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Final FY 2017 Medicare Payment and Policy Changes for Inpatient Psychiatric Facilities

July 29, 2016

OVERVIEW:  On July 28, 2016, the Centers for Medicare & Medicaid Services (CMS) issued a notice updating fiscal year (FY) 2017 Medicare payment policies and rates for the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS).  The updates for FY 2017 are summarized below.


Update to IPF Payments:  CMS estimates IPF payments to increase by 2.2 percent or $100 million in FY 2017.  This amount reflects a 2.8 percent IPF market basket update less the productivity adjustment of 0.3 percentage point and less the 0.2 percentage point reduction required by law, for a net market basket update of 2.3 percent.  Additionally, estimated payments to IPFs are reduced by 0.1 percentage point due to updating the outlier fixed-dollar loss threshold amount.

Wage Index:  CMS is updating the IPF wage index for FY 2017.  The FY 2017 IPF wage index values will reflect the full adoption of the Office of Management and Budget (OMB) area delineations finalized in the FY 2016 IPF PPS final rule, which provided a one-year transition during FY 2016.

As a result of the adoption of the new OMB area delineations in the FY 2016 IPF PPS wage index, some IPF providers had their status changed from rural to urban.  In the FY 2016 IPF PPS final rule, CMS implemented a policy to gradually phase out the rural adjustment for these IPFs over three years.  These affected IPFs received two-thirds of the rural adjustment in FY 2016, will receive one-third of the rural adjustment for FY 2017, and no rural adjustment for FY 2018 and subsequent years.

The FY 2017 IPF PPS notice can be downloaded from the Federal Register at:  It will publish at the Federal Register on August 1, 2016.

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