Inpatient PPS: The Final Rule for FY 2021

Regulatory Advisory
September 29, 2020

The Centers for Medicare & Medicaid Services (CMS) Sept. 2 issued its hospital inpatient prospective payment system (PPS) and long-term care hospital (LTCH) PPS final rule for fiscal year (FY) 2021. In addition to finalizing a 2.9% increase in inpatient PPS payments for 2021, the rule requires disclosure of certain payer-negotiated rates and makes changes to Disproportionate Share Hospital (DSH) payments, Chimeric Antigen Receptor T-cell (CAR T) therapy payment and the quality incentive programs. Highlights of the LTCH PPS final rule are covered in a forthcoming AHA Regulatory Advisory. Provisions of the final rule take effect Oct. 1.

AHA Take

The AHA remains deeply disappointed that CMS continues to require hospitals and health systems to disclose privately negotiated contract terms with payers. By continuing to focus on negotiated rates rather than expanding access to a patient’s out-of-pocket costs, the Administration fails to meet the goal it set for itself – assisting consumers in becoming more prudent purchasers of health care. We once again urge the agency to focus on what is really important to patients – ready access to their out-of-pocket costs. Additionally, CMS’s policy will require hospitals to divert critically needed resources during this historic pandemic to administrative tasks that will not benefit patients. We do not believe CMS has the authority to compel the disclosure of these terms and our legal challenge remains ongoing.

While we appreciate the agency’s focus in addressing cost issues for life-saving CAR T therapy, we remain concerned that the policy put forth in this final rule is inadequate to address the extraordinary level of resources necessary to provide CAR T therapy to patients. We continue to urge CMS to consider an alternative method of determining the cost of CAR T therapy, as well as to consider carving out these very costly new technologies from the Medicare Severity-Diagnosis-related Group (MS-DRG) and paying for them on a pass-through basis.

Key Takeaways

CMS’s finalized policies will:

Increase inpatient PPS payments by 2.9% in FY 2021.
Require hospitals to report the median payer-specific negotiated rates for inpatient services, by MS-DRG, for Medicare Advantage organizations on the Medicare cost report.
Use FY 2017 Worksheet S-10 data to determine the distribution of FY 2021 DSH uncompensated care payments.
Create a new a MS-DRG for CAR T therapy.
Modify the definition of “displaced resident” for the purpose of transferring Medicare residency slots after a teaching hospital or residency program closes.
Continue a reporting period of a minimum of any continuous 90 days for the calendar year (CY) 2021 Promoting Interoperability Programs.
Increase the number of quarters of electronic clinical quality measure (eCQM) data, and start publicly reporting eCQM data.

Inpatient Prospective Payment Systems (IPPS)