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Our top priority is providing value to members. Your Member Services team is here to ensure you maximize your ACS member benefits, participate in College activities, and engage with your ACS colleagues. It's all here.

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The 2020 Inpatient Prospective Payment System final rule: How will it affect surgeons and hospitals?

Policy changes to the 2020 Medicare Inpatient Prospective Payment System final rule that are relevant to general surgery and its related specialties.

Lauren M. Foe, MPH, Molly O’Grady Murray, Haley Jeffcoat, MPH

December 4, 2019

The Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2020 Inpatient Prospective Payment System (IPPS) final rule August 2. The IPPS outlines coverage, reimbursement, and quality reporting criteria for Medicare Part A inpatient hospital claims. Because a large proportion of surgical care is provided in the inpatient setting, the provisions in this rule are likely to affect many surgeons.

The IPPS pays hospitals for services provided to Medicare beneficiaries using a national base payment rate, adjusted for a number of factors that affect hospital expenses, including the patient’s condition and the cost of clinical labor in the hospital’s geographic area. This rule establishes policies for Medicare payments to hospitals for inpatient stays occurring between October 1, 2019, and September 30, 2020. On June 24, the American College of Surgeons (ACS) submitted comments to CMS on the IPPS proposed rule released earlier in the year, which the agency took into consideration when drafting the final regulation. This article describes some of the policy changes that CMS finalized for FY 2020.

MS-DRG classifications

For hospital payment under the IPPS, CMS classifies a Medicare beneficiary’s inpatient stay into various Medicare Severity Diagnosis-Related Groups (MS-DRGs), which are used to calculate reimbursement rates for inpatient claims based on the severity of the patient’s illness and the amount of hospital resources required to manage the patient’s condition. CMS updates MS-DRGs annually to reflect changes in treatment patterns, technology, and any other factors that may affect hospital resource consumption. Each year, the ACS evaluates the MS-DRG updates CMS proposes to ensure that these adjustments are representative of the nature of the underlying disease (that is, the principal diagnosis) and the resource use associated with the disease relative to other cases within the same MS-DRG.

CMS acknowledged the ACS’ comments in the IPPS final rule and withdrew its MS-DRG proposals for kidney transplantation procedures reported with heart failure and chronic kidney disease as the principal diagnoses.

For FY 2020, CMS reviewed instances in which International Statistical Classification of Diseases and Related Health Problems, 10th Revision (ICD-10) procedure codes 0TY00Z0 (Transplantation of right kidney, allogeneic, open approach) or 0TY10Z0 (Transplantation of left kidney, allogeneic, open approach) were reported with principal diagnoses of heart failure and chronic kidney disease. The agency noted that these cases were assigned to MS-DRGs describing procedures unrelated to the principal diagnoses and proposed to reassign these cases to MS-DRGs describing circulatory operating room (OR) procedures. This change, however, would result in lower reimbursement for transplant cases in which the patient presents with both heart failure and chronic kidney disease than for cases without serious comorbidities.

The ACS opposed CMS’ proposal, indicating that this reassignment would significantly reduce hospital reimbursement for kidney transplantation procedures furnished to Medicare beneficiaries with severe cardiac comorbidities because the circulatory OR procedure MS-DRG alone does not adequately reflect the severity of such transplant cases. CMS acknowledged the ACS’ comments in the IPPS final rule and withdrew its MS-DRG proposals for kidney transplantation procedures reported with heart failure and chronic kidney disease as the principal diagnoses.

OR and non-OR procedure designations

CMS conducts annual reviews of the designation of specific ICD-10 procedure codes as non-OR or OR procedures. Services assigned OR status are typically expected to require the resources available in an OR, such as sterile technique and anesthesia, whereas non-OR procedures generally can be performed in less resource-intensive settings. For FY 2020, CMS reclassified one ICD-10 procedure code describing the percutaneous occlusion of the gastric artery with an intraluminal device as an OR, rather than non-OR, procedure, indicating that the provision of this service often necessitates the specialized setting that an OR provides. The newly designated OR code is listed in Table 1.

