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CMS Issues IPPS Proposed Rule Updating Fiscal Year 2017 Payment Policies and Rates.

The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule updating the Inpatient Prospective Payment System (IPPS) for fiscal year (FY) 2017.  The IPPS uses a national base rate to pay hospitals for services provided to Medicare beneficiaries.  CMS establishes payment rates according to diagnoses and illnesses, and adjusts rates annually to reflect changes in hospital expenditures for goods and services used to treat Medicare patients.  Overall, CMS expects the total amount Medicare spends on inpatient hospital services in FY 2017 to increase by approximately $539 million.

Key highlights of the proposed rule include:

  • Removing the 0.2 percent inpatient payment reduction under the Two Midnight Rule and adjusting the FY 2017 payment rates to eliminate the effects of the reduction between FYs 2014 and 2016.
  • Modifying clinical quality measure reporting and submission requirements for Electronic Health Record Incentive Programs to better align with the Hospital Inpatient Quality Reporting
  • Adding the Medicare Outpatient Observation Notice (MOON) to the Notice of Observation Treatment and Implication for Care Eligibility Act to require the following:
  • Hospitals and Critical Access Hospitals (CAHs) must provide a standardized MOON to Medicare beneficiaries receiving outpatient observation services for more than 24 hours.
  • The MOON must inform beneficiaries of the reason for the observation services and the implication the services will have on cost-sharing and post-hospitalization eligibility.
  • Beneficiaries must receive the MOON at least 36 hours after the hospital or CAH initiates observation services.
  • Hospitals and CAHs must orally explain the MOON to beneficiaries and obtain their signatures to acknowledge receipt and understanding of the notice.

CMS will accept public comment on the proposed rule until June 17, 2016.

The proposed rule is available at:

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 2017 Rates; Quality Reporting Requirements for Specific Providers; Graduate Medical Education; Hospital Notification Procedures Applicable to Beneficiaries Receiving Observation Services; and Technical Changes Relating to Costs to Organizations and Medicare Cost Reports; Proposed Rule; 81 Fed. Reg. 24946, 24946-25322 (April 27, 2016).