2021 IPPS Proposed Rule

The following is a summary of the following: Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals, to be published in the May 29, 2020 Federal Register.

Inpatient Hospital Rates

The proposed increase in operating payment rates for general acute care hospitals paid under the inpatient prospective payment system (IPPS) that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users is approximately 2.6%. The 2.6% is equal to the market basket rate increase of 3.0%, less the proposed multifactor productivity (MFP) adjustment of -0.4%. Providers that are not EHR users and or do not participate in the IQR program will receive additional reductions in their base rates.

CAR T-Cell Reimbursement

The Centers for Medicare and Medicaid Services (CMS) is proposing to create a new MS-DRG for Chimeric Antigen Receptor T-Cell (CAR T) therapy with a reimbursement rate that would be higher than any other MS-DRG. CAR T therapy is currently included in a significantly lower-weighted DRG but is eligible for a new technology add-on payment (NTAP). Please note that the NTAP eligibility expires after FY 2020.

DRG Change Requests

Hospitals have the opportunity each year to request that CMS review the DRG classifications. The deadline to request these changes has been November 1 of each year. However, due to the time it takes for these reviews, CMS is moving the deadline to request changes up to October 20 of each year to allow for additional time for the review and consideration of any changes.

DRG Relative Weight Methodology Change

CMS has proposed to transition away from using the hospital’s gross charges (from the cost reports and claims data) as part of the base DRG weight calculations. CMS recognizes that the chargemaster (i.e., gross charges) rates do not typically reflect hospitals’ true market costs. As such, CMS is proposing that, for cost report periods ending on or after January 1, 2021, hospitals would report on new Medicare cost report forms median negotiated rates by DRGs for 2 groups of patients:

  1. Patients insured by Medicare Advantage (MA) plans, and
  2. Patients insured by all third-party payers, including MA plans.

Bad Debts

CMS has proposed several changes to “clarify, update and codify certain longstanding Medicare bad debt principles” into the regulations. These proposed changes would be effective for cost reporting periods beginning before, on, and after the effective date of this rule (which would be October 1, 2020).

