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CMS Issues IPPS and LTCH PPS Final Rule Updating Medicare Policy and Payment Rates.

The Centers for Medicare & Medicaid Services (CMS) issued a final rule updating fiscal year (FY) 2017 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-term Care Hospital Prospective Payment System (LTCH PPS).  CMS annually updates payment rates for IPPS hospitals and LTCHs.  The updated rates reflect changes in the hospital “market basket,” which includes the cost of goods, services, and other variables involved with treating Medicare patients.

Under the final rule, the operating payment rates for general acute care hospitals successfully participating in the Hospital Inpatient Quality Reporting (IQR) Program will increase by 0.95 percent. Participating hospitals must also be meaningful electronic health record (EHR) users.  Hospitals not successfully participating in the Hospital IQR Program will be subject to a one-fourth reduction of the market basket update.  Further, hospitals that are not meaningful EHR users will be subject to a three-fourths reduction of the market basket update.  CMS estimates that FY 2017 Medicare spending on inpatient hospital services will increase by as much as $746 million.

Key provisions of the final rule include:

  • A -1.5 percent adjustment to recoup documentation and coding overpayments in compliance with the American Taxpayer Relief Act of 2012;
  • CMS will remove the -0.2 percent adjustment created in anticipation of the projected increase in Two Midnight Policy expenditures and replace it with a 0.8 percent payment increase;
  • Updates to Medicare uncompensated care payment rates and modifications to the methodology used to calculate payments;
  • Finalized extension of the Medicare-dependent hospital program and low-volume hospital adjustment provided by the Medicare Access and CHIP Reauthorization Act of 2015;
  • Updates to the requirements for Medicare and Medicaid EHR incentive programs; and
  • Updates to the Hospital Value-Based Purchasing Program.

The final rule will apply to nearly 3,330 acute care hospitals and 430 LTCHs, and will affect discharges occurring on or after October 1, 2016.

The final rule is available at:

The CMS fact sheet is available at:

Medicare Program; Inpatient Rehabilitation Facility Perspective Payment System for Federal Fiscal Year 2017; Final Rule, 81 Fed. Reg. 52056, 52056-52141 (August 5, 2016).

Centers for Medicare & Medicaid Services.  “Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Final Rule Policy and Payment Changes for Fiscal Year (FY) 2017.”  Fact Sheet.  2 Aug. 2016.