IPPS Final Rule FY 2020 — 3 Main Takeaways

There are two things I know will happen at the beginning of August: Football is about to begin and the newest updates on the next fiscal year payment system will soon be released. Last Friday, the Federal Fiscal Year (FFY) 2020 Inpatient Prospective Payment System (IPPS) Final Rule was released. This quickly changed my weekend plans as I delved into the details to fully understand what changes the Centers for Medicare and Medicaid Services (CMS) would implement for FFY 2020. I’m just glad it was before football season started.

Two hot topics in the release of the proposed rule in April included wage index and S-10 uncompensated care changes. The proposal was to increase wage index values for hospitals below the 25th percentile, at the expense of hospitals with a value above the 75th percentile. CMS also proposed to use a single year of S-10 data, FY 2015, to determine Factor 3 for providers eligible for uncompensated care payments. Comments were solicited for using FY 2017 as the single year of data instead of FY 2015.


In the final rule, CMS will increase wage index for hospitals with a wage index below the 25th percentile, which is defined as .8457 for FFY 2020. Any hospitals with a wage index value below this amount will get an increase equal to half the difference. For example:

Provider Wage Index (WI) Value:


Difference in provider WI and 25th percentile:

.0200 (.8457-.8257)

Increase to provider WI:

.0100 (.0200/2)

Final Provider WI Value:

.8357 (.8257+.0100)

The four-year policy allows time for the increase to be reflected on cost reports used for wage index. It is important to note that CMS did not lower the wage index for hospitals in the top quartile as proposed. They instead applied a budget neutrality adjustment to the standardized amount across all IPPS hospitals.


CMS finalized its proposal to use FY 2015 in determining Factor 3 for uncompensated care payments. In the past, CMS has used data expanding over several fiscal years to determine what amount to use to compute Factor 3 for eligible providers. The FFY 2020 final rule will mark the first time CMS is only using one year of data. As explained in great detail in the final rule, FY 2015 is the first year S-10 information will be audited, and CMS believes it is reasonable to use only a single year of data in the calculation.

FY 2017 data recently began the audit process in July. CMS does not have audited data available for

FY 2017; therefore, they do not feel like it is appropriate to use data from this year.  


  1. Check your data. Providers have until August 31, 2019, to submit any corrections to CMS included in the tables and supplemental data files released with the final rule. We urge you to check all the data they are using for your facility and make sure it is true and accurate. Wage Index data is included in tables 2, 3, and 4 as well as the Wage Index Data files. Table 18, along with the Medicare DSH Supplemental Data file, covers Factor 3 for determining uncompensated care payments.
  2. Amend your FY 2017 and 2018 data as soon as possible. If you have already been selected for FY 2017 audits of S-10, your data will get updated through the audit process. If not, we urge you to amend your FY 2017 data as soon as possible, as it seems it will be used in future rulemaking policies. Amending FY 2018 data is also important, as CMS could decide to use multiple years of data going forward. The final rule typically pulls data from cost reports uploaded through March. Submit your amended cost reports by February to make sure the new data hits the March release date.
  3. Be prepared. Starting with cost reporting periods beginning on or after October 1, 2018, providers are required to submit detailed logs of their charity information reported on S-10, similar to bad debt logs. Cost reports could be rejected without supporting documentation. The required fields include patient name, dates of service, insurer (if applicable), and the amount of the charity care and/or uninsured discount given to the patient. Have reports in place to capture this data so you can easily pull it together for submission with your cost report.

I always like to see football teams play to the final whistle. Many teams and fans give up before a game is over or celebrate too early. Sometimes the ending of a game can be determined within the last few seconds. We never know what direction CMS is going to go in from one fiscal year to the next. I do not think S-10 is going away, and they will continue to rely heavily on the form to set uncompensated care payments. CMS is also recognizing the discrepancies in wage index and will continue to make changes to address it. Stay on top of the changes and make sure the data you have submitted is correct and up to date. Don’t get defeated before the game is over and don’t celebrate too early — play to the final whistle.

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Topics: IPPS

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