FY 2017 Medicare Inpatient Prospective Payment System (IPPS) Linda Corley, BS, MBA, CPC Vice President – Compliance, Quality Assurance and Associate Development 1-706-577-2256 lcorley@xtendhealthcare.net

2017 IPPS Updates Agenda This presentation will review the following areas of the Inpatient Prospective Payment System (IPPS): 2017 Payment Updates Bundling – Patient Care Initiatives New Technology Two-Midnight Rule DSH Adjustment Value-Based Purchasing Hospital-Acquired Conditions Readmissions Quality Reporting Programs

FY 2017 Inpatient PPS Final Rule Released August 22, 2016; effective October 1, 2016 for fiscal year 2017 Market basket increase of 2.7%, but 0.95% final update 0.3% decrease due to “multi-factor” productivity cut 0.75% additional market basket decrease due to ACA 1.5% reduction due to documentation and coding offset Increase 0.8% as offset to prior reduction from Two- Midnight Rule

FY 2017 Inpatient PPS Final Rule Quality Reporting and EHR Reductions For 2017, a hospital’s failure to report quality measures will result in a ¼ reduction of the market basket increase! If the hospital is not a “meaningful use” EHR participant, a ¾ reduction in market basket increase will occur. Note: The combined failure to report quality measures and to not be an EHR user results in ZERO rate of Medicare IPPS increase – even without the other negative adjustments that may take place! 130 non-compliant hospitals will be penalized for IQR 187 hospitals penalized for non-compliance with EHR Meaningful Use

FY 2017 Inpatient PPS Rule 63 total Inpatient Quality Reporting (IQR) measures for FY 2018 payment, removes 9 measures, requires 4 eCQMs, and adds 4 measures New Value Based Purchasing (VBP) measures for FYs 2018, 2019, and 2021, revised domain weights for FY 2018 Readmissions program expands pneumonia definition in FY 2017 Modifies Hospital Acquired Condition (HAC) Reduction Program domain weighting for FY 2017

FY 2017 Inpatient PPS Rule MS-DRG Refinements No major changes for FY 2017 Weights based on 2015 FY MedPAR data Continued refinement of relative weights based on cost Included refinements for specificity of ICD-10-CM and PCS Final year of documentation and coding adjustments . . . We believe! From American Tax Payer Relief Act (ATRA) of 2012 Collection of the remaining $5.05 billion is being addressed for 2017 through -1.5% reduction AHA contesting increased / continued reductions

Documentation and Coding Offset American Tax Relief Act requires $11B cut in Medicare spending between 2014-2017. Decrease would have been restored to base payments in 2018 in total, but instead is phased in over six (6) years due to the Sustainable Growth Rate (SGR) termination legislation that is moving toward MACRA payment for professionals based on “quality” and “value.” A -0.2% Coding offset (cut) remains into perpetuity The phase-in results in a $15.1B decrease between 2018-2023

Bundled “Payments for Care Improvement” CMS considering expansion Further expansion for 2017 Model 1: Retrospective Acute Care Hospital Stay Only Model 2: Retrospective Acute Care Hospital Stay plus Post-Acute Care Model 3: Retrospective Post-Acute Care Only Model 4: Acute Care Hospital Stay Only

Payment Updates Finalized Changes

Payment Update(s) – Final Rule IPPS Contributing Factor National %      Change Market Basket (for successful IQR / MU participation!) +2.70% ACA Multifactor Benefit reduction -0.30% ACA Productivity reduction -0.75% Documentation and Coding Adjustment -1.50% Offset for Two-midnight Rule SUBTOTAL: FY 2017 increase in payment rates +0.80% +0.95% TOTAL Application of 2% sequester reduction is at the close of the payment calculation, and is not shown above in the table.

