FY 2019 IPPS Final Rule: A Closer Look at Payment Per Discharge

CMS reports an estimated increase by 2.4 percent for FY 2019 in overall payments to hospitals paid under the IPPS. This increase is due to the applicable percentage increase and changes to policies related to MSDRGs, geographic adjustments, and outliers. National standardized amount increases by 1.85 percent. Hospitals paid under the hospital-specific rate will receive a 1.35 percent hospital update.

The annual hospital update includes:

  • 9 percent market basket update
  • 8 percentage point reduction for the multifactor productivity adjustment
  • 75 percentage point reduction under section 3401 of the Affordable Care Act

*Data Source; FY 2019 IPPS Final Rule, CMS Table II

By payment classification, urban areas hospitals are estimated to experience a 2.3 percent increase in payments per discharge in FY 2019. Rural area hospital payments per discharge are estimated to increase by 2.7 percent in FY 2019.

*Data Source; FY 2019 IPPS Final Rule, CMS Table II

In review of payment changes by Bed Size, larger hospitals (urban hospitals with 500 or more beds, rural hospitals with 200 or more beds) are estimated to experience the largest increase in payments at 2.9% and 1.6% change, respectively. However, the bed size category of 500 or more beds only accounts for approximate 8.8% of all urban geographic location hospitals and 5.2% of all rural geographic location hospitals.

*Data Source; FY 2019 IPPS Final Rule, CMS Table II

What are the effects of the changes to Medicare Disproportionate Share Hospital (DSH) and Uncompensated Care (UC) Payments?

Hospitals eligible to receive Medicare DSH payments will receive:

  • 25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments under section 1886(d)(5)(F) of the Act.
  • 75 percent of the remainder of what formerly would have been paid as Medicare DSH payments (Factor 1), reduced to reflect changes in the percentage of uninsured individuals and additional statutory adjustments (Factor 2), plus additional payment based on estimated share of the total amount of uncompensated care (Factor 3).

Note: The change to Medicare DSH payments under section 3133 of the Affordable Care Act is not budget neutral.

*Data Source; FY 2019 IPPS Final Rule, CMS Modeled Uncompensated Care Payments for Estimated FY 2019 DSHs by Hospital Type: Model UCP $ (in Millions) from FY 2018 to FY 2019

CMS included 2,448 hospitals projected to be eligible for DSH in FY 2019.

*Data Source; FY 2019 IPPS Final Rule, CMS Modeled Uncompensated Care Payments for Estimated FY 2019 DSHs by Hospital Type: Model UCP $ (in Millions) from FY 2018 to FY 2019

CMS is continuing to incorporate data from Worksheet S-10 to determine Factor 3 for amount of uncompensated care.  For FY 2019, Worksheet S-10 for FYs 2014, 2015 with proxy data regarding a hospital’s share of low-income insured dates for FY 2013 were utilized.

Why should hospitals be aware of Overall Payment Changes?

Overall payment changes are affected by several policy factors, of which key factors are:

  • Operating Base Rate
  • Wage Index
  • MSDRG Relative Weight
  • Unique service volumes

IPPS payments before and after changes are required to result to be budget neutral, which include the factors of wage index, geographic reclassification, and MSDRG recalibration and reclassification. Yet, impacts to each hospital could vary. With changes in these factors from year to year, hospitals should understand what is driving any significant payment differences specific to the provider.

In addition, hospitals need to provide appropriate attention to the completion of Worksheet S-10 due to direct impact in UCP payments.

Case Hospital Example: Urban Ohio Hospital

An Urban Ohio case hospital is showing to experience an overall 1.2% increase in operating payments from FY 2018 to FY 2019, despite this hospital’s overall Wage Index decreasing by 1.72% from 0.971 in FY 2018 to 0.9543 in FY 2019.

*Data Source: CMS, FY 2018 & 2019 Table 5, FY 2018 & 2019 IPPS Final Rule Impact Files, 2017 MedPAR

However, this projection was created under the assumption unique service volumes are not changing. Keeping that assumption in mind, the hospital should keep a watch on any individual MSDRG changes and how those changes affect overall payment. If volume increases in negatively impacted MSDRG payment areas, the hospital may not experience the projections set forth in the Final Rule polices.

What is the Impact to my Hospital?

Assessing the impact to Prospective Payment Rule polices is essential is understanding future Medicare payments and Medicare-like payments. Identifying driving factors could assist the hospital in offering feedback to CMS, other payers, and/or budgetary purposes at the facility and departmental levels. 

Want further information?

FY 2019 IPPS Final Rule posted to the Federal Register on August 17, 2018: www.federalregister.gov/documents/2018/08/17/2018-16766/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the

CMS’s Acute Inpatient PPS, FY 2019 Final Rule Home Page: www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2019-IPPS-Final-Rule-Home-Page.html

CMS’s Acute Care Hospital Inpatient Prospective Payment System FACT SHEET: www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/acutepaymtsysfctsht.pdf


 If you would like to discuss our coverage or what this might mean for your hospital, give us a call at 888.779.5663




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