CMS Issues Final Rule for 2020 Payment Models: What You Need to Know

by Mary Kay Thalken, RN, MBA on Sep 26, 2019

blue and white stethoscope on top of paperworkThe Centers for Medicare and Medicaid Services (CMS) released their long-awaited final rule for hospitals that fall under certain payment models in Fiscal Year 2020, and it’s a doozy.

Released at the beginning of August 2019, there’s a lot of information to sort through, and CMS has been kind enough to issue a summary and a Fact Sheet that looks at the high-level points. Still, even this information is somewhat unwieldy, particularly if all you want to know is: am I affected, how am I affected, and what do I need to know?

To that end, we’ve parsed CMS’s Final Rule and have come up with some key takeaways healthcare organizations need to understand if they fall under the affected payment systems. We’ll start with two key questions:


When Does the Final Rule Take Effect?


October 1, 2019. Any discharge that takes place on or after this date will be subject to the stipulations of the new rule.


What Payment Systems Are Impacted?


Get ready for some acronyms. The two payment systems affected by the rule are the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS).

All told, CMS estimates that a whopping 3,330 acute care hospitals fall under the purview of the new rule, as do 390 or so long-term care hospitals.

So exactly what has CMS chosen to focus on with these new rules? As we see it, there are four key areas that affected hospitals will need to know. Executives as well as frontline staff, such as case managers, nurses and discharge planners, should have a basic understanding of how the rule affects the following four topics.


Rural Health Payment Increases


The rule holds good news for rural health organizations that may have felt the pinch of reduced payments in recent years.

The new rule aims to help staff get paid a fairer market rate for their services, and it specifically affects those hospitals in the lowest quarter of all facilities in terms of wage index. By increasing the wage index for rural facilities, the hope is that CMS can close the gap between the care received at hospitals that pay workers higher salaries and have an abundance of resources versus those facilities that are more strapped for both cash and resources.

Overall, CMS hopes its moves in this space will reflect a higher degree of wage accuracy within rural healthcare, one that they point out may have been slightly undermined due to some states inappropriately reclassifying facilities in order to skirt a provision known as the rural floor classification. CMS has issued a rule addressing this.

What all of this essentially means for rural hospitals: higher Medicare payments, with the goal being for hospitals to immediately take those payments and apply them to higher wages for rural workers.


Targeting Hospital-Acquired Conditions and Readmissions


A penalty for facilities that experience an inordinate number of hospital-acquired conditions will continue to be refined in the new rule.

Those in the lowest 25% in terms of patients suffering from hospital-acquired conditions will continue to experience a 1% penalty in their payments. Currently, CMS is in the process of establishing new criteria and reporting standards for Fiscal Year 2022.

The rule governing readmissions also continues to be refined, with CMS taking a closer look at dual eligibility in Medicare and Medicaid. The idea is that facilities should be judged based on how they fare next to organizations with similar percentiles of eligible patients.

Both readmissions and hospital-acquired conditions point to CMS’s continued desire for hospitals to achieve a baseline of care wherein patients neither stay too long nor come back too soon.

It’s important to note, too, that these penalties come in connection with an overall increase in payments under IPPS. In fact, CMS estimates that, if you have an EHR system and take part in the Inpatient Quality Reporting Program, you could see a substantial 3.1% payment increase.

The takeaway: facilities meeting the threshold for high-quality patient care continue to reap the rewards, and those that don’t are penalized.


Promoting Interoperability


In July 2019, we held a webinar on the Promoting Interoperability (PI) Program, and during that webinar, the Advisory Board’s Ye Hoffman pointed out that we could expect some changes to PI once CMS released its rule.

Well, we’ve now seen the rule, and there are indeed some small shifts in how PI will operate. The big takeaway for hospitals is one requirement that’s, well, still not a requirement. The Query of Prescription Drug Monitoring Program (PDMP) still isn’t required, largely due to the influx of comments that pointed to difficulties in implementation and visibility into this metric. So for this year, no one will be penalized if they’re not yet set up to meet the reporting conditions; however, there will still be an incentive for those who have complied, in the form of bonus points in the Promoting Interoperability program.

In its continued bid to get more and more hospitals to shift to electronic health records, CMS will also institute a 90-day minimum reporting period for participants in 2021, and it will seek to align reporting between CQM and IQR.


Site-Neutral Payments are Here to Stay


Finally, one thing that we can’t ignore: the transition period to site-neutral payments is almost up, with the blended rate that hospitals may have gotten used to going away completely by Fiscal Year 2020. This affects long-term care hospitals, who can expect this final year of the transition to see an estimated 5.9% payment decrease.

The lesson should be clear: site-neutral payments are almost here, so get your facility and your team ready for the adjustment if you haven’t done so already.


Good Cop Bad Cop


One thing that should be obvious from all of the above mentioned points, as well as the full text the CMS has made available: quality wins out. CMS is clearly doubling down on its carrot-and-stick approach to ensure high-quality, affordable patient care. That’s why you’re seeing additional payments for facilities able to bring down costs and reduce readmissions and penalties for organizations that fail to meet the necessary metrics.

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Meet the Author

Thalken brings more than 30 years of experience in health-care leadership to our company. Prior to joining the company, she served as Enterprise Vice President for Care Logistics in Atlanta, Ga. She has held executive leadership positions at hospitals in Nebraska and Iowa, including the position of System Quality Executive for Alegent Health. Thalken has presented on the topics of improving quality, patient flow and throughput at various industry conferences and webinars. Thalken holds an MBA from the University of Nebraska at Omaha. She is a member of the American College of Healthcare Executives, American Organization of Nurse Executives and American Case Management Association.