CMS 2016 Proposal May Squeeze Bottom Lines

Published: April 29, 2015


On April 17, the Centers for Medicare & Medicaid Services (CMS) released its inpatient prospective payment system (IPPS) proposed rule for acute care hospitals for fiscal year 2016. The rule contains new and updated quality reporting requirements for acute care hospitals, including related proposals for hospitals participating in the Medicare Electronic Health Record (EHR) Initiative, updated policies relating to the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition (HAC) Reduction Program. All of the proposals continue in the theme of health care reform coming from the current Administration, which is to shift away from paying for the volume of care toward paying for the quality of care. This continued emphasis on data collection and measures reporting provides the nursing profession an opportunity to continue showcasing how nursing directly impacts revenue by preventing adverse events and reporting improved performance on a growing number of outcome-based performance measures.

Payment Rates

The rule would increase rates to reporting hospitals by 1.1% in FY 2016 compared to FY 2015, after accounting for inflation and other adjustments. The American Hospital Association (AHA) promptly expressed its disappointment with the 1.1% rate increase, “[The] rule implements numerous congressionally-mandated policies and provisions in the context of the existing payment system,” said AHA Executive Vice President Rick Pollack. “These very modest increases will make it even more challenging for hospitals to deliver care patients and communities expect.” Given these challenges nurses must continue contributing to meaningful data collection and measures reporting, as well as implementing process improvements to improve patient outcomes. Many of the reported measures relate to the operating room and the care provided and coordinated by perioperative registered nurses.

Hospital Readmissions Reduction Program

The hospital readmissions reduction program requires a reduction to a hospital’s base operating diagnosis-related group (DRG) payment to account for excess readmissions of selected applicable conditions. For FYs 2013 and 2014, these conditions were acute myocardial infarction, heart failure, and pneumonia. Additional readmissions measures were added for FY 2015 and future years: chronic obstructive pulmonary disease (COPD), total hip arthroplasty, and total knee arthroplasty (THA/TKA). The readmissions measures were later expanded to include a measure of patients readmitted following coronary artery bypass graft (CABG) surgery for FY 2017 and beyond.

The 2016 proposed IPPS rule does not add any new readmission measures to the readmissions reduction program, but does propose to refine the pneumonia readmissions measure, which would expand the measure cohort for FY 2017 and beyond. In addition, the 2016 proposal includes an extraordinary circumstance exception policy that would align with existing extraordinary circumstance exception policies for other IPPS quality reporting and payment programs, allowing hospitals that experience an extraordinary circumstance (such as a hurricane or flood) to request a waiver for use of data from the affected time period.

Hospital Value-Based Purchasing Program

The hospital value-based purchasing program provides value-based incentive payments to hospitals based on their performance on certain measures identified in a given fiscal year. CMS is proposing to remove the IMM-2 Influenza Immunization and the AMI-7a Fibrinolytic Therapy Received within 30 Minutes of Hospital Arrival measures beginning in FY 2018 because they are “topped out.”

CMS would then add one new measure for FY 2018 – the 3-Item Care Transition Measure (CTM-3) endorsed by the National Quality Forum, and one additional for FY 2021 – the Hospital 30-Day, All-Cause, RSMR following COPD Hospitalization, a risk-adjusted, NQF-endorsed mortality measure monitoring mortality rates following chronic obstructive pulmonary disease hospitalizations.

The CTM-3 measure proposed for FY 2018 would add three questions to the HCAHPS (patient satisfaction) Survey, as follows:

  • During this hospital stay, staff took my preferences and those of my family or caregiver into account in deciding what my health care needs would be when I left. 
    1. Strongly disagree
    2. Disagree
    3. Agree
    4. Strongly agree
  • When I left the hospital, I had a good understanding of the things I was responsible for in managing my health.
    1. Strongly disagree
    2. Disagree
    3. Agree
    4. Strongly agree
  • When I left the hospital, I clearly understood the purpose for taking each of my medications.
    1. Strongly disagree
    2. Disagree
    3. Agree
    4. Strongly agree
    5. I was not given any medication when I left the hospital.

These changes are consistent with CMS’s continuing shift from process measures to outcome measures and offer ongoing opportunities for nurses to contribute to their hospital’s bottom line. Nurses are often cited as the key to improving a hospital’s patient satisfaction survey scores, and are also integral to improving data collection and measures reporting in facilities.

Hospital-Acquired Condition Reduction Program

Under the HAC reduction initiative, Medicare does not reimburse for services related to identified HACs, including certain post-operative complications, medication errors, wrong-site surgery, and patient falls. CMS imposes a 1% payment reduction to the 25% of hospitals with the highest national average of HACs during a given performance period. CMS proposed three changes to the existing HAC reduction program in its FY 2016 proposed rule: (1) expand the population covered by the CLABSI and CAUTI measures to include patients in select non-intensive care unit types; (2) adjust the relative contribution of each domain to the total HAC score; (3) an extraordinary circumstances exception that would align with other quality reporting programs. CMS is not proposing changes to the 11 current categories of HACs, available here.

Hospital Inpatient Quality Reporting Program

In addition to the value-based payment initiatives above, hospitals are required to report on certain identified measures in order to receive their full annual increase in payments. The 2016 proposal would add eight new measures for FY 2018 and beyond, and notes CMS’ intent to align the IQR reporting and submission timeline with the electronic reporting measures required under the Medicare EHR incentive program to reduce the reporting burden on providers. A seamless reporting system will require interoperability between EHRs and CMS data collection systems, additional infrastructure development on the part of hospitals and CMS, and adoption of standards for capturing, formatting, and transmitting the data elements that make up the measures.

Two-Midnight Rule

CMS did not make or discuss changes to its two-midnight policy, but noted it is considering the recommendation in the April Medicare Payment Advisory Committee report that CMS withdraw the two-midnight rule. Under the two-midnight rule, hospital stays of less than two midnights are treated as outpatient cases for reimbursement purposes, while stays spanning two midnights are reimbursed under the inpatient system.

Bundled Payments for Care Improvement

CMS is not expanding its bundled payment initiative at this time, but is seeking comment and policy from the field on future expansion of its bundled payments for care initiative. Expansion of the bundled care improvement initiative will take place outside of the IPPS rulemaking process.

The proposed rule will be published in the Federal Register on April 30and comments will be accepted through June 16. CMS will respond to comments with a final rule expected August 1.