost reports to calculate Factor 3 in the FY 2021 methodology for all eligible hospitals with the exception of Indian Health Service (IHS) and Tribal hospitals and Puerto Rico hospitals. Factor 3 would be calculated using the most recent available single year of audited Worksheet S-10 data.

Graduate Medical Education (GME)

CMS is proposing policies to assist residents in closing teaching hospitals and closing residency programs attempting to find alternative hospitals in which to complete their training and to foster seamless Medicare indirect medical education (IME) and direct graduate medical education funding. For the purposes of transferring funded GME/IME residency slots, a "displaced resident" will now be an individual who is at the hospital on the day before there is a public announcement of the closure rather than the day before the actual closure.

Price Transparency

CMS proposes that hospitals would be required to report certain market-based payment rate information on their Medicare cost report for cost-reporting periods ending on or after Jan. 1, 2021. This information would be used in the new methodology for calculating MS-DRG relative weights.

Hospitals would report on the Medicare cost report two median payer-specific negotiated charges by MS-DRG. For a third-party payer that uses the same MS-DRG patient classification system used by Medicare, the payer-specific negotiated charges that the hospital uses to calculate the median by MS-DRG would be the payer-specific negotiated charges the hospital negotiated with that third-party payer for the MS-DRG to which the patient discharge was classified. Because not all third-party payers use the MS-DRG patient classification system, for those third-party payers that do not, the payer-specific negotiated charges they negotiate with hospitals would be based on the system used by that third-party payer, such as per diem rates or All Patients Refined (APR)-DRGs. In that case, the hospital would determine and report the median payer-specific negotiated charges by MS-DRG using its payer-specific negotiated charges for the same or similar package of services that can be walked to an MS-DRG.

CMS proposes that hospitals would report on the Medicare cost report the following data elements:

• the median payer-specific negotiated charge by MS-DRG that the hospital has negotiated with all of its MA payers
• the median payer-specific negotiated charge by MS-DRG that the hospital has negotiated with all of its third-party payers, which would include MA organizations

The data would become publicly accessible in the Healthcare Cost Report Information System (HCRIS) dataset in a de-identified manner.

This is likely to be met with resistance as a U.S. federal district court in Washington, D.C., heard opening arguments in early May 2020 regarding a legal challenge to CMS' finalized hospital price transparency rule that argued it oversteps the U.S. Department of Health and Human Services' (HHS) authority.

New MS-DRG for CAR T-cell Therapy

CMS is proposing to create a new MS-DRG for CAR T-cell immunotherapy. These therapies will no longer be eligible for NTAP in FY 2021 as they have been in the previous few years.

The ICD-10 procedure codes XW033C3 and XW043C3 are assigned to this new DRG, MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy). CMS conducted a review of data from existing instances of the utilization of CAR-T cell therapies to determine whether reimbursement under the currently used DRG was adequate and noting a "vast discrepancy" in resource consumption, determined that a new MS-DRG code was warranted. The standardized charge per case for this MS-DRG is $913,224. The payment for this DRG would be adjusted for each individual hospital based on a variety of factors (as all DRGs are).

CMS said they would distinguish between clinical trials and non-clinical trial therapies when calculating relative weights for the proposed DRG. Because the cost of the drug is not factored into a clinical trial, that would have an outsized impact in determining the cost of care calculations that are used to set reimbursement rates. For example, based on prior years' claims data, CMS found that non-clinical trial CAR T-cell cases have an average cost of $274,952, while those in clinical trials were $44,853.

CMS also is proposing to discontinue the NTAPs for two CAR-T products: Yescarta and Kymriah.

Proposed NTAP for Certain Antimicrobial Products

CMS proposes additional changes to the NTAP process to facilitate add-on payments for certain antimicrobial products approved as a Qualified Infectious Disease Product (QIDP) or under the Limited Population Approval Pathway for Antibacterial and Antifungal Drugs (LPAD). Under the proposal, QIDPs and LPADs will be eligible for conditional NTAP payments the quarter after they receive U.S. Food and Drug Administration (FDA) marketing authorization, instead of requiring manufacturers to wait through the annual NTAP application process.

