Issue link: https://beckershealthcare.uberflip.com/i/717576
46 CFO / FINANCE CMS' Final IPPS Rule for 2017: 9 Points to Know By Ayla Ellison C MS has issued its inpatient prospective payment systems final rule for fiscal year 2017, which does away with the two-mid- night rule's inpatient pay cuts. e 2,434-page rule also includes rate changes for long-term care hos- pitals. Overall, the rule will apply to about 3,330 acute care hospitals and 430 long-term care hospitals. e final rule will be published in the Federal Register Aug. 22, and take effect Oct. 1. Here are nine key points from CMS' final IPPS rule for 2017. 1. Under the final rule, acute care hospitals that report quality data and are meaningful users of EHRs will receive a 0.95 percent increase in Medicare operating rates. 2. Hospitals that do not submit quality data would lose a fourth of the market basket update (2.7 percent), and hospitals that are not mean- ingful users of EHRs will be subject to a three-fourths reduction of the market basket update in FY 2017. 3. CMS arrived at its proposed rate of 0.95 percent (again, which only would apply to hospitals that report quality data and attest to meaning- ful use) through the following updates: a positive 2.7 percent market basket update, a negative 0.3 percentage point update for a productivity adjustment, a negative 0.75 percentage point update for cuts under the Affordable Care Act, a negative 1.5 percentage point documentation and coding adjustment as part of the American Taxpayer Relief Act of 2012 and an increase of approximately 0.8 percentage points to remove the adjustment to offset the estimated costs of the two-midnight rule. 4. Under the two-midnight rule, which was introduced in the 2014 IPPS rule, CMS expected a decline in the number of long observation stays and an increase in the number of inpatient admissions. CMS pro- posed offsetting the cost through a 0.2 percent reduction in inpatient payments. e payment reduction was strongly opposed by hospitals and sparked lawsuits challenging the payment cut. In its FY 2017 rule, CMS removed this adjustment for FY 2017 and also its effects in FYs 2014 through 2016. "CMS believes the assumptions un- derlying the -0.2 percent adjustment were reasonable at the time they were made," wrote CMS in the final rule. However, in light of the unique cir- cumstances surrounding this adjustment, the agency decided to remove it. 5. CMS projects total medical spending on inpatient hospital services will increase by about $746 million in fiscal 2017. Medicare disproportionate share hospital payments 6. As part of the ACA, Medicare disproportionate share hospital pay- ments will be reduced by 75 percent, or $49.9 billion, by 2019. CMS will distribute nearly $6 billion in DSH payments in FY 2017, about $400 million less than in FY 2016. Hospital Inpatient Quality Reporting Program 7. In the final rule, CMS added four new claims-based measures (three clinical episode-based payment measures and one communication and coordination of care measure) for the FY 2019 Inpatient Quality Re- porting Program and subsequent years. CMS also removed 15 mea- sures for the FY 2019 payment determination and subsequent years. Hospital Value-Based Purchasing Program 8. CMS made changes to the Hospital Value-Based Purchasing Pro- gram, which was established under the ACA. CMS added two condi- tion-specific payment measures (one for acute myocardial infarction and one for heart failure) beginning with the FY 2021 program year and a 30-day mortality measure following coronary artery bypass gra surgery beginning with the FY 2022 program year. CMS said the con- dition-specific payment measures capture payments for all care, in- cluding readmissions and subsequent cardiac events, across multiple care settings, services, and supplies during the 30-day episode of care. Hospital Acquired Conditions Reduction Program 9. CMS made several changes to existing Hospital Acquired Condi- tions Reduction Program policies in the FY 2017 final rule, including changing the program scoring methodology from current decile-based scoring to a continuous scoring methodology. n CHS Records $1.4B Loss, Plans to Sell Off 12 Hospitals By Ayla Ellison F ranklin, Tenn.-based Community Health Systems saw earnings drop significantly in the second quar- ter of 2016. Here are six things to know about the for-profit hospital operator's financial results for the second quarter. 1. CHS reported operating revenues of $4.6 billion in the second quarter of 2016, down 6 percent from revenues of $4.9 billion in the same period of the year prior. 2. During the second quarter of 2016, CHS recorded a noncash impairment charge of $1.4 billion. The impair- ment charge resulted from a determination that CHS' hospital operations exceeded fair value. This was primari- ly due to a decline in the company's market capitalization and long-term debt during the three months that ended June 30. A decrease in the estimated future earnings of CHS compared to previous estimates also led to the im- pairment charge, CHS said. 3. CHS also reported a charge of $169 million to reduce the long-lived assets of hospitals the company is trying to sell, and a $70 million charge for certain underperform- ing hospitals. 4. CHS saw admissions fall 9.1 percent year over year in the second quarter of 2016. When adjusted for outpa- tient activity, admissions were down 8.5 percent. 5. CHS ended the second quarter of 2016 with a $1.4 billion loss from continuing operations, compared with a profit of $117 million in the same period of the year prior. 6. The operator plans to sell a dozen hospitals by the end of 2016 — two more than it was negotiating to di- vest in May. CHS Chairman and CEO Wayne Smith and CFO Larry Cash shared plans to sell the 12 undisclosed hospitals and some other non-hospital operations, which have combined annual revenues of $1.45 billion, in five separate transactions. The company expects the sale of the facilities to trim its debt by $850 million. n