  1. CMS proposes to amend CFR §413.89(e)(2) by adding a new paragraph (e)(2)(i) to define, for Medicare bad debt purposes, that a non-indigent beneficiary is a beneficiary who has not been determined to be “categorically or medically needy” by a State Medicaid Agency to receive medical assistance from Medicaid, and has not been determined to be indigent by the provider for Medicare bad debt purposes.
  2. CMS proposes to amend CFR §413.89(e)(2) by adding a new paragraph (e)(2)(i)(A) to specify the reasonable collection effort requirement for a non-indigent beneficiary must be similar to the effort the provider, and/or the collection agency acting on the provider’s behalf, puts forth to collect comparable amounts from non-Medicare patients. These efforts must include the issuance of a bill to the beneficiary or the party responsible for the beneficiary’s personal financial obligations on or before 120 days after: (1) the date of the Medicare remittance advice; or (2) the date of the remittance advice from the beneficiary’s secondary payer, if any; whichever is latest. A provider’s reasonable collection effort usually also includes other actions such as subsequent billings, collection letters and telephone calls or personal contacts with the responsible party which, according to CMS, constitutes a genuine, rather than token, collection effort. Additionally, a provider must maintain and, upon request, furnish documentation to its contractor (i.e., MAC) that includes the provider’s bad debt collection policy which describes the collection process for Medicare and non-Medicare patients; the beneficiary’s account history documents which show the dates of various collection actions such as the issuance of bills to the beneficiary, follow-up collection letters, reports of telephone calls and personal contact, etc.; and the beneficiary’s file with copies of the bill(s) and follow-up notices.
  3. CMS proposes to amend CFR §413.89(e)(2) by adding a new paragraph (e)(2)(i)(A)(5)(ii) to specify that when the provider receives a partial payment within the minimum 120-day required collection effort period, the provider must continue the collection effort and the day the partial payment is received is day one of the new collection period. For each subsequent partial payment received during a 120-day collection effort period, the provider must continue the collection effort and the day the subsequent partial payment is received is day one of the new collection period. The provider is permitted to end the collection effort at the end of a 120-day collection effort period when no payments have been received during those consecutive 120 days.
  4. CMS proposes to amend CFR §413.89(e)(2) by adding a new paragraph (e)(2)(i)(A) to specify that a provider’s effort to collect Medicare deductible and coinsurance amounts must be similar to the effort the provider puts forth to collect comparable amounts from non-Medicare patients.
  5. CMS proposes to amend CFR §413.89(e)(2) by adding a new paragraph (e)(2)(i)(A)(6) to specify the requirements a provider must follow in order to establish the provider’s reasonable collection effort for non-indigent beneficiaries.
  6. CMS proposes to amend CFR §413.89(e)(2) by adding new paragraph (e)(2)(ii) to define an indigent non-dual eligible beneficiary as a Medicare beneficiary who is determined to be indigent by the provider and not eligible for Medicaid as categorically or medically needy.
  7. CMS proposes to amend CFR §413.89(e)(2) by adding new paragraph (e)(2)(ii)(A) to specify that to determine a beneficiary to be an indigent non-dual eligible beneficiary, the provider must apply its customary methods for determining whether the beneficiary is indigent under the following requirements: (1) the beneficiary’s indigence must be determined by the provider, not by the beneficiary; that is, a beneficiary’s signed declaration of their inability to pay their medical bills and/or deductibles and coinsurance amounts cannot be considered proof of indigence; (2) the provider must take into account a beneficiary’s total resources which includes, but is not limited to, an analysis of assets (only those convertible to cash and unnecessary for the beneficiary’s daily living), liabilities, and income and expenses. While a provider must take into account a beneficiary’s total resources in determining indigence, any extenuating circumstances that would affect the determination of the beneficiary’s indigence must also be considered; and (3) the provider must determine that no source other than the beneficiary would be legally responsible for the beneficiary’s medical bill; for example, a legal guardian.
  8. CMS proposes to amend CFR §413.89(e)(2) by adding new paragraph (e)(2)(ii)(B) to specify that as part of its determination of indigence, the provider must maintain and furnish, upon request to its Medicare contractor (i.e., MAC), documentation (for example, a Policy for Determination of Indigence) describing the method by which indigence or medical indigence was determined and the beneficiary specific documentation which supports the provider’s documentation of each beneficiary’s indigence or medical indigence.
  9. CMS proposes to amend CFR §413.89(e)(2) by adding a new paragraph (e)(2)(iii) to clarify and codify that, effective for cost reporting periods beginning on and before the effective date of this rule, to be considered a reasonable collection effort, a provider that has furnished services to a dual eligible beneficiary must determine whether the State’s Title XIX Medicaid Program (or a local welfare agency, if applicable) is responsible to pay all or a portion of the beneficiary’s Medicare deductible and/or coinsurance amounts. To make this determination, the provider must submit a bill to its Medicaid/title XIX agency (or to its local welfare agency) to determine the State’s cost sharing obligation to pay all or a portion of the applicable Medicare deductible and coinsurance.
  10. CMS proposes to amend CFR §413.89(b)(1) by adding new paragraph (b)(1)(i) to specify that for cost reporting periods beginning before October 1, 2020, bad debts are amounts considered to be uncollectible from accounts and notes receivable that were created or acquired in providing services. “Accounts receivable” and “notes receivable” are designations for claims arising from the furnishing of services, and are collectible in money in the relatively near future.
  11. CMS proposes to amend CFR §413.89(b)(1) by adding new paragraph (b)(1)(ii) to specify that for cost reporting periods beginning on or after October 1, 2020, bad debts, also known as “implicit price concessions,” are amounts considered to be uncollectible from accounts that were created or acquired in providing services. “Implicit price concessions” are designations for uncollectible claims arising from the furnishing of services, and may be collectible in money in the relatively near future and are recorded in the provider’s accounting records as a component of net patient revenue.
  12. CMS proposes to amend CFR §413.89(c) by adding new paragraph (c)(1) to specify that effective for cost reporting periods beginning before October 1, 2020 bad debts, charity, and courtesy allowances represent reductions in revenue.
  13. CMS proposes to amend CFR §413.89(c) by adding paragraph (c)(3) to specify that, effective for cost reporting periods beginning on or after October 1, 2020, Medicare bad debts must not be written off to a contractual allowance account but must be charged to an expense account for uncollectible accounts (bad debt or implicit price concession).

Wage Index

CMS is proposing to adopt the Office of Management and Budget’s (OMB) 2018 revisions to the CBSA delineations for FFY 2021. CMS notes that using the revised OMB delineations, there would be some new CBSAs, urban counties that would become rural (none in New England), rural counties that would become urban (in New England, only rural CBSA 25011 – Franklin, MA would become urban CBSA 44140 – Springfield, MA and some existing CBSAs would be split apart (None in New England.

Also, in New England there was a technical name change of CBSA 25540- Hartford-West Hartford-East Hartford, CT which will become CBSA 25540 – Hartford – East Hartford – Middletown, CT.

