FY 2020 IPPS final rule addresses rural wage index disparities, expedites new technology processes

Wednesday, August 14, 2019

CMS released the fiscal year (FY) 2020 IPPS final rule on August 2, increasing inpatient operating payment rates by 3.1%, significantly altering rural health payments, and expediting opportunities to pay for new technologies. Policy updates affect approximately 3,300 acute care hospitals and apply to discharges occurring on and after October 1.

Updating new technology payment processes

CMS finalized a proposal to increase the add-on payment to 65% for new technology, including CAR-T cancer therapy, and to 75% for certain antimicrobials. Previously, Medicare paid hospitals an add-on payment for certain high-cost cases involving the use of new technologies with up to 50% of the cost of these new technologies.

CMS also lowered the criterion necessary for certain medical devices to receive this add-on payment. Specifically, the rule finalizes an alternative new technology add-on payment pathway for medical devices that have received Food and Drug Administration (FDA) marketing authorization and that are part of the FDA’s Breakthrough Devices Program.

Beginning in 2021, these medical devices will no longer be subject to the substantial clinical improvement criterion but will need to meet certain cost criterion to receive the add-on payment.

Payment rate update

The final rule increases operating payment rates by 3.1% for acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting Program and are meaningful electronic health record users. CMS projects that the rate increase, in addition to other policy changes, will increase Medicare spending on inpatient hospital services by approximately 3% in FY 2020.

Addressing wage index disparities

To address wage index disparities in rural areas, CMS finalized a new methodology for wage index calculation. The final rule increases the wage index for hospitals below the 25th percentile of the wage index value. This policy will be effective for at least four years, beginning in FY 2020.

In response to public comments, CMS modified the budget neutrality adjustment for this policy. CMS will apply a budget neutrality adjustment to the standardized amount that is applied across all IPPS hospitals, rather than decrease the wage index values of hospitals above the 75th percentile, as proposed. CMS will cap the negative adjustment at 5% for fiscal year 2020 on any decrease in a hospital’s wage index from its final wage index for FY 2019.

More information on these and other updates, including changes to quality reporting measures under the Hospital IQR Program and payments for uncompensated care, is available in CMS’ fact sheet on the final rule.

Learn the latest on IPPS changes at the 2019 Revenue Integrity Symposium, October 15-16 in Orlando.