How CMS Final Rule for Fiscal Year 2017 IPPS Impacts Your Business

News | Published: Wednesday, August 10, 2016 4:30 pm

by MedAxiom


On August 2, CMS published the Final Rule for Fiscal Year 2017 IPPS for hospital reimbursement; this rule outlined inpatient payment rates for hospital services beginning October 1, 2016. The rule also included a number of key policies that will impact hospital services in the coming year. To keep you up-to-date on this important development, we provide a summary of the key policy changes as well as an analysis of policy impact on cardiovascular services.


Initial Analysis of Policy Impact on Cardiovascular Services


  • Publication of final rule – August 2
  • Effective date of final rule – discharges occurring on or after October 1, 2016

Overall Payment Changes

  • CMS is proposing an overall increase in DRGs of ~0.95%
    • Individual MS-DRG payment changes will vary, and are included in the payment tables for cardiovascular-related MS-DRGs
    • This adjustment includes a positive 0.8% adjustment related to the Two-Midnight policy, and a negative 1.5% adjustment for documentation and coding overpayments

Hospital “Value” Initiatives

  • Hospital Readmissions Reduction Program (RRP)
    • Adding CABG to the existing conditions for the program (AMI, Heart Failure, Pneumonia, COPD, TKA, THA)
    • Estimate the RRP impact to be $528 million, an increase of ~$108 million from 2016
    • CMS estimates that 2,588 hospitals will see some percentage of payment reduction due to RRP
  • Value-Based Purchasing (VBP)
    • Percentage in play for hospitals rises to 2%
    • CMS estimates that $1.8 billion will be redistributed among hospitals through VBP
    • CMS provides a summary of previously adopted and recently baselined performance periods for program year 2018-2022, including adding AMI and HF payment measures for 2021. These will be calculated in the same manner as CMS calculates the MSPB measure.
  • Hospital Acquired Conditions (HAC) Program
    • CMS is making five changes to existing HAC Reduction Program policies:
      • Establishing National Healthcare Safety Network (NHSN) CDC Healthcare Associated Infections (HAI) data submission requirements for newly opened hospitals;
      • Clarifying data requirements for Domain 1 scoring;
      • Establishing performance periods for the FY 2018 and FY 2019 HAC Reduction Program;
      • Adopting the refined PSI 90: Patient Safety for Selected Indicators Composite Measure (NQF # 0531); and
      • Changing the Program scoring methodology from the current decile-based scoring to a continuous scoring methodology
    • HAC will reduce total IPPS payments by 1 percentage point to the top quartile of ranked hospitals – no estimated dollar impact was provided

MS-DRG Changes (Cardiovascular Related)

  • Implantable Loop Recorder
    • CMS finalized its proposal to include 4 of the 6 requested ICD-10 procedure codes related to ILRs as OR procedures, which will result in these procedures mapping to higher paying MS-DRGs
  • Pacemaker Implants, Replacements and Revisions
    • CMS finalized its proposals to eliminate the code combinations, and instead provide lists of codes for each category (i.e. Implant, Revision, Replacement) – if the appropriate codes appear on the claim from these lists, they will map to MS-DRGs 242-244
  • MitraClip System Implants
    • CMS finalized its proposal to map MitraClip procedures to MS-DRGs 228, 229
    • MS-DRG 230 has been eliminated based on claims data and the rules governing splitting MS-DRGs. These cases will be included with MS-DRG 229
  • AICD Procedures
    • CMS is finalizing its proposal for no changes to MS-DRG 245 based on their analysis
    • Implantable Medical Device Credits
      • CMS policy states that if a hospital received a credit for a recalled device equal to 50 percent or more of the cost of the device, CMS would reduce a hospital’s IPPS payment for those MS-DRGs
      • No changes were made to this policy for FY 2017 – this policy impacts 48 MS-DRGs
  • Implantable Medical Device Credits
    • CMS policy states that if a hospital received a credit for a recalled device equal to 50 percent or more of the cost of the device, CMS would reduce a hospital's IPPS payment for those MS-DRGs
    • No changes were made to this policy for FY 2017 – this policy impacts 48 MS-DRGs

New Technology Add-On Payments (NTAP)

  • CMS provides incremental payment (in addition to the DRG payment) for technologies that qualify for NTAP
  • Status for current NTAP technologies
    • CardioMEMS HF System – continued for FY 2017 (cap of incremental $8,875 + DRG payment)
    • MitraClip System – discontinued effective October 1, 2016
    • Drug Coated Balloons – continued for FY 2017 (cap of incremental $1036 + DRG payment)
  • New applications (if approved, effective for FY 2017)
    • 9 total applications received by CMS: 2 were withdrawn, including Edwards INTUITY Valve System as FDA approval was not granted by July 1, 2016
    • GORE® EXCLUDER® Iliac Branch Endoprosthesis (IBE)
      CMS awarded NTAP – incremental payment of up to $5,250 in addition to DRG payment
    • Other Applications
      • MAGEC Spinal Bracing and Distraction (spinal deformities in children)– approved
      • Miroderm Wound Matrix – denied
      • Idarucizumab (reverse effects of Pradaxa) – approved
      • Titan Spine (spinal interbody device) – denied
      • Defitelo (treatment for patients diagnosed with sinusoidal obstruction syndrome) – approved
      • Vitogard (antidote to Fluorouracil toxicity) – approved


  • CMS is finalizing regulations to implement the NOTICE Act, which requires hospitals to provide patients receiving more than 24 hours of observation services as an outpatient both written notice and oral explanation of the implications of this status
    • Standard written notice needs to be provided, called the Medicare Outpatient Observation Notice (MOON) – this must be signed by patient or person acting on their behalf
    • CMS will provide oral explanation guidance in forthcoming manual provisions
  • Notice must be given to Medicare patients no later than 36 hours after observation services begin. However, the MOON can be provided before the patient has received more than 24 hours of observation services, and be in compliance with the written requirement.
  • Please note – CMS is not proposing changes to the “Two-Midnight Rule” policy. The only changes CMS is proposing regarding this policy is the payment adjustment tied to it, and this is reflected in the overall 0.9% adjustment described above.




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