New Technology Add-on Payments Creating new component within ICD-10 PCS codes, labeled Section “X” codes (analogous to outpatient C codes). Will be used to identify and describe new technologies and services (drugs, biologicals, and newer medical devices being tested in clinical trials). Section intended to assist in identifying and tracking new technologies and related inpatient services for add-ons. Component will be available October 1, 2015. Applications for “X” codes will be same as others through Coordination and Maintenance Committee. More information available on CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD9-CM-C-and-M-Meeting-Materials.html

New Technology Add-on Payments Received nine (9) applications for consideration Two withdrawn Seven reviewed Two denied Five approved (shown below) In the final rule, CMS Discontinued add-on payments for four medical services / technologies. Kcentra Argus II Retinal Prosthesis System MitraClip System Responsive Neurostimulator (RNS) System

New Technology Add-on Payments Continued new technology add-on payments for four (4) technologies CardioMEMS Heart Failure Monitoring System $ 8,875. Blinatumomab (BLINCYTO) $27,018. Lutonix Drug Coated Balloon PTA Catheter $ 1,036. In.Pact Admiral Pacliaxel Coated Transluminal Angioplasty Balloon Catheter $ 1,036.

New Technology Add-on Payments Initiated add-on payments for five new medical services / technologies. MAGEC Spinal Bracing and Distraction System $15,750. Idarucizumab $ 1,750. Defitelio (Defibrotide) $75,900. Gore Excluder – Iliac Branch Endoprosthesis (IBE) $ 5,250. Vistogard Uridine Triacetate $37,500.

Wage Index Same labor market areas used in FY 2017 to calculate wage indexes and transition periods. Geographical “delineations” based on 2010 census data (OMB bulletin published February 28, 2013). Third year of transition policies for new OMB delineations 3rd year of transition period for urban to rural: Keep old urban area AWI for 3 years, if not reclassified / redesignated, and including deemed urban Get 1/3 of the difference between urban / rural DSH for the third year of the transition Considered rural for all other policy purposes

Admissions and Medical Review Criteria In FY 2014, CMS created the “2-Midnight” Rule for when a patient is expected (documented) to stay across two consecutive midnights (or has an “Inpatient only” service) will be presumed appropriate for Part A (Inpatient) payment. Less than 2-Midnights is presumed “inappropriate” for Inpatient stay, and would be reviewed for possible denial. Enforcement has been “on again” but “off again.” Per the Medicare Access and CHIP Reauthorization Act of 2015, delayed until September 30, 2015. Although re-established October 1, 2015; but restarted on January 1, 2016, audits were delayed due to the QIOs varying interpretation of the guidelines. Began in earnest around July 1, 2016.

Admissions and Medical Review Criteria Changes to the Two Midnight Rule: If physician expects stay to be less than two midnights: Admission payable on a case-by-case basis based on the clinical judgment of the admitting physician. Documentation in the medical record must support an inpatient admission is necessary, and is subject to medical review. The following factors (among others) will be relevant: The severity of the signs and symptoms exhibited by the patient. The medical predictability of adverse occurrence to the patient. The need for diagnostic studies that are more appropriately Outpatient services (i.e., do not ordinarily require the patient to remain at the hospital for 24 hours or more). 

Admissions and Medical Review Criteria While payment reduction may no longer be a factor, audits to continue for providers that have exhibited: Persistent non-compliance with Medicare payment policies High Inpatient denial rates Failure to adhere to the Two-Midnight Rule after educational intervention from the QIO. Hospitals referred to the RACs for further evaluations. To avoid recoupments! Ensure appropriate classification of patients as Inpatient or Observation upon initial status determination! Ensure adequate Inpatient medical record documentation Carry-out clinical review of one-day stays to check for “rare and unusual” exception policy

Admissions and Medical Review Criteria Caution – follow your resolution of Medicare Additional Development Requests (ADRs) for Inpatient stays to determine if all claims are being paid by the MAC. May want to hold Inpatient stays of less than Two- Midnights for clinical review of documented medical criteria before filing an Inpatient claim. ALWAYS review one-day stays to ensure Inpatient criteria were met – or a “rare” exception occurred – prior to filing an Inpatient claim to Medicare.

