On-Demand Webinar: “FY 2027 Medicare Final Rules: Inpatient, SNF, Rehab, Psych, and Hospice Updates”

This transcript was generated with AI and may contain errors or omissions. Please refer to the webinar recording for the most accurate version.

PYA Moderator [00:02]: Good morning, everyone. Welcome today’s episode of PYA’s Healthcare Regulatory Roundup webinar series. Today’s topic is fiscal year 2027 Medicare final rules, inpatient, skilled nursing facility, rehab, psych, and hospice updates. PYA is happy to present today’s webinar on this important topic. You may submit questions during the webinar by typing a message into the Q&A pane. Also, immediately following the end of the webinar, you’ll be asked to complete a short survey and submit any additional comments. Any questions posed during the webinar will be responded to via email after the webinar, you can customize your viewing experience by resizing, moving, or minimizing all of the panes within the webinar.net platform. We’ve posted a PDF copy of the presentation slides for your reference in the resources pane. You’ll also receive an email later today with a link to a copy of the slides and a recording of the webinar. With that, I would like to introduce our presenters, Carine Leslie and Kathy Reep.

Kathy Reep [01:09]: Thanks, Jennifer, and I’m glad to present today again with Carine. It’s amazing to me that we actually got all of the fiscal year 2027 rolls out at the same time, so that we can cover all of this today. I think it’s a lot of material that we’re going to go through, but please don’t hesitate if you have questions to put them in the question pane, and we will respond to them as quickly as we can. But let’s get started with the agenda. You can see that we’re looking at the inpatient rule, long-term acute care, skilled nursing, inpatient psychiatric, inpatient rehabilitation, and hospice. Recognize, please, that all of these final rules are effective October one. These are all tied to the federal fiscal year, so we are looking at an October one effective date, unless there is a particular provision within a rule that they are delaying, let’s say until January one, but for the most part, all of the information we’re sharing today is effective for discharges on or after October one. So let’s begin. Inpatient is probably the one system that impacts the majority of you, so we’re going to start there with the changes that have been finalized. I’m sure many of you joined us for the proposed rule, so we’ll kind of talk about where some of these things that they have finalized vary from what was actually proposed, and this a concern. The first item is they had proposed a 2.4 percent increase in the payment rate or the market basket for both inpatient operating and capital. They settled at 2.3. This was because of a moderate change in the productivity adjustment. The issue that causes me to be concerned about this that they have also proposed a 2.4 percent increase for inpatient and for outpatient prospective payment. Will they wind up at 2.3 under that program as well, so it is something to be concerned if you’re working on budgeting and wondering what will be the adjustment for 2027 from an outpatient perspective. They did settle at 2.3 for inpatient. There is no change in the labor-related share, that portion of your base rate that is adjusted by your area wage index. Those with a wage index greater than one, 66% of your rate will be adjusted by labor, and as mandated federally, 62% will be adjusted for those with a wage index equal to or less than one. The capital payment is going to go up slightly, going up to $540. It’s currently at 524. They had proposed a slightly higher amount, but $540 will be the capital payment rate. The outlier threshold is going to increase by over $9,000, or right at $9,000. They had proposed an $11,000 increase, so we are actually a little bit better off than proposed, but very concerned about that increase of $9,000 and the outlier threshold. It will make it much more difficult for high-cost cases to actually qualify for an additional payment as an outlier. We’re going to see about a $230 million increase in uncompensated care payments going up from the. Seven 771 billion to seven $7.9 billion, so a slight increase there, and it they had actually proposed a decrease, so that is a positive adjustment for providers. By the time we go through all of the areas that we’re going to discuss today, outliers changes to DRGs etc. The overall impact on all hospitals about the across the country is about a 1.7 percent change in their actual reimbursement rate. So recognize there will be those that are higher, those that are lower, but it is not that 2.3 that we typically see promoted. This slide gives you an idea as to the actual payment rates for those hospitals that do submit their their quality information and are meaningful users of electronic health records, and it also shows those that are not meaningful users and do not submit their quality data. The difference between the two the 222 items is the table one A is for those who are receiving a labor adjustment of 66 percent, the one on the bottom is your 62 percent adjustment for labor. So that the one on the bottom would be the one that applies to those hospitals with a wage index equal to or less than one.