Table 1. Newly designated OR procedure for FY 2020

Table 1. Newly designated OR procedure for FY 2020
Table 1. Newly designated OR procedure for FY 2020

In addition, CMS reclassified two ICD-10 procedure codes describing percutaneous drainage of the pelvic cavity and the percutaneous removal of drainage devices from the pancreas as non-OR procedures, rather that OR procedures, for FY 2020, indicating that the provision of these services does not typically require the resources of an OR. These newly designated non-OR codes are listed in Table 2.

Table 2. Newly designated non-OR procedures for FY 2020

Table 2. Newly designated non-OR procedures for FY 2020
Table 2. Newly designated non-OR procedures for FY 2020

Payment for GME costs in CAHs

In this IPPS final rule, CMS clarified the criteria hospitals must meet to receive reimbursement under the Medicare program to cover graduate medical education (GME) costs. Teaching hospitals’ full-time equivalent (FTE) caps dictate the maximum number of residents for whom the hospital is eligible to collect Medicare payment for the GME costs associated with resident training. Under CMS policy, a hospital may include residents training in a “nonprovider” setting in its FTE count if the hospital incurs the residents’ salaries and fringe benefits while the residents are training at that site.

The agency noted in the FY 2020 IPPS proposed rule that it received questions about whether critical access hospitals (CAHs) are considered nonprovider sites for the purposes of GME payment, considering that CAHs are omitted from the definition of a hospital and that the term nonprovider is not explicitly defined in Medicare statute. In recognizing that its existing rules lack both a clear statutory description of a nonprovider site and a definitive determination as to whether a CAH is considered a hospital, the agency finalized its policy to allow hospitals to include FTE residents training at a CAH in its FTE count starting October 1, 2019. The ACS’ position is that it is important to support residency training in rural and underserved areas, including at CAHs, and the College stated its support of CMS’ decision to consider CAHs eligible nonprovider settings for GME payment.

Quality data reporting requirements

In the final rule, CMS takes steps to reduce reporting burden by further aligning measures across programs, thereby limiting the number of separate programs in which hospitals have to report in order to streamline workflows and reduce administrative burden. In its comments, the College supported the consolidation of measures but urged CMS to incorporate measures that are both meaningful and actionable to surgeons and important to patients. The final rule introduces several opioid-related measures, as well as requests for information (RFIs) on developing new opioid measures throughout the various quality programs. Additional RFIs are included on health information technology (HIT) and how to increase provider efficiency through advanced HIT.

Hospital Readmissions Reduction Program

The Hospital Readmission Reduction Program (HRRP) is a value-based purchasing program in which facilities are assessed based on their risk-adjusted readmission rate for six clinical domains during a three-year period. The program requires a reduction in a hospital’s base operating DRG to account for excess readmissions for the applicable conditions, including acute myocardial infarction, chronic obstructive pulmonary disease, heart failure, pneumonia, coronary artery bypass graft, and elective primary total hip arthroplasty and/or total knee arthroplasty. To comply with the 21st Century Cures Act requirement to stratify HRRP performance based on patient social risk factors, CMS implemented policies to compare a hospital’s performance on the six readmissions measures to other hospitals with a similar proportion of dual-eligible patients.

To prevent the misidentification of hospitals when assigning them peer groups, CMS finalized an updated definition of dual-eligible in the final rule. Another notable change adds two more data points to confidential hospital-specific reports, which are intended to provide meaningful comparisons and assessments of the quality of care hospitals provide to patients with social risk factors and help facilities identify gaps in care for this population group.

The ACS supported both policies and encouraged CMS to further study socioeconomic status factors that could play a role in higher health care spending or poorer patient outcomes. For the FY 2020 performance year, CMS did not propose or finalize any updates to the measures included in this program.

Hospital IQR Program measure set

The Hospital Inpatient Quality Reporting (IQR) Program is a pay-for-reporting program that requires hospitals to report specific quality measures to CMS. Successful participation is determined based only on whether hospitals report the Hospital IQR measures and not on performance. The Hospital IQR primarily functions as a reporting mechanism for hospital quality performance on the Hospital Compare website, where the performance results are publicly available. Under the Hospital IQR Program, hospitals must meet the requirements for reporting specific quality measures to receive the full market basket update for that year.

