Medicare Hospital Inpatient Prospective Payment System for Acute Care Hospitals Final 2016 Rates & Policies 1

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1 Medicare Hospital Inpatient Prospective Payment System for Acute Care Hospitals Final 2016 Rates & Policies 1 Cardiac Rhythm Management (CRM) Market Impacts Introduction On August 3, 2015, the Centers for Medicare and Medicaid Services (CMS) released the final policy changes and payment rates for the Hospital Inpatient Prospective Payment System (IPPS) for Fiscal Year The final rule will apply to approximately 3,400 acute care hospitals, beginning with discharges occurring on or after October 1, The CRM device market is expected to receive favorable increases in payment relative to FY 2015 payments based on proposed FY 2016 rates. See the list below for a summary of the final weighted average of payment estimates for proposed FY 2016 as compared to final FY ICD and CRT-D system implants increase 3% ICD and CRT-D generator and ICD lead replacements increase 4% Pacemaker and CRT-P implants increase 2% Pacemaker and CRT-P generator replacements increase.2% Transcatheter ablations increase 21% (new MS-DRGs proposed) Diagnostic EP Study increase 21% (new MS-DRGs proposed) Stand-alone surgical ablations increase.05% 1. General Updates The increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of certified electronic health record (EHR) technology is 0.9 percent. This reflects the hospital market basket update of 2.4 percent adjusted by -0.5 percentage points for multi-factor productivity and an additional adjustment of -0.2 percentage points in accordance with the Affordable Care Act; like last year, the rate is further decreased by 0.8 percentage points for a documentation and coding recoupment adjustment required by the American Taxpayer Relief Act of Hospitals that do not successfully participate in the Hospital IQR Program and do not submit the required quality data will be subject to a one-fourth reduction of the market basket update. Also, the law requires that the update for any hospital that is not a meaningful user of EHR will be 1 Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System Policy Changes and Fiscal Year 2016 Rates; Revisions of Quality Reporting Requirements for Specific Providers, including Changes Related to the Electronic Health Record Incentive Program; Extensions of the Medicare-Dependent, Small Rural Hospital Program and the Low-Volume Payment Adjustment for Hospitals; Federal Register, 42 CFR Part 412. Displayed August 17,

2 reduced by one-half of the market basket update in FY Other payment adjustments will include continued penalties for readmissions, a continued -1 percent penalty for hospitals in the worst performing quartile under the Hospital Acquired Condition Reduction Program, and continued bonuses and penalties for hospital-valued based purchasing. Cardiac specialty hospital payments will increase of 0.7 percent in FY 2016 relative to FY Bundled Payments for Care Improvement Initiative In 2011, CMS launched the Bundled Payments for Care Improvement (BPCI) initiative. The BPCI initiative links payments for multiple services during an episode of care into a bundled payment. BPCI episodes initiate either with an inpatient stay or with post-acute services following a qualifying inpatient stay. CMS is continuing to implement the initiative, which is testing four models of care with hundreds of providers across the country. Documentation and Coding Adjustment. Section 631 of the American Taxpayer Relief Act of 2012 requires CMS to recover $11 billion by 2017 to fully recoup documentation and coding overpayments related to the transition to the MS-DRGs that began in FY For FY 2016, CMS is continuing the approach begun in FY 2014 by making another -0.8 percent adjustment. 2. Quality Data Reporting The final rule will update the measures and financial incentives in the Hospital Acquired Condition Reduction, Hospital Value-Based Purchasing and Hospital Readmissions Reduction programs, as well as the Hospital Inpatient Quality Reporting (IQR) Program and Electronic Health Records Incentive Program. Hospital-Acquired Condition Reduction Program In the FY 2016 IPPS/LTCH PPS Final Rule, CMS is finalizing: (1) the dates of the time period used to calculate hospital performance, (2) an expanded population for two measures that are already included in the program, (3) an adjustment to the relative contribution of each domain to the Total HAC Score, (4) an adjustment to the relative contribution of each measure within Domain 2, and (5) an extraordinary circumstance exception policy. Hospital Readmissions Reduction Program In the FY 2016 IPPS/LTCH PPS Final Rule, CMS is finalizing a refinement of the pneumonia readmission measure that expands the measure cohort. This finalized measure is a modification from what was proposed. CMS is also finalizing the formal adoption of an extraordinary circumstance exception policy. CMS is also continuing to monitor the impact of socioeconomic status on provider results in our quality programs, and is working with the National Quality Forum as they undertake a two-year trial to test 2