Kathy Reep [06:39]: One area that CMS touched on very briefly in the rule, but is something that I think we need to make sure that everyone is aware of, and I guess the issue is what happens in Congress between now and the end of the year. I think that’s the issue for a lot of things that are going on in healthcare, but of a concern is low-volume hospitals and Medicare-dependent hospitals. So let’s start with low-volume hospitals. Essentially, as of October 120, 26, low-volume hospitals, those that are currently designated at low volume, will continue to qualify for the increased payment if they have fewer than 3,800 discharges and are located more than 15 road miles from another subsection D hospital. That will be October, November, December. Absent action on the part of Congress, then the qualification changes for low-volume hospitals, and we would only be looking at those hospitals with fewer than 200 discharges, and that are located more than 25 road miles from another subsection D hospital. Subsection D hospital is going to be an acute hospital paid under the inpatient prospective payment system. So three months, end of this year, there will be an increase of 25% for the payment adjustment for low-volume hospitals. What we look at beginning January one of 27 again absent Congress acting, is whether or not we, those hospitals that are qualifying based upon 3800 discharges and 15 road road miles would still qualify for low volume payment adjustment. So we’ve got to monitor what Congress does on that particular issue. At the same time, the Medicare-dependent hospital program will expire december 31 of this year, unless Congress takes action to continue the program. If the program does expire, then Medicare-dependent hospitals will receive strictly the inpatient payment rate, no additional payment rates dollars for those hospitals. So, very important that we monitor what’s going on in Congress, both for low-volume hospitals and Medicare-dependent hospitals, to keep those programs going.

Carine Leslie [09:18]: All right, thanks, Kathy. MS-DRG changes. So, in the final rule, there are some shifts, changes, and revisions to some of the DRG categories. Essentially, CMS has indicated to delete about 18 MS-DRGs related to various categories. So, cardiac cardiac pacemaker revisions, replacement joint procedures, and then diseases of the female reproductive system. Some of the ones that were added, there are approximately 14 DRGs that are added. We’ve listed a few of them here. Most of them are related to just the complexity of services and you know discussions within. Certain specialty organizations and how they are treating patients. So there have been three DRGs added for extensive or complex spinal fusions. So those are essentially fusion procedures or spinal fusion procedures that involve eight or more vertebrae within the thoracic area. And so the purpose of that was to reassign basically some of the spinal fusion procedures that are in other DRGs to a category that seems more appropriate for what is actually happening and what’s being performed by the providers. Two new DRGs, 403 and 404, for hip and knee replacements have been added when there’s a joint infection, and those are ones that either include an MCC or don’t include an MCC. And then there’s been some some revisions to the cardiac pacemaker, where they’ve added two DRGs, 210 and 211, for cardiac pacemaker revisions or device replacements to be able to appropriately capture those procedures when they are performed. In 2026, the 2026 fiscal year, we had 770 MS-DRGs effective October 1st. There will be a total of 768 DRGs. So there’s a slight decrease, but some of the services have been moved and recategorized to a DRG that seems more appropriate for the intensity intensity of service that’s being provided. Another change that has occurred is that CMS has made the decision that for IC 10 code z5 9.00 to z5 9.819 for homelessness, inadequate housing, or housing instability. That code will no longer be categorized as a complication or comorbidity, and so it will not impact the DRG or impact reimbursement for fiscal year 2027. Essentially, what has been determined is that the this particular ICD-10 code represents more of a social circumstance rather than a medical condition, and the purpose of CCs and MCCs is how it impacts the severity of the care that’s being provided to the patient within the hospital. So, while it will continue to be important to capture patients’ social determinants of health, and it just know that it will no longer impact reimbursement in 2027.

Kathy Reep [12:24]: So, Carine, quick question: From your HIM background and your experience there, you do believe that hospitals should continue to code for those social determinants.

Carine Leslie [12:37]: I do think they should, just because it does impact. While it doesn’t impact necessarily what’s happening with the patient within the hospital, but it helps kind of guide what’s happening in the in the kind of community and what’s occurring out there in the community. So you want to make sure that you’re capturing it to say this patient is homeless or they have inadequate housing or instability of housing. While it may not impact the hospital’s DRG reimbursement. There are some considerations for physicians as well, so making sure that they are documenting it for their perspective as well,

Kathy Reep [13:09]: and could also come into play for the community needs assessment.

Carine Leslie [13:13]: Yep, you make a good point about that. Yep.

Kathy Reep [13:16]: Thanks for the interruption, or thanks for letting me interrupt.

Carine Leslie [13:22]: New technology add-on payments. So, some adjustments here. CMS has essentially made the decision to approve 19 new add-on payment technology applications for fiscal year 2027. If you’re, if you remember, there are two kind of pathways to approval. There’s the traditional, and then there’s the alternative. Of the 19 new technologies, three of them are being kind of pushed through through the traditional pathway, and 16 of them are under the alternative pathway, which includes various components and pieces. CMS is providing somewhat of a two-year extension for the alternative pathway, but their ultimate goal is to get rid of that pathway and have one way for a new technology to receive an add-on payment. So essentially, effective, I believe it’s 20 fiscal year 2028. All of the eligibility for new technology add-on payments will go through the one traditional path pathway, CMS has finalized to continue add-on payments for 41 technologies, but they will discontinue add-on payments for 13 technologies because those 13 technologies, as of april 1 of 2027, will have basically met their three-year anniversary, and so that therefore they fall off that new technology add-on payment cycle.