The final rule finalizes the adoption of one opioid-related electronic clinical quality measure (eCQM) for the Hospital IQR Program beginning with the FY 2021 reporting period/FY 2023 payment determination. The adopted measure, Safe Use of Opioids–Concurrent Prescribing, assesses patients ages 18 and older who were prescribed two or more opioids or an opioid and benzodiazepine concurrently at discharge. The College supported the inclusion of this measure in the eCQM measure set in 2021 based on the exclusion of cancer patients, patients receiving palliative care, and patients with hospital-based encounters of 120 days or longer.

The ACS opposed the inclusion of another opioid-related eCQM, Hospital Harm–Opioid Related Adverse Events, which CMS chose not to finalize for the FY 2021 reporting period/FY 2023 payment determination. The measure focuses on patients who experience opioid-related adverse events during admission in an acute care setting. It uses the administration of Naloxone, an opioid-reversal agent, after 24 hours from hospital arrival or in the first 24 hours after hospital arrival with evidence of hospital-administered opioids to account for opioid-related adverse respiratory events. The College opposed the adoption of this measure because of concern that unintended consequences may arise if physicians interpret the measure as a deterrent to Naloxone administration. To address this concern, the ACS recommended that CMS add a measure that captures patient outcomes following Naloxone administration.

Hospital VBP Program

Under the Hospital Value-Based Purchasing (VBP) Program, CMS calculates incentive payments to hospitals based on their performance and improvement on specified measures. CMS did not propose any changes to the measures included in the Hospital VBP Program; therefore, for the 2020 reporting year, 12 measures remain in the Hospital VBP Program measure set. Because the Hospital VBP and Hospital IQR Programs assess performance in the calendar year (CY) two years before the payment year, performance in CY 2020 will be reflected in a hospital’s 2022 payment adjustment.

It is important to remember that as of the 2019 performance year, the Hospital VBP Program takes on greater significance because of the new “facility-based scoring option” under the Merit-Based Incentive Payment System (MIPS). Under this new scoring option, clinicians who meet CMS’ definition of “facility-based” may qualify to automatically receive a MIPS quality and cost score based on their facility’s Hospital VBP Program Total Performance Score. This new scoring mechanism was first applied to MIPS performance scores in 2019, which affects 2021 Medicare payments. CMS will initially rely on FY 2020 Hospital VBP Program scores, which were released in the fall. In the meantime, facility-based clinicians can access informational-only MIPS preview data based on FY 2019 Hospital VBP Program performance.

PCHQR Program

The PPS-exempt Cancer Hospital Quality Reporting (PCHQR) Program began in 2014 as a pay-for-reporting program for cancer hospitals. In the 2020 final rule, CMS finalized the removal of one measure and added a new measure to the PCHQR measure set for the FY 2022 program year. In 2016, CMS adopted the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey into the PCHQR Program measure set and began publicly reporting the measure. To align with the agency’s efforts to reduce adverse events and patient harm related to opioid misuse, CMS finalized the removal of three pain management questions in the HCAHPS survey used for the PCHQR Program. Similar questions were removed from HCAHPS in both the Hospital IQR and Hospital VBP Programs in previous years.

The College supported the removal of these questions until evidence emerges to inform their effect on the prevention of opioid misuse. The College highlighted that cancer patients may require unique pain management therapies, and, therefore, frequent communication between patients and their physicians is critical. To support continued communication and assist physicians in managing pain in these patient populations, the College urged CMS to rethink the HCAHPS surveys and move beyond an era of long retrospective surveys to one of patient-reported outcome (PRO) measures. The ACS envisions a process that distributes fewer questions more frequently to patients on easily accessible platforms (such as smartphones) to actively engage patients as they move through each phase of their health care journey.

CMS also finalized the adoption of a new measure in the PCHQR Program, Surgical Treatment of Complications for Localized Prostate Cancer. The measure aims to identify urinary incontinence and erectile dysfunction among patients undergoing localized prostate cancer surgery.

