CMS releases its annual IPPS final rule: key updates for manufacturers

Written by Nicole Lodowski

On September 2, 2020, CMS released its annual Inpatient Prospective Payment System (IPPS) final rule, which applies to hospital discharges occurring on or after October 1, 2020 and will impact approximately 3,200 acute care hospitals across the US.

While the ruling is made up of enormous detail across a 2,160-page document, there are several key updates which will have implications on manufacturers in months and years to come. These include:

  • Increase in hospital payment rate: Acute care hospitals, that meet criteria for quality reporting and EHR utilization, will receive an increase in Medicare payment rates in FY 2021, up a net 2.9% from FY 2020 rates. CMS has estimated that this rate increase, coupled with other changes to inpatient payment policies, will increase the total IPPS payments by about $3.5 billion.

  • Disclosure of negotiated inpatient payment rates: Based on the final rule, acute care hospitals must report the median rate they have negotiated with Medicare Advantage organizations for inpatient services to CMS to increase hospital price transparency. The goal is to continue to collect these negotiated rates long-term and use this to inform a new methodology to set inpatient hospital payments in 2024. This ruling has already received criticism from some major organizations in the US, such as the American Hospital Association (AHA), who believe that disclosure of privately negotiated contract terms with payers interferes with expanding transparency of patient out-of-pocket costs.

  • New DRG for CAR-T: The final rule also included a new Medicare Severity-Diagnosis Related Group (MS-DRG 018) for CAR T-cell therapy based on available Medicare claims data. The goal of this new DRG is to increase predictability of payment for these innovative CAR-T therapies, and also provide payment flexibility as new CAR-T therapies become available. This will hopefully drive uptake of CAR-T therapies, from a provider and patient perspective, with increased reimbursement structures in place. Meanwhile, the new DRG has already received criticism from groups like the AHA, who believe there will still be a gap in reimbursement, and therefore, there should be an alternate method to determining cost outside of the MS‑DRG and a carve-out payment should be considered to receive reimbursement on a pass-through basis.

  • Additional add-on payments: Add-on payments were approved by CMS for 24 eligible new and relatively high-cost technologies, as well as the expansion of new technology add-on payments for certain antimicrobials approved under FDA’s Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway). These add-on payments will likely be realized as a benefit for manufacturers developing novel therapies for inpatient settings and drive innovation for future products.

Other key changes within the 2021 IPPS final rule include updates to inpatient quality incentive programs, Disproportionate Share Hospital payments, and graduate medical education policy. While the full extent of impact from the 2021 IPPS final rule remains to be seen, there is potential for disruption of the inpatient reimbursement landscape as we know it today.

To arrange a confidential conversation about how the 2021 CMS IPPS final rule impacts your market access needs, please get in touch.

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