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Medicare officially kills 25% rule for long-term care hospitals

(Updated at 8 p.m. ET)

The CMS on Thursday finalized its plan to eliminate the so-called 25% rule that would ding long-term care hospitals' Medicare reimbursement rates.

Under the long-postponed policy, if more than a quarter of a long-term care hospital's patients came from a single acute-care hospital, the long-term care hospital would receive a reduced Medicare reimbursement rate for patients exceeding that threshold.

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The reduced rate would be 50% to 60% less than what they would have received otherwise, according to the National Association of Long Term Hospitals.

The 25% rule was first introduced in the CMS' 2004 inpatient pay rule and has been delayed regularly since by both the CMS and Congress due to industry concerns. It was scheduled to finally kick in on Oct. 1.

Overall, under the changes included in this final rule, the CMS projects that long-term care hospital payments will increase by approximately 0.9%, or $39 million, in fiscal 2019. That's down from the $110 million increase they received last year.

The CMS rule also took a modest step to advance HHS Secretary Alex Azar's announced priority of making it easier for consumers to find out how much medical services and prescription drugs will cost before they receive them.

The agency updated its previous price transparency guideline, drawn from the Affordable Care Act, by requiring hospitals starting Jan. 1, 2019 to publish a list of standard charges in an online, machine-readable format. They must update that charge information, drawn from their retail chargemaster list, at least annually.

The CMS said it's considering future actions based on public comments it received on ways hospitals can display price information that would be most useful to consumers, allowing them to more easily compare providers on price and quality. It will address broader price transparency initiatives in future rulemaking.

While many hospitals already publish charges, some argued in their comments that payers should be the primary source of information for patients about prices and out-of-pocket costs. They also said data on charges and payments from providers are proprietary, and that such information would not be useful to consumers interested in what they will have to pay out of pocket.

But the CMS rejected those arguments, saying nothing justifies a delay in the provision of chargemaster information to the public. It added that the agency will work with stakeholders to determine the best approach to making price-transparency information available to consumers.

Elsewhere in the rule, the CMS is promising more oversight as it changes the way it doles out uncompensated care funds. The agency plans to distribute roughly $8.3 billion in uncompensated care payments for FY 2019, an increase of approximately $1.5 billion from the FY 2018.

Last year, the CMS announced it planned to base uncompensated care reimbursements on data from Schedule S-10 forms, which outline a hospital's uncompensated-care spending. Previously, payment was based mostly on the number of Medicaid, dual-eligible and disabled patients each hospital served.

Hospitals have argued that data on S-10 forms are not an accurate representation of their unpaid care costs and could lead to underpayment.

To address this concern, Medicare contractors will begin to conduct audits of the Worksheet S-10 data this fall, according to the CMS.

That proposal falls short from hospitals' request to hold off on using S-10 data until the agency is certain that the information accurately depicts unpaid care.

"We continue to acknowledge that the Worksheet S-10 data are not perfect, but there are no perfect data sources available to us," the CMS said in the rulemaking.

The agency hopes that increasing uncompensated care funds by $1.5 billion will help mitigate hospitals' losses stemming from the change, especially if they serve many Medicaid and SSI patients.

The inpatient pay rule finalized the CMS' overhaul of the meaningful use program to better emphasize measures that require the exchange of health information between providers and patients and give providers incentives to make it easier for patients to obtain their medical records electronically.

To reflect these priorities, it renamed the meaningful use program to "promoting interoperability" earlier this year.

The rule encourages providers to use application programming interfaces that would allow patients to collect their health information from multiple providers and incorporate all of their health information into a single application. That would allow patients to share their records with other clinicians easily, which could reduce duplication and improve continuity of care.

The rule will also eliminate some quality measures that acute-care hospitals report. All in all, the CMS will nix 18 measures, saving hospitals $72 million in reporting costs. The CMS said the measures were redundant and process-driven.

The changes outlined in the final annual inpatient hospital rule will give hospitals $4.8 billion more in Medicare inpatient funding next year. That amount is more than last fiscal year's $2.4 billion bump in inpatient funding. It's also $700 million more than what was outlined in the proposed version of the pay rule.

Harris Meyer contributed to this report.

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