The ACS opposed the adoption of this measure and agreed with the Measure Application Partnership’s (MAP’s) recommendations to delay the use of this measure until it is revised and tested. The ACS also agreed with the MAP’s comments that this outcome could be measured best as a PRO that allows patients to identify their symptoms following the procedure. The ACS will continue to track the implementation and progress of this measure going forward.

EHRs and interoperability

CMS aims to reduce reporting burden by aligning measures across programs, thereby limiting the number of separate hospital reporting programs.

PI Program

The Promoting Interoperability (PI) Program is designed to encourage and reward the use of Certified Electronic Health Record Technology for data exchange and to increase patient engagement. The PI Program has four broad objectives, each containing a measure set: public health and clinical data exchange, electronic prescribing, health information exchange, and provider to patient exchange. For the CY 2020 PI Program, CMS continues to make adjustments to achieve the following goals: stabilize the program, align it with the PI category in the Quality Payment Program, continue to broadly advance interoperability, reduce administrative burden, and improve the accessibility of electronic health record (EHR) data to patients.

Electronic Prescribing Objective

The Electronic Prescribing Objective is the only objective that had finalized changes in the PI Program. The Electronic Prescribing Objective is meant to promote the use of writing and sending allowable prescriptions electronically. This objective contains three measures: e-prescribing, query of the Prescription Drug Monitoring Program (PDMP), and verify opioid treatment agreement. As part of the electronic prescribing objective for the PI Program in 2019, CMS included two opioid measures: query of the PDMP and verify opioid treatment agreement. Both measures were optional in 2019, and query of the PDMP was to be required in 2020. However, for 2020, CMS finalized the following changes:

  • Query of PDMP measure: CMS is not requiring this measure for CY 2020. Instead, it will remain optional in CY 2020 and eligible for five bonus points.
  • Verify opioid treatment agreement measure: CMS is removing this measure in CY 2020 because of feedback from stakeholders on the challenges with documentation that prevent adequate reporting on this measure.

The ACS advocated for these changes because both measures are challenging to report and would require additional documentation and use of an additional external system outside of the EHR, creating increased surgeon administrative burden. The College further suggested that CMS delay creating and requiring any measures that involve PDMPs until PDMPs and EHRs are more integrated to avoid additional reporting burden on surgeons.

Proposed clinical quality measures for 2021

To align the PI Program with the Hospital IQR Program requirements, CMS adopted the Safe Use of Opioids–Concurrent Prescribing measure as part of the PI measure set beginning in CY 2021. For reasons outlined previously, the College supported this addition.

The ACS opposed the inclusion of another opioid-related eCQM, Hospital Harm–Opioid Related Adverse Events, which CMS chose not to finalize for the FY 2021 reporting period. As discussed previously, the College opposed the inclusion of this measure. Based on the ACS’ and other stakeholders’ feedback, CMS will not include this measure in the PI measure set.

Requests for information

The College advocated that positive incentives (not penalties) or simple attestations are productive ways to incentivize early adoption of technology.

CMS included multiple RFIs within the IPPS proposed rule to collect feedback on ways to encourage the adoption of advanced HIT and updated standards for data exchange, without increasing physician burden. The ACS encouraged CMS to work with other regulatory bodies, such as the Office of the National Coordinator (ONC), to ensure that technology standards are consistent across programs in order to reduce regulatory burden and better allow for information exchange across technology platforms and vendors. The College also recommended that government agencies work together to update patient privacy protections, particularly because standards for data exchange will increase the flow and reach of health information in order to improve patient matching, create a more complete and accurate health record, and better protect surgical patient information.

The College advocated that positive incentives (not penalties) or simple attestations are productive ways to incentivize early adoption of technology. This will give hospitals and practices time to test and choose technologies that are most appropriate for their workflows in order to improve quality of care and reduce administrative burden. Examples of surgery-specific technological enhancements that could be incentivized include surgical risk calculation within EHRs, electronic workflow integration of the Enhanced Recovery After Surgery protocols, telehealth, and other digital care service options, such as making the prior authorization process electronic. The ACS will continue to monitor CMS’ activity, and will remain actively engaged in advancing HIT and eager to work in partnership with CMS and the ONC.