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The Medicare IPPS rule changes are here. Are you taking action?

August 20, 2019 Article 2 minute read
Chris Walski
The 2020 Medicare IPPS rule changes are creating millions of dollars in adjustments to reimbursements nationwide. Do you understand the impact the final rule has on hospitals within your system? Here’s what you should do now.
Image of government building with American flag.On Aug. 2, 2019, the Centers for Medicare & Medicaid Services (CMS) released the Medicare Inpatient Prospective Payment System (IPPS) 2020 Final Rule. The rule ushers in important changes to reimbursement rates for hospitals and the methodology used to distribute the Medicare Disproportionate Share Hospital (DSH) uncompensated care pool.

Changes to reimbursement rates

The CMS estimates reimbursement rates to hospitals will increase by approximately 3.1 percent on average; however, the actual change for individual hospitals will vary significantly due to:

  • The impact of various elements of reimbursement, such as medical education and Medicare DSH.
  • Year-over-year changes to an individual hospital’s wage index and expected case-mix index.

Action steps to take now

Since all IPPS hospitals are impacted, you should calculate or seek out an individual impact analysis for each hospital within your health system. Plante Moran can compile a complimentary analysis estimating the impact of the final rule on individual facilities.

Distribution of the DSH uncompensated care pool

CMS has made significant changes to the distribution of Medicare’s $8.4 billion DSH uncompensated care pool. CMS had previously distributed this pool using a three-year average of a combination of Medicare and Medicaid indigent days and information from the Medicare cost report Worksheet S-10 data. However, for FY2020 CMS has distributed this pool using one-year of 2015 Medicare S-10 data. This change in allocation methodology has created significant shifts in the allocation of the pool among providers.

Action steps to take now

You should conduct a full analysis of the impact changes in reimbursement methodology will have on your facilities for the upcoming federal fiscal year. Many hospitals are receiving millions of dollars — more or less than — they had in the past. The analysis should include looking at what your facility filed on the Medicare Worksheet S-10 in 2015 and in subsequent years. To ensure your hospital receives its full portion of the $8.4 billion pool, it’s important to look at the entire patient population. While the majority of the claim amounts on the Medicare Worksheet S-10 may come from a handful of charity care, financial assistance, or bad debt adjustment codes, opportunities could be missed if your hospital isn’t looking at all the adjustment codes and certain populations that would have a high likelihood of being included. We’ve created a supplemental summary of Medicare Worksheet S-10 data that we can provide upon request.

Additionally, Plante Moran has combined the technical expertise of our healthcare reimbursement group with our data analytics group to help our clients optimize their Medicare DSH uncompensated care pool payments.

Changes for rural providers

The final rule also includes changes that affect many rural providers across the country, including an adjustment for hospitals with wage index values below the 25th percentile and a revised wage index rural floor calculation to exclude urban-to-rural reclassifications. If you’re a rural provider, these adjustments should also be considered in your analysis.

Action steps to take now

It’s imperative that you understand the impact the 2020 Medicare IPPS changes will have on your facilities and what you need to do to stay ahead of changes and plan for the upcoming federal fiscal year. These changes to rural providers are part of our complimentary analysis, showing the impact of the final rule on individual facilities. To ensure an optimized outcome for your organization, give us a call.

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