Other Payment Policies Low Volume Adjustment ACA criteria extended by MACRA through Sept. 30, 2017 At least 15 miles from another hospital Less than 1,600 Medicare Part A discharges Sliding scale payment between 25% for ≤ 200 and 0% ≥ 1,600 discharges Medicare Dependent Hospitals MACRA extends through Sept. 30, 2017 = +$96 M to hospitals Outliers Fixed loss threshold from $22,544 for FY 2016 to $23,570 in 2017 5.1% of total payments in 2017 estimated CMS estimates spent 5.3% in 2016 Audit to see if Outlier paid when earned!

Medicare DSH: Uncompensated Care DSH Payment Total DSH Payments in FY 2015 Absent ACA Provision “Empirically Justified DSH Payments” 25% Distributed in exactly the same way as current policy Distributed based on three factors: Factor 1: Total DSH payment pool in FY 2015 Factor 2: Change in the percentage of uninsured Factor 3: Proportion of total uncompensated care each Medicare DSH hospital provides “Uncompensated Care DSH Payments” 75% Subject to reduction to reflect the impact of insurance expansion under the ACA

Proposed values of Factors 1, 2, and 3 Factor 1 – Total DSH Payments Total 2017 DSH pool estimate = $14.397 billion $13,411 B 2016 75% of $13.338 = $10.797 billion Factor 2 – Change in the Uninsured Percent Adjust Factor 1 to reflect impact of ACA insurance expansion 44.64% reduction for FFY 2016 $5.977 B to be distributed Factor 3 – Distribute UCC payments based on hospital’s ration of UCC relative to the total UCC for DSH-eligible hospitals. Hospital's Medicare SSI Days + Medicaid Days (Hospital) Total DSH Hospitals’ Medicare SSI Days + Medicaid Days (Nation)

Hospital “Pay for Performance” Quality Programs Updates

Hospital Readmissions Reduction Program Hospital-specific payment adjustment factors were applied to inpatient claims beginning Oct 1, 2012. Proposes to use 30-day AMI, HF, PN, COPD, and THA / TKA (Hip/Knee) and CABG measures based on 3 years of data for FY 2017 payments. Applies to wage-adjusted base operating DRG payment amount (includes new tech add-on payment only, no adjustments for DSH, IME, outlier, or low volume) Not “budget neutral.” Hospitals can either maintain full payment levels or be subject to a penalty of up to 3.0% for 2017. 1% 2% 3% 3% 3%

HRRP: Expansion of Applicable Conditions Expand applicable conditions to include Coronary Artery Bypass Graft (CABG) for FY 2017 (finalized in FY 2015 IPPS rule) Proposes to expand pneumonia cohort definition for FY 2017 payment to include patients diagnosed with: Aspiration pneumonia Principal diagnosis of sepsis or respiratory failure, and a secondary diagnosis of pneumonia present on admission Impact of expanding definition: major increase to number of cases (about 65%) and the number of hospitals meeting the minimum number of cases for this measure

HRRP: Extraordinary Circumstance Exception/Exemption Proposes an extraordinary circumstance exceptions / exemptions (ECE) policy which could exclude claims data from the readmission measures calculations for a certain period of time Hospitals must submit ECE form within 90 days post event, request form similar to existing VBP and IQR ECE policy Does not preclude CMS from making exemptions for hospitals that do not apply in cases where a region is affected by a natural disaster or other event

Inpatient Value-Based Purchasing (VBP) A percentage of inpatient base operating payments are at risk based on quality and efficiency metric performance A budget neutral policy, where hospitals must fail to meet targets for bonuses to be generated for others Rewards for achievement or improvement Quality measures from Hospital Compare measure set 20 measures (12 process / 8 HCAHPS dimensions), Added 3 outcome measures (3 mortality) previously, Added 2 outcome measures and 1 efficiency measure Amount available for incentive payments = $1.8 billion 1% 1.25% 1.5% 1.75% 2% FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Inpatient Value-Based Purchasing (VBP) Removed 5 process and added 1 process, 2 outcome measures in FY 2016, and Removes 6 process and adds 1 process, 2 “safety” measures in FY 2017 Upcoming additions for 2018