Kathy Reep [14:50]: And yes, it’s still coming. The mandatory comprehensive care for joint replacement model CJRX is coming to a hospital near you. The good news is that they have proposed, they have finalized a effective date of January one of 2028, as opposed to the October one of 2027 as the effective date for this new rule or this new program, as we’ve talked about in the past, under the mandatory model, the hospital is going to be required to take financial accountability for hip, knee, and ankle replacement procedures. These are we’ll talk about the DRGs and the APCs momentarily, but as as opposed to the TEAM model, the Transforming Episode Accountability Model under CJRX hospitals are going to be responsible for a 90 day episode of care. The episode begins when the patient is either admitted for inpatient services or when the patient comes in for their outpatient service, and then it will continue for 90 days, and it will include all Part A and Part B costs during that time period. A little bit more about that momentarily. One issue that I wanted to make clear is that this applies to original Medicare beneficiaries only. It does not apply to Medicare Advantage, so recognize we are looking at only your MA population for exclusions. First of all, we’re only looking at hospitals that are paid under the inpatient prospective payment system and the outpatient prospective payment system, so it does not apply to critical access hospitals. Those hospitals that are in the team model, because that program expires in 2031, you would be you would then become enrolled or a part of the CJRX model, because it does become mandatory. You have a little bit of a leeway here. Hospitals in Maryland, because of the payment methodology in Maryland, they are exempt from this. And the issue of hospitals with fewer than 31 lower extremity joint replacement episodes in the baseline period-it’s not that you are per se excluded from this, and you can just let it go. But you are treated as a low volume hospital under this program, different than the low volume hospital that we talked about earlier. But you are treated as a low volume hospital, and therefore will be subject to a regional benchmark rather than a hospital specific benchmark to meet that benchmark for reducing costs, and if you do not exceed 31 episodes during a particular year during this program, then you would be excluded from reconciliation. So recognize you’re still a part of it. You still need to look at your operations. You still need to look at your programs and the way you relate to post acute care providers and your physicians. But it’s going to be back and forth in terms of whether or not you are going to actually receive a payment adjustment under this program. As I mentioned, it does apply to both inpatient and outpatient services. We have four DRGs that are impacted by this program and two outpatient services. So again, this CMS has this ability. I can see them at some point deciding to add additional services to this program, but right now we are looking only at the services that are listed. There are quality measures that are associated with CJRX. They are listed on the slide, and I think the thing that is most important to say as far as quality goes with CJRX is you could reduce costs significantly, but if you are not meeting the quality components, then you are not going to receive any positive reimbursement from the program. You’re not going to benefit from those cost savings if you have not met the quality requirements. So it is very important that you monitor your compliance with the quality measures and that you are reporting this information. Essentially, when we look at how the program operates, they’re going to be looking at three years of baseline data runs through September of this year. So shortly after, or I hope it’s shortly for your benefit. After the after September of this year, you will be getting reports from CMS providing you information on your prior costs for these services. It will be your specific information. You will also receive information. Related to your target prices, and looking at will give you the way a way to look at your actual spending compared to the target for your geographic area. CMS will essentially off the top discount payments.

Kathy Reep [20:17]: Not it doesn’t impact your actual payment on a claim, but will assume that you are going to be able to save at least 2% of the current reimbursement for those services. So recognize that comes off the top when we go in and we actually go in and look at target prices and actual costs. They will benchmark your prices at the individual service level, whether it be the DRG or the APC, and that you will be looking to meet or exceed the target price for each of those services. They are going forward with what they’re calling a 20% stop loss stop gain for the majority of providers. So the maximum that you can gain from this program is 20% The maximum that you can lose is 20% However, if you are a safety net hospital, a rural hospital, Medicare-dependent, or sole community, then your stop loss stop gain is limited to 5% so that is something very important to look at if you are do qualify in as either safety net rural Medicare-dependent, assuming that program continues, or sole community. But then also recognize that there are some hospitals across the country who perhaps could qualify, let’s say as sole community, if you you know take a look at the rules associated with that, and that could impact you in terms of that stop loss, stop gain, and actually make this program a little bit more palatable to you. Let’s talk quality, Carine.

