The Centers for Medicare & Medicaid Services (CMS) announced the finalization of new policy changes it says will spur competition and innovation and help deliver improved care and outcomes at a better value to patients. The final rule updates Medicare payment policies for hospitals under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) for fiscal year 2020 and advances two key CMS priorities—“Rethinking Rural Health” and “Unleashing Innovation”—by making historic changes to how Medicare pays hospitals.
In last year’s proposed rule, CMS invited comments on changes to the Medicare inpatient hospital wage index, which is an adjustment to inpatient payment rates to account for local differences in wages that hospitals face in their respective labor markets.
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CMS says a common concern from the public was that the current wage index system worsens wage index disparities between hospitals in high-wage areas and low-wage areas, which tend to be rural. Rural areas have experienced more than 100 hospital closures since 2010 and continue to face limited access to specialty care.
Increasing the wage index: This final rule addresses these disparities by increasing the wage index for certain low-wage index hospitals, including many rural hospitals, and ensures rural Americans have access to needed care. The wage index is intended to measure differences in hospital wage levels across geographic regions and is updated annually based on wage data reported by hospitals. Hospitals located in areas with wages below the national average receive a lower Medicare payment rate than hospitals in areas with above-average wages.
For example, a hospital in a low-wage rural community could receive a Medicare payment of about $4,000 for treating a beneficiary admitted for pneumonia, while a hospital in a high-wage area (many urban communities) could receive a Medicare payment of nearly $6,000 for the same case due to wage index differences. With the changes made to the hospital wage index, CMS is helping many rural and other low-wage hospitals attract and maintain a highly skilled workforce, which will strengthen competition and lead to greater choice for patients in rural areas.
CMS charges the final rule also ensures Medicare beneficiaries will have access to a world-class healthcare system by unleashing medical innovation, removing barriers to competition, and enabling faster access to new medical technology through several payment changes.
New technology add-on payment: This final rule increases Medicare add-on payments known as the new technology add-on payment (NTAP) for cases with high costs involving eligible new technologies. The increased payment from 50 percent to 65 percent will promote patient access and reduce uncertainty that innovators face about Medicare payment for new medical technologies.
Breakthrough Devices: CMS is modernizing payment policies for medical devices that meet the FDA’s Breakthrough Devices designation for expedited FDA approval or clearance. Under an expedited timeframe, it can be challenging for innovators to gather evidence of the device’s “substantial clinical improvement” which is required to qualify for Medicare new technology add-on payments. To address this issue, CMS finalized an alternative NTAP pathway in which Breakthrough Devices would no longer be required to demonstrate evidence of “substantial clinical improvement” to qualify for new technology add-on payments. This will provide additional Medicare payment for these technologies while real-world evidence is emerging, giving Medicare beneficiaries timely access to the latest innovations in treatment. And, to give innovators greater transparency and predictability on the CMS NTAP approval process, CMS is finalizing changes to clarify our general policies on “substantial clinical improvement” to qualify for new technology add on payments.
New antimicrobial therapies: CMS is also finalizing policies to remove barriers for new antimicrobial therapies, which treat drug-resistant infections, and are currently in short supply. Drug-resistant infections are a public health crisis, affecting more than 2 million Americans each year and resulting in thousands of deaths annually, with the majority of new diagnoses and subsequent fatalities attributed to Medicare beneficiaries. To encourage the development of antimicrobials, CMS has also created an alternative NTAP pathway, which would no longer require new antimicrobial drugs to meet the “substantial clinical improvement” criteria and would also increase the NTAP from 50 percent to 75 percent. Importantly, the drugs eligible for this pathway will be new antimicrobials which have received a Qualified Infectious Disease Products (QIDP) designation from the FDA. These particular antibiotics are specifically designed with the intent of addressing resistant infections.
