2019 IPPS Proposed Rule Part 1: Proposed Payment Changes

on Tuesday, 08 May 2018. All News Items | Documentation | Coding

Creating a Patient-Centered Healthcare System

CMS released the 2019 Inpatient Prospective Payment System (IPPS) Proposed Rule on Tuesday April 24th, 2018. In a related CMS Fact Sheet to the Proposed Rule, CMS notes the policies being proposed “would further advance the agency’s priority of creating a patient-centered healthcare system by achieving greater price transparency, interoperability, and significant burden reduction so that hospitals can operate with better flexibility and patients have what they need to become active healthcare consumers.”

Just as I have come to count on CMS releasing the Proposed Rule in April, MMP will once again walk you through the proposed changes. This week we highlight the proposed payment rate changes in this article and the proposed changes to the admission order requirement in another article. Over the next two weeks be on the look-out for articles about proposed Quality and MS-DRG changes.

Proposed Payment Rate Changes for IPPS Participating Acute Care Hospitals

“By law, CMS is required to update payment rates for IPPS hospitals annually, and to account for changes in the prices of goods and services used by these hospitals in treating Medicare patients, as well as for other factors. This is known as the hospital “market basket.” The IPPS pays hospitals for services provided to Medicare beneficiaries using a national base payment rate, adjusted for a number of factors that affect hospitals’ costs, including the patient’s condition and the cost of hospital labor in the hospital’s geographic area.”


“The proposed increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users is approximately 1.75 percent.” This first table details Payments Rates Finalized for FY 2016 through FY 2018 compared to Proposed Rate 1.75 percent change for FY 2019.

Table 1: Operating Payment Rate Compare: Hospital Inpatient Quality Reporting & Meaningful EHR Users

IPPS Payment Rates Compare: Final Changes for FY 2016 – 2018 vs. Proposed Changes for FY 2019
 FY 2016FY 2017FY 2018FY 2019
Hospitals successful participation in Hospital Inpatient Quality Reporting (IQR) & are Meaningful Electronic Health Record (EHR) users 0.9% increase 0.9% increase 1.6% increase 1.75% increase
Hospitals not successfully participating in the Hospital IQR Program & Do Not submit required Quality Data ¼ Reduction Market Basket Update ¼ Reduction Market Basket Update ¼ Reduction Market Basket Update ¼ Reduction Market Basket Update
Hospitals that are not Meaningful EHR Users ½ Reduction Market Basket Update ¾ Reduction in Market Basket Update ¾ Reduction in Market Basket Update ¾ Reduction in Market Basket Update

This next table details the Market Basket and “other factors” accounted for in their payment rate updates. Keep in mind that this percentage is for Hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) and are Meaningful EHR users.

Table 2: Elements Used to Compute Operating Payment Rates

How CMS computes Acute Care Hospital Operating Payment Rates
 FY 2016FY 2017FY 2018FY 2019
Hospital Market Basket Update 2.4% 2.8% 2.9% 2.8%
Adjustment for multi-factor productivity -0.5% -0.5% -0.4% -0.8%
Adjustment in accordance with the Affordable Care Act -0.2% -0.75% -0.75 -0.75%
Documentation & Coding Recoupment Adjustment required by American Taxpayer Relief Act of 2012 -0.8% -1.5% (+)0.46% (+)0.5%
Proposed Increase to remove adjustment to offset estimated costs of the Two Midnight policy and address its effects in FYs 2014, 2015 & 2016 N/A (+)0.8% -0.6% N/A
Payment Change Total: 0.9% 0.85% (*) 1.6 % 1.75%
(*) CMS 2019 IPPS Proposed Rule Fact Sheet “rounded” 1.61% as 1.6% increase.

“In sum, CMS projects that total Medicare spending on inpatient hospital services, including capital, will increase by about $4 billion in FY 2019” which is a significant increase from their projection of $3.1 billion in FY 2018.

CMS is accepting comments which must be received no later than 5 p.m. EDT on June 25, 2018.


CMS 2019 IPPS Proposed Rule Home Page: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2019-IPPS-Proposed-Rule-Home-Page.html

CMS Fact Sheet Announcing Release of 2019 Proposed Rule: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2018-Fact-sheets-items/2018-04-24.html

Article by Beth Cobb

Beth Cobb, RN, BSN, ACM, CCDS, is the Manager of Clinical Services at Medical Management Plus, Inc.  Beth has over twenty-five years of experience in healthcare including eleven years in Case Management at a large multi-facility health system. 

In her current position, Beth is a principle writer for MMP’s Wednesday@One weekly e-newsletter, an active member of our HIPAA Compliance Committee, MMP’s Education Department Program Director and co-developer of MMP’s proprietary Compliance Risk Assessment (CRA) Tool. You may contact Beth at This email address is being protected from spambots. You need JavaScript enabled to view it..

This material was compiled to share information.  MMP, Inc. is not offering legal advice.  Every reasonable effort has been taken to ensure the information is accurate and useful.

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