Carine Leslie [22:03]: Alrighty. So, hospital inpatient quality reporting program. So, CMS has made a few changes for 2027. So, in regards to quality of care with patients, they’ve added three new quality measures. One for patients that have a principal diagnosis of diabetes, and they are readmitted essentially within 30 days. The second is the hospital harm post-op venous thromboembolism ECQM, and then advanced care planning. So I’ll kind of talk through some of these because as I kind of review the comments, there’s you know some concerns and considerations of overlapping. How is it going to impact operationally? So, if you start with diabetes, one of the main concerns that was identified in the comments and essentially, you know, CMS’s response is how do you manage a patient that leaves your hospital? They admitted for diabetes, they leave, they go out into the community, but they don’t follow the requirements. And so, there were concerns about you know follow up care and making sure the patient is you know taking their medication and the expectation from an operational perspective is that’s where that case management team gets involved. That case management team is operationally meeting with the patient at discharge, doing the discharge planning, reviewing medications, even going to the point of scheduling their follow-up appointments to make sure that they are following kind of the guidance and not being readmitted within 30 days, and so those are some of the recommendations or responses that were found in the in the final rule for that specific quality measure in regards to the post-op venous thromboembolism one. It’s a risk-adjusted outcome measure that’s basically assessing patients that have had at least one surgical procedure that’s performed inside of the operating room during an admission, and then they basically suffer a postoperative VTE within 30 days of the hospitalization, and the key point to that is that it’s from the that first surgical procedure. It’s not necessarily from the time that the patient is discharged. So the 30 day clock basically starts from that first surgical procedure. It is essentially taking it over to other measures that are planned to be deleted that I’ll cover on the next slide, but one of the things that came up that I thought was very interesting is we’re all kind of familiar and have been in the world of you know PSI four and PSI 12 for quality measures and related to that, and there’s this there’s this consideration that this hospital harm measure may overlap with PSI 12, which is for pulmonary embolisms, and so the difference is that PSI 12 is solely for Medicare, where this hospital harm post-op VTE is actually for all patients. What you’ll kind of see in a theme is that in the quality measures for all of the programs, Medicare is not. Longer making a distinction or differentiation of saying this just for Medicare, they’re including Medicare Advantage patients in that. But in regards to the post-op VTE, the thought and hope is that sometime in the future, the PSI 12 for pulmonary embolism will no longer exist, and it’ll be focused on this this specific quality reporting measure, the advance care planning eCQM, which will essentially become effect begin impacting payment determinations in fiscal year 2030, is basically measuring when patients are having that conversation and discussion with their providers about their advance care planning. the The the thought is that is more data that’s being captured and making sure that information is being passed along for the patient to ensure that their advance care planning, what they are looking for in their healthcare, how they want to kind of be cared for while they’re in the hospital or afterwards, is being captured. CMS has finalized the five the 530 day mortalities for acute myocardial infarction, heart failure, pneumonia, COPD, and CABG. They have essentially pulled it into the hospital IQR program for fiscal year 2028 payment determination, and then they will essentially transition them in the future to the value-based purchasing. If you recall, like I stated earlier, these five mortality measures were solely focused on Medicare fee-for-service beneficiaries. With the adoption of that and the increase of Medicare Advantage, the Medicare Advantage population, these measures are now going to start including Medicare Advantage and traditional fee-for-service Medicare patients in that calculation and impacting that measure.

Carine Leslie [26:51]: Medicare is also shortening the performance period in reporting these from three years to two years, and hoping that it improves the risk adjustment and using ICD-10 level data to be able to capture that information. the The thought and theory is that because all of this data is based on the ICD-10 codes that are being built out on the claims for the hospitals, that there should not be any additional burden to an organization in regards to reporting those quality measures back. As I stated before, CMS is removing three quality measures: the VTE one, VTE two, and STK-02. So the first two are related to venous thromboembolism. the The thought is that organizations have become very familiar with that, and they’ve become stable, and they’re less about the the quality of care that’s being provided either during the stay or post stay, and so they felt like it was it was time to remove those and kind of move on from there. Excuse me. There’s modifications being made to three measures for the excess days in acute care by expanding the exclusion criteria again to include Medicare Advantage patients, and then shortening the time period for the reporting period for the calculation of the payment determinations from three years to two years, and then finally, or two final components: the malnutrition care score, which was initially adopted in the 2023 IPPS final rule, and hospitals were basically self-selecting to report beginning calendar year of 2024. It has now become a mandatory reporting requirement beginning for fiscal year 2030 for payment determination purposes, and then in regards to the hospital hospital harm eCQMs, while they have not any of the eCQMs that have not been finalized for mandatory reporting will become required for reporting in year three, so currently there are there are five eCQMs or hospital harm eCQMs that have mandatory reporting, and essentially from 2028 onward, there’s going to be an added one that will be reported that will be required or mandatory. So for 2028 calendar year, there will be six, and then seven for 29, and then eight for 2030. So the hospital readmission reduction program, there is a payment reduction that’s up to 3% to hospitals on their performance on six procedure-specific readmission measures. Medicare is adding the sepsis hospitalization measure starting for fiscal year 2030. Originally in the proposed rule, they had considered fiscal year 2029, but decided to push that back. I will. Note that if you have been in the industry long enough, there have been various sepsis guidelines, and essentially there’s there’s two floating out there. So there’s sepsis two criteria and sepsis three criteria, and those were some of the concerns from some of the commenters. Are could we wait to stabilize or get to a consistent guideline that’s being utilized amongst all organizations to be able to make sure that the reporting of data is consistent across every hospital system. CMS does not feel that is necessary to hold on determining a consistent sepsis guideline before the implementation of this measure, and so they’ve essentially finalized to be able to include it in that, and again, it’s including both Medicare Advantage and Medicare, the Medicare population as well. Last but not least is the Hospital Acquired Condition Reduction Program. There are no changes to the program as far as the requirements or the diagnoses that will be considered hospital-acquired conditions, there are just for from a knowledge perspective, there are approximately 25% of the hospitals that are in considered to be in the worst-performing quartile, as calculated by CMS. Those hospitals in the worst-performing quartile will now receive a 1% reduction for any HAC conditions that fall into that measure.