3 sociodemographic factor risk adjustment. The Office of the Assistant Secretary for Planning and Evaluation is currently researching the impact of sociodemographic status as directed by the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act), and CMS will closely examine the findings presented in their reports to Congress and related Secretarial recommendations at such time as they are available. Electronic Health Record Incentive Programs and Quality Reporting This final rule also includes the requirements for eligible hospitals and critical access hospitals participating in electronic reporting of clinical quality measures (CQMs) for the EHR Incentive Programs and the Hospital IQR Program. CMS is finalizing modifications to some of the proposed policies regarding CQM reporting and submission requirements to align the CQM reporting period for electronic reporting for both programs, to specify the options for the Editions of certified EHR technology providers may use, and to establish requirements for the version of electronic specifications (ecqms) a provider must use for electronic submission of quality reporting data. Hospital Inpatient Quality Reporting (IQR) Program In the final rule, CMS is updating the measures used in the Hospital IQR Program. CMS will add a total of seven new measures: three new claims-based measures and one structural measure for the FY 2018 payment determination and subsequent years; and three new claims-based measures for the FY 2019 payment determination and subsequent years. For the FY 2018 payment determination and subsequent years, CMS also proposes to remove nine measures, two of which are suspended, as well as refine two previously adopted measures to expand measure cohorts. Hospital Value-Based Purchasing (VBP) Program Established by the Affordable Care Act, the Hospital VBP Program adjusts payments to hospitals for inpatient services based on their performance on a set of measures. In the final rule, CMS is finalizing updates to the Hospital VBP Program and expanding the number of measures. Specifically, the rule adds a care coordination measure beginning with the FY 2018 program year and a 30-day mortality measure for chronic obstructive pulmonary disease beginning with the FY 2021 program year. CMS will also remove two measures, effective with the FY 2018 program year. Additionally, the rule signals future policy changes that will affect certain National Health Safety Network measures beginning with the FY 2019 program year. 3. MS-DRG Updates Creation of Percutaneous Intracardiac Procedures DRGs Consistent with recommendations in the proposed rule, CMS finalized the creation of MS-DRGs 273 and 274 Percutaneous Intracardiac Procedures with and without MCC to replace several procedures historically grouped to MS-DRG 250 and 251. These new MS-DRGs include procedures occurring within the heart chambers using intracardiac techniques, such as transcatheter mitral valve repair, catheter based invasive electrophysiology and endovascular cardiac ablation. With the establishment of the new MS-DRGs these procedures receive an estimated 19% payment increase. Coronary angioplasty and atherectomy procedures will continue to group to MS-DRGs 250 and

4 Creation of Other Major Cardiovascular Procedures DRGs [[DRGs ]] The final rule creates new MS-DRGs for Heart Assist and other Major Cardiovascular Procedures. Upon review of MS-DRGs , CMS discovered varying resource utilization, clinical complexity and wide range of costs for procedures classified to Therefore, are deleted for FY The newly created MS-DRGs distinguish types of procedures based on length of stay and costs. For a detailed code lists for each MS-DRG refer to pages New Technology Add-On Payments CMS evaluated six applications for New Technology Add-on Payments (NTAP) for FY Two applications were approved as new and Five continuations of previous approvals, effective October 1, 2016 (FY 2017): Kcentra Argus II Retinal Prosthesis System CardioMEMS HF (Heart Failure) System MitraClip System Responsive Neurostimulator System (RNS ) Blinatumomab (BLINCYTO ) new LUTONIX Drug Coated Balloon (DCB) Percutaneous Transluminal Angioplasty (PTA) and IN.PACT Pacliaxel Coated Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter NTAP allows for incremental payment above the base DRG rate. NTAP is calculated as the lesser of (1) 50 percent of the incremental cost of the new technology above the DRG payment (2) 50 percent of the device s costs per case. Approval of NTAP enables CMS to provide separate add-on payment for up to 2 to 3 years following FDA approval until which time that CMS determines there are sufficient data to assess the ultimate DRG assignment for the new medical service. 5. FY 2016 Inpatient Diagnosis & Procedure Code Changes For FY 2016, the ICD-9-CM coding system is no longer in use and the ICD-10-CM/ICD-10-PCS coding system will be implemented October 1, Implementation of ICD 10 PCS Section X Codes for Certain New Medical Services and Technologies for FY 2016 As part of the transition to the ICD 10 CM/PCS coding system, at the September 23 24, 2014 ICD 10 Coordination and Maintenance Committee meeting, CMS received a request to create a new section within the ICD 10 PCS to capture new medical services and technologies that might not Appropriately align with the current structure of the ICD 10 PCS codes. Examples of these types of new medical services and technologies included drugs, biologicals, and newer medical devices being tested in clinical trials that are not currently captured within the ICD 9 CM or the ICD 10 PCS. CMS has created a new component within the ICD 10 PCS codes, labeled Section X codes, to 4

5 identify and describe these new technologies and services. The new Section X codes identify new medical services and technologies that are not usually captured by coders, or that do not usually have the desired specificity within the current ICD 10 PCS structure required to capture the use of these new services and technologies. As mentioned earlier, examples of these types of services and technologies include specific drugs, biologicals, and newer medical devices being tested in clinical trials. The new Section X codes within the ICD 10 PCS structure will be implemented on October 1, 2015, and will be used to identify new technologies and medical services approved under the new technology add-on payment policy for payment purposes beginning October 1,