On July 28, 2016, CMS issued a notice updating the prospective rates for Medicare inpatient hospital services provided by inpatient psychiatric facilities.  Beginning in fiscal year 2017, inpatient psychiatric facilities will receive an estimated 2.2 percent, or $100 million, increase in Medicare reimbursement, which is more than the 1.5 percent increase in reimbursement those facilities received this fiscal year.  The notice also updated the Inpatient Psychiatric Facilities Prospective Payment System (“IPF PPS”) per diem rate from $743.73 to $761.37 for providers that reported quality data for FY 2017 payment. 

In addition to the change in reimbursement rates to inpatient psychiatric facilities, the notice included the most recent Office of Management and Budget's area delineations, which were finalized in the 2016 IPF PPS final rule.  Due to the adoption of the new area delineations, some inpatient psychiatric facilities’ statuses changed from rural to urban, which means those facilities will lose the 17percent pay increase that rural providers receive.  Under the 2016 IPF PPS final rule, CMS implemented a policy to phase out that rural pay adjustment for the affected inpatient psychiatric facilities.  The affected inpatient psychiatric facilities will receive two-thirds of the rural adjustment this year, one-third of the rural adjustment next year, and no adjustment starting in 2018.

CMS waived the notice and comment procedure for the updates contained in this notice, stating:  “We find it unnecessary to undertake notice and comment rulemaking for this action because the updates in this notice do not reflect any substantive changes in policy, but merely reflect the application of previously established methodologies.”