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The much-maligned 0.2-percent reduction in Medicare payments brought about by the contentious and oft-misunderstood “two midnight” rule has been eliminated in the 2017 Inpatient Prospective Payment System (IPPS) final rule released today by the Centers for Medicare & Medicaid Services (CMS).

CMS released the IPPS and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) final rule one day past the statutorily required date of release.

CMS had originally implemented the 0.2-percent adjustment in the IPPS final rule for the 2014 fiscal year, and the initial move was intended “to account for an estimated increase in Medicare expenditures due to the two midnight (rule),” the agency said in a fact sheet.  

CMS also defended the assumptions underlying the -0.2-percent adjustment as “reasonable at the time they were made.” The agency went on to say that it “does not generally believe it is appropriate in a prospective payment system to retrospectively adjust rates.” 

“However, in light of recent review and the unique circumstances surrounding this adjustment, for FY 2017, CMS is permanently removing this adjustment and also its effects for FYs 2014, 2015, and 2016 by adjusting the FY 2017 payment rates,” CMS said. “This will increase FY 2017 payments by approximately 0.8 percent.”

In removing the 0.2-percent cut, the agency also finalized a temporary one-time prospective increase to the FY 2017 rates of 0.6 percent to compensate for the 0.2 percent reduction that has been in place since October 2013.

CMS also announced that the Medicare Outpatient Observation Notice, the MOON, would be delayed by at least four months, and guidance was released for its use once it is approved.

Ronald Hirsch, MD is expected to provide an in-depth analysis of the changes to the MOON requirements in his upcoming webcast, Thursday, Aug. 4 at 1:30 p.m. EST. 

RACmonitor will continue to report on the 2017 IPPS final rule.

The final rule is available to be viewed online in the Federal Register at https://www.federalregister.gov/public-inspection

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Chuck Buck is the publisher of RACmonitor and the executive producer and program host for Monitor Mondays.

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Chuck Buck

Chuck Buck is the publisher of RACmonitor and is the program host and executive producer of Monitor Monday.

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