NTAP Applications for FY 2021

The following devices and drugs have been submitted for NTAP using the traditional approval pathway:

• Accelerate PhenoTest BC Kit
• BioFire FilmArray Pneumonia Panel
• ContaCT
• Supersaturated Oxygen (SSO2) Therapy (DownStream System)
• Eluvia Drug-Eluting Vascular Stent System
• GammaTile Therapy
• Hemospray Endoscopic Hemostat
• IMFINZI (durvalumab)
• KTE-X19
• Lisocabtagene maraleucel
• SOLIRIS (eculizumab)
• SpineJack System
• TECENTRIQ (atezolizumab)
• WavelinQ (4F) EndoAVF System
• ZULRESSO (brexanolone)

CMS is proposing to approve the following applicants for NTAP payments, beginning Oct. 1, 2020, because they used one of the new alternative pathways for breakthrough devices and QDIPs:

• BAROSTIM NEO System (CVRx)
• NanoKnife System
• Optimizer Smart System
• FETROJA (cefiderocol)
• CONTEPO (fosfomycin) for injection
• NUZYRA (omadacycline) for injection
• RECARBRIO (imipenem/cilastatin/relebactam)
• XENLETA (lefamulin)
• ZERBAXA (ceftolozane and tazobactam)

CMS also proposes to continue for FY 2021 add-on payments for 10 of the 18 technologies currently eligible (the remaining eight technologies no longer qualify as new).

Quality Reporting

CMS proposes minor updates to the quality reporting programs, including changes to the Hospital Inpatient Quality Reporting (IQR) Program regarding a requirement to use the electronic file submissions via a CMS-approved secure file transmission process.

PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

CMS is proposing to 1) refine two existing National Healthcare Safety Network (NHSN) measures - Catheter-Associated Urinary Tract Infection (CAUTI) and Central Line-Associated Bloodstream Infection (CLABSI) - to incorporate an updated methodology developed by the U.S. Centers for Disease Control and Prevention (CDC) that uses updated HAI baseline data that is risk-adjusted to stratify results by patient location, and 2) begin to publicly report the updated versions of the CLABSI and CAUTI measures in fall CY 2022.

Promoting Interoperability Program

CMS is proposing to continue an Electronic Health Records (EHR) reporting period of a minimum of any continuous 90-day period for CY 2022 for new and returning participants of the Medicare Promoting Interoperability Program. For CY 2021, CMS is proposing that the Electronic Prescribing Objective's Query of Prescription Drug Monitoring Program (PDMP) measures will remain optional and be worth five bonus points in CY 2021.

CMS is proposing significant changes to electronic clinical quality measure (eCQM) reporting. Eligible hospitals would have to report two self-selected quarters of eCQM data from CY 2021, three-quarters of data from CY 2022, and four quarters of data from CY 2023 and each subsequent year. If finalized as proposed, hospitals would have just a few months before these policy updates take effect.

Low Wage Index Policy

For FY 2020, CMS implemented a policy that increased the wage index for hospitals with a wage index value below the 25th percentile. Impacted hospitals had their wage index value increased by half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value across all hospitals. For FY 2021, CMS proposes to maintain this policy. Hospitals with a wage index value below the 25th percentile will have their wage index value increased by half the difference between the final wage index for that hospital and the 25th percentile across all hospitals. The 25th percentile for FY 2021 is estimated to be 0.8420.

Hospital Star Ratings

CMS does not propose any updates to the overall hospital quality star rating methodology in light of the COVID-19 pandemic. CMS states they will return to this topic in future rulemaking.

For questions about the proposals discussed in this alert, please contact the author.

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Article originally published on 14 May 2020

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