1. FY 2017 Medicare Inpatient Prospective Payment System (IPPS)
Linda Corley, BS, MBA, CPC
Vice President – Compliance, Quality Assurance and Associate Development

2. 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

3. 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

4. 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

5. 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

6. 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

7. Documentation and Coding Offset
American Tax Relief Act requires $11B cut in Medicare spending between
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

8. 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

9. Payment Updates
Finalized Changes

10. 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.

11. 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:

12. 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

13. 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.

14. 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.

15. 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

16. 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.

17. 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). 

18. 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

19. 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.

20. 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!

21. 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

22. Proposed values of Factors 1, 2, and 3
Factor 1 – Total DSH Payments
Total 2017 DSH pool estimate = $ billion
$13,411 B 2016
75% of $ = $ 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)

23. Hospital “Pay for
Performance” Quality
Programs Updates

24. 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% % % % %

25. 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

26. 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

27. 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% % % % %
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017

28. 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

29. 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

30. 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

31. 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

32. 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)

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

34. 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?

35. 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

36. 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.

37. Linda Corley
VP of Compliance
Xtend Healthcare

38. Thank you!