Inpatient VBP FY 2016 Recap Measure ID NQS-Based Domain AMI-7a Clinical Process IMM-2 NEW* PN-6 SCIP-Inf-2 SCIP-Inf-3 SCIP-Inf-9 SCIP-Card-2 SCIP-VTE-2 HCAHPS Patient Experience CAUTI *NEW* Outcomes CLABSI MORT-30-AMI MORT-30-HF MORT-30-PN PSI-90 SSI *NEW* MSPB-1 Efficiency Clinical process Patient experience Outcomes Efficiency

Inpatient VBP FY 2017 Recap Clinical Care Process (5%) Outcomes (25%) Patient and Caregiver Experience Efficiency and Cost Reduction Safety (20%)  Measure ID   NQS-Based Domain AMI-7a Clinical Care – Process IMM-2 PC-01 *NEW* MORT-30-AMI Clinical Care – Outcomes MORT-30-HF MORT-30-PN HCAHPS Patient and Caregiver Centered Experience of Care / Care Coordination CAUTI Safety CLABSI MRSA *NEW* C. Diff *NEW* PSI-90 SSI MSPB-1 Efficiency and Cost Reduction

Inpatient VBP FY 2018 Proposed Changes Clinical Care (25%) Patient and Caregiver Experience (25%) Efficiency and Cost Reduction (25%) Safety (25%)  Measure ID  NQS-Based Domain AMI-7a Clinical Care – Process IMM-2 PC-01 Safety *PROPOSED CHANGE* MORT-30-AMI Clinical Care MORT-30-HF MORT-30-PN HCAHPS Patient and Caregiver Centered Experience of Care / Care Coordination CTM-3 *NEW* CAUTI Safety CLABSI MRSA C. Diff PSI-90 SSI MSPB-1 Efficiency and Cost Reduction

Overlapping Medicare Policies – Triple Threat Hospital-acquired conditions (HACs) Not eligible higher payment (FY 08 ongoing) IP VBP (FY 13 ongoing) HAC Reduction Program (Starting FY 2015) Catheter associated UTI X Finalized FY 16 Finalized FY 15 Surgical Site Infections X* Vascular cath-assoc. infections X** PSI-90/ CLABSI Foreign object retained after surgery Air embolism Blood incompatibility Pressure ulcer stages III or IV PSI-90 FY 2015 Falls and trauma X*** DVT/PE after hip/knee replacement Manifestations of poor glycemic control Iatrogenic pneumothorax Methicillin resistant Staph. aureus (MRSA) Finalized FY 17 Clostridium difficile (CDAD)

Quality Reporting (IQR) Hospital Inpatient Quality Reporting (IQR) Proposed Changes

New Structural Measure Hospital Survey on Patient Safety Culture Reporting on a patient safety culture survey involves providing answers to the following questions listed below. Hospitals would submit answers via a Web-based tool on the QualityNet Web site: (A) Does your facility administer a detailed assessment of patient safety culture using a standardized collection protocol and structured instrument? (B) What is the name of the survey that is administered? (C) How frequently is the survey administered? (D) Does your facility report survey results to a centralized location?

New Structural Measure Hospital Survey on Patient Safety Culture (E) During the most recent assessment: (1.) How many staff members were requested to complete the survey? (2.) How many completed surveys were received? (These questions can allow calculation of a response rate.) First year would start with January 1 through December 31, 2016. Survey results would be reported during the annual structural measure submission schedule

Future Proposal Core Clinical Data Elements from EHRs Seeking comments for requiring collection of a core clinical data set the use of the core clinical data elements derived from EHRs for use in risk adjustment of outcome measures as well as other types of measures; The collection of additional administrative linkage variables to link a patient’s episode of care from EHR data with his/her administrative claim data; the use of content exchange standards for reporting these data elements.

Linda Corley VP of Compliance Xtend Healthcare 706 577-2256 lcorley@xtendhealthcare.net

Thank you!