Kathy Reep [31:30]: Thanks. A couple other things on the inpatient final rule before we move on to the other rules. But one of the issues that they had discussed in the proposed rule related to provider-based status. I know there is a lot of provider-based status regulation coming in the outpatient rule, but this was a particular provision that CMS had proposed, and they are actually finalizing in order to determine whether or not an area or a facility qualifies for provider-based. They have historically used a definition of it’s in the immediate vicinity of the main provider. They have defined immediate vicinity as within 35 miles, but if you were not within 35 miles, they had two opportunities for both inpatient and outpatient facilities to qualify as provider-based. If you didn’t meet the 35-mile test, you could qualify as provider-based if 75% of your patients resided in the same zip code as at least 75% of the patients at the main provider, that was the zip code overlap test, and then the other option was 75% of the patients who required services that were furnished by the main provider received them from the main provider. So the majority of patients who were at a particular outpatient clinic did receive when they needed to have an inpatient admission, they went to that main provider. What CMS has now finalized both of those were applicable on both the inpatient and the outpatient perspective. In addition, if that was if you didn’t qualify for the 35 mile test, then you could use either of those two to qualify. What they are doing is that they will be limiting both options to outpatient departments only, and from an inpatient perspective, you would have you would have to qualify under that number one, the zip code overlap test. You would no longer be able to qualify for provider-based status based upon a referral type test. So it is something to look at. CMS questions if they have actually even had any inpatient facilities that they have that have actually qualified based upon the referral-based test, but it is something to look at those new rules as you move forward. And finally, under the inpatient final rule, they did look at team, of course, because this where we’re going to be monitoring rules and regs related to the Transforming Episode Accountability Model, and what they have done here is they have expanded the spinal fusion episodes by including three new MS-DRGs. They are looking at the refinement of attribution methodologies. Essentially, what they have done here, and I guess it ties to we’ve got team. We got CJRX. What happens if a team patient goes to a CJRX patient facility? In that case, the attribution stays with the team hospital. What happens if a CJRX patient goes to a team hospital the other way around? Then what you’re going to wind up is that the attribution goes to the CJRX facility. So it is who started the process is who is going to receive the scoring for that particular patient and the costs associated with that patient’s care. They are aligning the quality measures under team with the other CMS programs, and then they are going to make sure that the target pricing that is established each year keeps up with the annual increases or adjustments to both the inpatient and the outpatient prospective payment systems. So also, whenever they publish the inpatient rules, we get long-term acute care. These are hospitals that have an extremely lengthy length of stay, average length of stay of at least 27 days, if I remember correctly. And so the final rule there essentially they kept with the same update as the inpatient prospective payment system a 2.3 percent update to the rates. There is no change in the outlier threshold. It is $78,000. You can see based upon the table on the slide that those hospitals that do not participate in LTAC quality reporting. There is a 2% reduction in their rate, so you have the full update being 2.3 versus only a point 3% update for those hospitals that do not submit quality information under the LTAC program. And what is that quality information?

Carine Leslie [36:42]: Thanks, Kathy. So CMS has made the decision to remove two of the measures related to COVID just because they no longer align with some of the current clinical environments. So they’ve made that decision. There are the biggest change that I have seen, and I think this will be a consistent pattern amongst some of the other quality reporting programs for some of the other prospective payment systems, is that for long-term acute care, what CMS essentially has requested is that long-term acute care assessment data and the CDC National Healthcare Safety and Network data is now being requested to be submitted sooner than it previously has been, and so essentially, the what is being what has been finalized is that on the 15th day of the second month after the end of the calendar quarter, all of the data will need to be submitted, and that will be effective for fiscal year 2029. So, if you think about operationally, you had four and a half months, basically from the end of that quarter to submit the data. You now have 45 days, and so it’s kind of time to consider operationally: is that a reason? Is that feasible with your current staffing structure, can you submit that information as you need to, or do you need to start kind of planning for the future for that time frame to be to be reachable and not receive any penalties for that noncompliance component?

