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IMA Wellness Blog

FFY 2018 Proposed IPPS Changes

by Craig Steen, Sue Brammer, Brad Brotherton, Casey McMilliam, Valeri Boswell, Sherry Witzman, and Patty Rachell


BKD is an IMA member accounting firm…

The Centers for Medicare & Medicaid Services (CMS) released their proposed inpatient prospective payment system (IPPS) regulations for federal fiscal year (FFY) 2018. If finalized, these regulations will include a variety of Medicare reimbursement changes.

Rate Changes

CMS is proposing an increase of 0.4588 percent to the base DRG rate as it begins the restoration of documentation and coding adjustments. This restoration process is anticipated to continue through 2023 at a rate of 0.5 percent annually. For years, CMS implemented cuts that were anticipated to reach $11 billion after conversion to Medicare Severity-Diagnosis Related Groups, but those cuts have now expired, and payment restoration is proposed to begin in 2018.

The proposed rate changes are based on rebased market basket costs from fiscal year (FY) 2014 and a few revisions to the price indices applied to the market basket, resulting in a 2.9 percent increase in the market basket. The update factors also include adjustments for quality reporting, meaningful use, multifactor productivity and mandated Section 1886(b)(3)(B)(xii) to arrive at a maximum increase of 1.75 percent to a maximum decrease of -1.15 percent.

In addition, the proposed labor component share decreased from the prior year’s 69.6 percent to 68.3 percent in FY 2018.

Lastly, the proposed 1.2 percent Capital Input Price Index resulted in a proposed capital standard federal payment rate of $451.37.

Cost Reporting Requirements

Currently, providers are required to submit a hard copy of the settlement summary and certification statement with the original signature with the filing of their Medicare cost report. CMS is proposing to allow the use of an electronic signature beginning for cost reporting periods on or after October 1, 2017, which will allow providers more flexibility in signing the cost report. The proposal also allows for electronic submission of the Certification and Settlement Summary Page to be included with the electronic filing of the cost report. Providers will have to check a box on the cost report if they wish to sign electronically but will still have the option of sending in a hard copy with original signature if they choose.

Due to a rise in questions, the proposed rule also clarifies that Medicare doesn’t recognize a provider’s gain or loss on the sale or scrapping of an asset that occurs on or after December 1, 1997, regardless of whether the asset is sold incident to a provider’s change of ownership or is otherwise sold or scrapped as an asset of the Medicare participating provider.


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