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The Inpatient Prospective Payment Systems (IPPS) FY 2017 Overview

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Last Tuesday, August 2, the Centers for Medicare & Medicaid Services (CMS) released the FY 2017 IPPS final rule
Please note: This is an archived post. Some of the information and data discussed in this article may be out of date. It is preserved here for historical reference but should not be used as the basis for business decisions. Please see our main Insights section for more recent posts.

Overall, adjustments from the proposed rule and to the system broadly were minimal.

Notable Updates:

Disproportionate Share Hospital (DSH) Payment Reductions: CMS will distribute just under $6.0 billion in uncompensated care payments, a $400 million decrease from the FY 2016 amount. This will result in an overall 2.2 percent decrease in DSH payments. The impact of lower payments will have varying effects, but will have the greatest impact on high-DSH hospitals.

Two Midnight Rule: When this rule was initially adopted in FY 2014, CMS issued a 0.2 percent reduction in IPPS payment rates that year to offset a projected $220 million increase in expenditures by Medicare as a direct result of this policy. In the FY 2017 rule, CMS finalized the reversal of the FY 2014 decision by eliminating the 0.2 percent payment reduction and by refunding hospitals for the three years in which that reduction was in place. These changes will amount to an increase in IPPS payment rates of 0.8 percent by 2018.

New Technology Add-on Payment (NTAP): CMS evaluated seven new technologies for FY 2017, which included four medical devices and three drugs. CMS awarded NTAP to five technologies: Defitelio ®, VISTOGARD™, Praxbind®, GORE® EXCLUDER® Iliac Branch Endoprosthesis, and MAGEC® Spinal Bracing and Distraction System.

Trends to Watch:

Focus on High-Impact Therapeutic Areas: Several quality measures specific to cardiac care were updated. This signals a broader trend of Medicare focusing on beneficiaries in high spending and high utilization therapeutic categories including cardiovascular care.

CMS’s Priorities: The agency continues to focus on quality and value as important drivers of reimbursement. Previously established quality improvement programs will continue to affect overall hospital reimbursement while encouraging high-value care.

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