Kathy Reep [38:16]: Great point. Keep them coming. We get skilled. We’ve got the skilled nursing facility final rule as well. Again, effective October one. So, just a couple of things on the skilled nursing rule. Skilled nursing is a 2.4% update. They had proposed 3.2. So, but they did finalize a 2.4 percent increase in the payment rate for skilled nursing facilities. This based upon a market basket increase of 3.3 percent less 0.9 productivity adjustment. The thing that is missing from this calculation this year is the forecast error adjustment because CMS has a threshold of 05, and that if the forecast error is greater than 05, then they will do a further adjustment, either positive or negative, to the payment rate. What happened is in this year is that the adjustment would have been only point two. Therefore, CMS is not making a forecast error. The thing that’s important to think about if you have inpatient rehabilitation, if you have inpatient psychiatric, if you are an inpatient prospective payment system facility, skilled nursing is the only program that has a forecast error. In other words, if I was wrong about what I forecasted last year in terms of the increase or the adjustment to the rates that was needed, there is that forecast. Error that can be made to the rates the following year. Only system that has it. It was the last system prospective payment system that was implemented, but recognize that this something that it would be great for providers to work with their legislators to actually include that forecast error adjustment in all the programs if the update that was scheduled for 2026 did not and was expected to be was not in line with what the actual costs of care were, it would then be very appropriate to add that forecast here. The labor-related share is going up to, I guess I would say it’s almost rounding itself off, but it does make a difference for those skilled nursing facilities with a wage index less than one and greater than one, because there will be a little bit more of your payment rate adjusted for labor. One of the provisions or discussions that was included in the skilled nursing final rule was this thing that they’re calling case mix creep. We’ve heard that term before. We heard it a lot under the inpatient rule many years ago, but CMS is very concerned that there are significant increases in coding for malnutrition, swallowing disorders, and depression, and they are saying we’re not going to make any adjustments to the PDPM right now, but we are concerned. We want to continue tracking the providers who have had a significant increase in the coding for these particular conditions, and consider payment adjustments in the future. It does show you that CMS is looking at the coding patterns, so it is something that no matter what program you’re in, I do think you need to recognize here that CMS is definitely moving forward with looking at what is causing changes to these various programs that have been operationalized for a number of years.

Carine Leslie [42:11]: Alrighty, quality reporting. I think what you’ll see is a theme of CMS is trying to get the information out to the community, out to the consumers quicker than they previously have been able to. So the main thing to note is that starting with fiscal year 2029, the skilled nursing skilled nursing facility quality reporting CMS has shortened the submission time frame from four and a half months after the end of the quarter to no later than the 15th day on the second month, so essentially a month and a half. So more than more than half of the time has been removed for that reporting piece. The goal of the change was one again to be able to provide that information to the community so that they can make the decisions they need to make about family members in regards to skilled nursing facilities, and then ensuring that you know families have current performance data on the facilities that their family members or individuals that they know may be at. The interesting thing that I saw in some of the commentary was that it was determined by CMS that 95% of the Minimum Data Set information is actually already being submitted within 45 days, and so again, it is perception and perspective from CMS, and maybe different for your organization. But CMS is not anticipating that shortening that time frame will increase a burden to organization. So it’s another thing to evaluate and make sure one that you’re able to meet that compliance requirement of that 45 days, but two identifying how you need to adjust operationally to make sure that you are in compliance. The Minimum Data Set submission again. CMS is looking to expand beyond traditional Medicare. And sorry, did you have something to say, Kathy? Okay. And so instead of having MDS data submitted for a small subset of individuals. CMS has finalized the requirement for MDS data to be submitted for all skilled nursing facility patients effective for fiscal year 2031, regardless of their payer. So, if they have a commercial payer or a different private payer, that the MDS data would need to be submitted, and that’s going to apply effective october 1 of 2029.

Kathy Reep [44:51]: Talk about burden on that one, but never mind. We’re going to keep going. Let’s do inpatient psychiatric. This also effective October. One, we are just like with the inpatient rule. We are looking at a 2.3% increase in the payment rate. This compared to the increase last year, which was two four. Again, using the same information, three 2% increase in the market basket, less productivity. The federal per diem rate is now going to go up to about $912. It’s currently 893, so that is a jump in that payment rate. If you are a provider who is not submitting the quality reporting, not the required quality reporting, your payment rate would be reduced by two percentage points, and for electroconvulsive therapy, your payment rate is going to go up a little bit from $674 to 689. So a slight increase in all around for the services provided under that Program, however, the current labor-related share. This also it could be a positive for those hospitals with a. This would be would be a positive for those hospitals with a wage index greater than one. It could be an issue for those with a wage index less than one, because they are going to increase the labor-related share from the current 79% or decrease from the current 79% to 78.9% They had proposed a slight increase in the labor-related share. They’re going to wind up with a slight decrease, so recognize that this could have an issue in terms of calculating your actual reimbursement moving forward. Rural inpatient psychiatriciatric facilities will continue to get an add-on of 18% to the federal per diem rate, so that is a positive there. From a cost outlier perspective, when we the idea of the cost outliers and CMS emphasized in this rule that cost outliers were intended to limit the financial risk of unusually costly patients, but CMS also had identified that a large number of providers or a number of providers were receiving the vast majority of the outlier payments. They had a large number of patients who qualified for outliers, so they are proposing or they finalize to increase the outlier threshold from 39 360 to 40,007 50. They had proposed a decrease, but at the same time that they are increasing the threshold, they are implementing a facility level outlier cap. This will be effective October 1 of 2027. What they are going, what they are saying is an individual hospital’s outlier payments can’t exceed 20% of their total annual inpatient psychiatric payments, and if you do exceed the cap, once you hit that cap, you’re not going to get any more outlier payments. You will continue to be paid for the services rendered, but no additional outlier payments. If you have fewer than 50 stays annually, then this pro this outlier cap won’t apply to you. But if you do have more than 50 50 or more stays, then recognize that you are subject to this cap, so that only 20% of your total payments can actually be based upon outliers.