In addition, the following New England counties that are currently classified as a “Lugar” rural county would be reclassed to Urban.

  1. Litchfield, CT would be classified now as part of urban CBSA 35300 – New Haven-Milford, CT
  2. Oxford, ME would be classified now as part of urban CBSA 12580 – Lewiston-Auburn, ME
  3. Merrimack, NH would be classified now as part of urban CBSA 31700 – Manchester-Nashua, NH

As such, due to the varying impacts of the OMB’s revised delineations, CMS is proposing a one-year transition of a 5% cap on wage index decreases from FY 2020 across all hospitals, which it would implement in a budget-neutral manner.

CMS is also proposing to continue the FFY 2020 policy to increase the wage index values of hospitals in the lowest quartile of hospital wage indexes nationwide and apply an across-the-board budget-neutrality adjustment.

Sole Community Hospital

CMS is proposing that for a hospital that has a short period cost report before it applies for classification as a Sole Community Hospital (SCH), that CMS will use the hospital’s most recent 12 month or longer cost reporting period to define the service area.

GME

CMS is proposing to expand the definition of a “displaced” resident. As such, CMS proposes to address two areas of concern regarding displaced residents.

The first is that CMS is proposing that rather than use the day prior to or the day of program or hospital closure, the key day would be the day that the hospital closure was publicly announced as the key date for the Medicare temporary funding for displaced residents.

The second is a proposal to also allow the Medicare temporary funding to be transferred temporarily for those who are not physically at the closing hospital/closing program, but had intended to train at (or return to training at, in the case of residents on rotation) the closing hospital/closing program.

These changes would apply to the IME FTE cap transfers as well.

CMS is also prosing to modify its policy requiring the receiving hospital of the displaced resident to include the displaced resident’s name and full social security number in its correspondence. CMS is proposing to require the receiving hospital to only include the name and the last four digits of each displaced resident’s social security number instead.

Disproportionate Share Hospital

CMS has proposed the uncompensated care costs (UCC) Pool to be $7,816,726,242. This is a decrease of $533,872,853 (6.39%) from the FFY 2020 final UCC pool of $8,350,599,096.  FFY 2020 factor 3 will be calculated using the audited 2017 cost report Worksheet S-10 data (CMS states that they have audited approximately 65% of the FY 2017 worksheet S-10 schedules). CMS is also proposing that going forward they will continue to use single year of audited S-10 data for determining factor 3 and that worksheet S-10 line 30 would continue to be used as the definition of uncompensated care costs for hospitals.

Long-Term Care Hospitals

CMS has proposed a PPS based payment rate increase of 2.5% for those that qualify for the full update.

Low Volume Hospitals

Section 50204 of the Bipartisan Budget Act of 2018 reinstated Low Volume Add-On (LVA) program effective October 1, 2017 through September 30, 2022. In addition to reinstating and extending this provision, for FFY 2019 through the current expiration of this program in FFY 2022, the maximum Medicare discharge threshold to initially qualify for this add-on reimbursement was increased from fewer than 1,600 Medicare discharges (per the MedPar database and includes Medicare Part A and Part C discharges) to a requirement of fewer than 3,800 total discharges (Medicare and non-Medicare discharges). The other qualifying criteria is that hospitals must be located more than 15 road miles from the nearest subsection (d) hospital.

For FFY 2021, qualifying hospitals must submit a written request to their MAC (we suggest checking with your MAC to inquire if you can submit the request via email) that includes sufficient documentation to verify that it meets the more than 15 mile and discharge requirements.

If hospitals submit their request after September 1, then if the MAC approves the request, the hospital will begin to receive low volume add-on reimbursement payments within 30 days of the MAC determination.

Interoperability and Electronic Clinical Quality Measures (eCQM)

CMS is proposing several changes to the hospital inpatient quality reporting (IQR) program which include increasing the number of quarters reported for eCQMs over three years until four quarters of data are reported publicly reporting eCQMs starting with the calendar year (CY) 2021 reporting period, and implementing several changes to the IQR validation process.

CMS also proposes several changes to the Promoting Interoperability Programs that includes an electronic health record reporting period of a minimum of any continuous 90-day period in CY 2022 in addition to changes to the reporting of eCQMs consistent with those proposed in the IQR program.

FOR MORE INFORMATION, PLEASE CONTACT THE FOLLOWING:

Eric Wetherell, CPA: Principal and Healthcare Advisory Group Leader

Marc Levy: Senior Manager, Healthcare Advisory Group

Denis Houle: Senior Manager, Healthcare Advisory Group

Pamela Cook: Senior Manager, Healthcare Advisory Group

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.