Carine Leslie [48:51]: Alrighty, standardized inpatient psychiatric facility patient assessment instrument. So CMS has finalized the use of the IPF Patient Assessment Instrument. If you recall, there are essentially five statutory categories that need to be captured. So everything from functional status to cognitive function, mental status, special services, treatments, and interventions, and then medical conditions and comorbidities and impairments such as hearing need to be submitted, and it has been determined that it will be required for all patients age 18 and over, and should be administered at at admission and discharge. In the proposed rule, what was being considered essentially was that 100% of the data points in this assessment instrument would need to be submitted for at least 80% of the patients in the population within that admission population. CMS has kind of rolled that back and are looking to do a phased in approach and added some caveats related to that. So one of the caveats related to that is for. Patients that have a length of stay that’s less than three calendar days, that initial assessment that is completed at admission would be able to count as the admission and discharge assessment, assuming that the discharge components are also completed at the end. So the organization would not have to complete one on day one and then turn around and complete a second one on day three if that length of stay is less than three calendar days. The other caveat or component to that is that they’re taking a phase in approach from a compliance perspective, and so CMS will require completion of 100% of the items for at least 50% of the submissions for q3 and q4 of calendar year 2028, and then and then for calendar year 2029, they will increase that kind of percentage compliance to 70% on onward and be able to give organizations an opportunity to adjust, mainly because there there’s there are two methods for submission. CMS has want their first option is they have created a free web application called the Parent Assessment Reporting Interoperability Tool or PARIT tool that you can utilize to submit this data and information to CMS on a quarterly basis, the other option is an application that interfaces using HL7, and so organizations will have an option, but they’re allowing kind of a phase and approach related to that. In regards to quality reporting, the thing, the main thing to note here is that CMS has proposed to remove two measures because they essentially do not seem to be a great benefit for continuing to capture within the organizations, and so they’ve decided to remove the alcohol and other drug use treatment provided or or offered at discharge quality measure, and then the tobacco use treatment provided or offered at discharge quality measure.

Kathy Reep [52:07]: Thanks, Carine. Two more systems to go. Let’s take a look at inpatient rehabilitation and what they’re doing there. From a payment perspective, just like with the others, a 2.3% increase in the in your base payment amount again last year it was 2.6 so significantly higher. Your base rate is going to increase to 19 866 from the current 819 371. There will be a slight decrease in the labor related share. However, remember that they also had proposed a slight increase in the labor-related share. So it’s important to take a look at the impact of that change in the labor-related share of the base rate and the impact on your hospital. The outlier threshold is going to decrease significantly from 10,001 41 to 8008 57. This will allow more cases to qualify for outlier payments, particularly those that involve medically complex patients, and you will see additional reimbursements for those individuals. By the time we actually go through and do the adjustments that are made related to case mix and a wage index, shockingly, under the inpatient rehabilitation program, we’re going to see an average increase of 2.7% Although the payment rate change is only 2.3, all of the other adjusters that come into play, we’re going to wind up with closer to 2.7% increase in payment rates. CMS keeps looking at both the inpatient psychiatric program and the inpatient rehabilitation program as how can we make changes to this? What should we be doing differently? They are not finalizing any changes, but they did indicate in the final rule that we are looking closely at patient classification, comorbidity, potential refinements to the case mix categories, and totally other payment approaches to paying for inpatient rehabilitation services. So I urge you to stay tuned for future rules and webinars on that. The area that I wanted to really touch on is the issue of the initiation of therapy and the interdisciplinary team meetings, CMS had proposed changes to this. I think they are very significant for inpatient rehabilitation facilities and for facilities that are looking to discharge a patient. Two inpatient rehabilitation. So first of all, there will be a requirement that all therapy treatments, not just one therapy treatment, which was implied in the proposed rule, but all therapy treatments and/or therapy evaluations must begin within 36 hours of admission. So this going to increase the expectations for compliance. You’re going to need to look at this from an issue of weekend staffing, therapy scheduling, your admission processes. I I think it is something very concerning when we’re looking at patients coming in and making sure that we have initiated all therapy within 36 hours. I think Carine, you and I were talking earlier about the impact on the discharging provider who is discharging a patient to inpatient rehabilitation, and what was that?

Carine Leslie [55:58]: Yeah, I think hospitals that are discharging to inpatient rehabilitation facilities need to start thinking about one. If you have that, we had talked about scheduled surgical procedures for you know orthopedic procedures or spinal procedures that are inpatient, and if those are scheduled, how do you schedule them well in advance so that the patients discharge the rehab facility to allow for therapy to start within 36 hours, and then the other consideration is in regards to patients that are discharged on a Friday. Do you have to hold them until Sunday, or hold them at least till late on Saturday to discharge them so that they can get their therapy within 36 hours? Will the rehab facilities not accept admissions on the weekends. So those are some considerations because that may extend the inpatient stay and may impact the medical necessity of those additional those additional days for the patient.

Kathy Reep [56:51]: Could also wind up having an impact on the patient from the perspective of they did not get the intensive therapy that they needed while they were continuing to stay in the inpatient facility, and do they then no longer qualify for three hours of intensive therapy because they haven’t had what they needed? So it is something very important. The interdisciplinary team meetings are also they the initial meeting must occur on or before day four following admission, with the admission day counted as day one, so going to have to make sure that the IDT meetings start promptly after a patient is admitted, and then any subsequent meetings must occur at least weekly. This, I thought, a great little tool that was included in the final rule. That basically looked at the interdisciplinary team meeting and whether or not you were meeting the requirements of this. It actually goes through based upon the day that a patient was admitted. What works? What doesn’t work for actually timing of the program. So this in your slide deck, and I urge you to take a look at it. And quality reporting.

Carine Leslie [58:09]: Okay, I think it’s a repeat theme. I think I’ve become a parent in repeating the time frame that Medicare is going to require for the submission of quality reporting data. Again, they finalize for inpatient rehabilitation quality measures to reduce the time frame from the four and a half months of the end of the quarter to the 45 days, and so they’re they’re just looking to make that information more readily available to the consumer and to families.

Kathy Reep [58:37]: And we’re going to wrap up with hospice, Basically, again, a 2.3% increase, a little bit less than they had proposed, significantly less than what was provided to hospice providers last year. They are basically saying that a large number of hospice providers are not following, or they fail the hospice quality reporting requirements, and therefore they are basically saying that if a hospice submits either no quality data or less than 90% of the required data, that is going to be reported beginning in fiscal year 2028 on the Hospice Care Compare website, you can see on the slide the changes in the payments for the various levels of hospice care. But the hospice cap is also going to go up slightly from the current 35361 to 36 174. That is not patient specific; it is facility specific. So, Carine,

Carine Leslie [59:50]: righty. I’m going to take us on home. So, CMS has finalized the rule, making that the hospice election statement addendum is now a mandatory request. Previously, it was kind of if the patient asked for it, then they would receive that hospice election statement. And so, starting October 1st of 2026, it’ll be required that it is provided to the patient. The key requirements to note here is that the addendum is given to every new patient or their representative upon election of hospice care, it must be provided in writing within five days of the effective date of the hospice election, and so there is a time frame that needs to be considered in that in that moment. It must clearly list any conditions, items, services, or medications that the hospice is going to deem unrelated to that patient’s terminal illness, and so therefore that the patient understands what is and is not covered by Medicare for hospice care. If at any point in time that patient’s determinations were changed, such as their care was changed or was updated at any point in time, then that new hospice election statement addendum must must then be provided within three days of that planned care change, and then one of the I think the big takeaways from it is that there’s a compliance fact factor to that. Fairly basically essentially an organization that fails to properly provide that document can lead to a technical denial of the claim upon an audit, and so it’s really important to make sure that information is being provided and it’s it’s being notated and captured in that sense. A couple provisions just to be able to add from a hospice perspective, and some things that I think will be helpful and beneficial. So CMS has added that the a physician member of the hospice interdisciplinary team can serve as an individual that may certify the patient’s terminal illness. A medical director, the physician, whoever the physician designates, or a mem a physician member of that disciplinary team may review the clinical information as part of that recertification of the terminal illness as needed. In addition to that, to go along with the telehealth extension, they have extended the use of telehealth by a hospice physician or their hospice nurse practitioner to be able to conduct that face-to-face encounter as the requirement for hospice services, and so that has been extended through through december 31 of 2027. And last but not least, in regards to hospice increased focus on program integrity. So CMS had developed a measure that they were calling the Service and Spending Variation Index, or the SSVI, which is basically scoring hospice organizations based on their patients’ relative non-hospice spending in an attempt to identify any risks to potential organizations. They have finalized the requirement to be able to submit that information, and so the scoring system will essentially rank hospice organizations based on specific indicators for any potential inappropriate utilization. They’ll look at quality issues, any compliance risk. The tool is data-driven rather than individual claim submission-driven, and so that all of that information, all of that scoring, will actually get posted to the CMS’s hospice site. And any organizations that receive a score that’s on the higher end will be basically, essentially, subject to additional reviews and assessments for potential program integrity or compliance issues, and so from a reporting perspective and documentation perspective, it’s going to be important to make sure that you’re you’re communicating with the patients and being able to provide them the information that they need. Just because that is being now captured and scored, and essentially rating you as a hospice organization.

Kathy Reep [1:04:05]: Back to Jennifer.

PYA Moderator [1:04:08]: Thanks to our presenters, Kathy and Carine. Please remember to stay on the line once the webinar disconnects to complete the short survey. Later today, you’ll receive an email with a link to their contact information and a recording of the webinar. Also, the slides and recordings for every episode of PYA’s Healthcare Regulatory Roundup series are available in the Thought Leadership section of PYA’s website, pyapc.com. While at our website, you may register for other PYA webinars and learn more about the full range of services offered by PYA. Please remember to stay on the line once the webinar disconnects to complete the short survey and post any additional questions you may have. On behalf of PYA, thank you for joining us. Have a great rest of your day.