The Centers for Medicare & Medicaid Services (CMS) has issued its federal fiscal year (FFY) 2023 inpatient prospective payment system (IPPS) proposed rule. Comments on the proposed rule are due to CMS by June 17.
CMS proposes to increase payment rates for most hospitals paid under the IPPS by 3.2% in FFY 2023. However, the net impact of the proposed rule will result in a $.3 billion decrease in payments from FFY 2022 to FFY 2023. The negative financial impact is the result of reductions in payments to Medicare disproportionate share hospitals (DSH), new technology, and outlier payments and statutorily required changes to the Medicare-dependent hospital and low volume adjustment programs.
Key highlights of the proposed rule include:
Medicare DSH: CMS is proposing to distribute roughly $6.5 billion in uncompensated care payments for FFY 2023, a decrease of approximately $654 million from FFY 2022. The decrease is partly due to a projected decrease in the uninsured population. As recommended by CHA, CMS will use two years of audited data from worksheet S-10 to distribute uncompensated care DSH in FFY 2023. In FFY 2024, CMS will use three years of cost report data.
The rule also proposes to revise the Medicaid fraction of the Medicare DSH calculation. Under this proposal, CMS would define “regarded as eligible” for Medicaid to include only patients who receive health insurance through a section 1115 demonstration or purchase such insurance with the use of premium assistance provided by a section 1115 demonstration.
Wage Index: In FFY 2023 CMS proposes to continue its “bottom quartile” wage index policy, which was first implemented in FFY 2023. The policy will increase the wage index in core-based statistical areas that are in the bottom quartile of the wage index distribution while reducing payments to all hospitals to maintain budget neutrality. The rule notes that CMS is evaluating the recent decision in the Bridgeport case, which found that the secretary does not have the authority to make this type of adjustment to the wage index and may “take a different approach” to this policy in the final rule.
The rule also includes a proposal capping any decrease to a hospital’s wage index from the prior year at 5%. The cap would be applied in a budget-neutral manner.
Medicare Dependent Hospital and Low Volume Adjustment: By statute, additional payments for Medicare dependent hospitals and the temporary change in payments for low volume hospitals will expire in FFY 2023 unless Congress acts to extend these programs. If they were to expire, the proposed rule estimates that payments to hospitals that benefit from these policies would decrease by $0.6 billion.
Graduate Medical Education: CMS proposes to modify its policy related to full-time equivalent (FTE) caps when the weighted FTE counts exceed the cap as a result of a recent court decision. The policy addresses situations for applying the FTE cap when a hospital’s weighted FTE count is greater than its FTE cap but would not reduce the weighting factor of residents who are beyond their initial residency period to an amount less than 0.5.
The rule also proposes to allow an urban and a rural hospital participating in the same rural training program (RTP) to enter into an “RTP Medicare GME affiliation agreement” effective for the academic year beginning July 1, 2023.
Hospital Performance-Based Quality Programs: CMS proposes several policies intended to address the impact of the COVID-19 public health emergency on the Hospital Readmissions Reduction Program (HRRP), the Hospital Value-Based Purchasing (VBP) Program, and the Hospital Acquired Conditions (HAC) Reduction Program. Under the proposals, CMS will not penalize any hospitals under the VBP or HAC programs in FFY 2023. For the HRRP, CMS will continue to suppress the pneumonia readmissions measure as previously finalized for FFY 2023 and proposes modifications to measures in FFY 2024 to adjust for patients with a history of COVID-19.
Hospital Inpatient Quality Reporting (IQR) Program: CMS proposes several changes to the Hospital IQR Program, including the addition of 10 new measures, refinements to two current measures, and the expansion of electronic clinical quality measure (eCQM) reporting requirements. Among the newly proposed measures are three related to health equity and two related to maternal health. CMS also proposes to establish a publicly reported hospital designation on the quality and safety of maternity care.
Promoting Interoperability Program: CMS proposes significant changes to the Promoting Interoperability Program, including the same expanded eCQM reporting requirements as the IQR Program, several new measures, and modifications to the scoring methodology.
Quality Program Requests for Information (RFI): CMS seeks stakeholder feedback on RFIs related to measuring health care disparities, the current state of hospital assessment on the impact of climate change and health equity, advancing toward digital quality measurement, and advancing the Trusted Exchange Framework and Common Agreement.
Reporting of COVID-19 Data and Future Pandemics: CMS proposes revisions to infection prevention and control conditions of participation that would require hospitals and critical access hospitals to continue COVID-19 and seasonal influenza reporting after the conclusion of the current COVID-19 PHE. CMS also proposes to establish reporting requirements for future PHEs that would apply to future epidemics and pandemics.
Payment Adjustment for Domestically Made N95 Respirators: In FFY 2023 and subsequent years, CMS is considering a payment adjustment for hospitals that use domestically produced N95s. The rule outlines two possible frameworks for the adjustment and seeks comment on them.
Market Basket Weight Setting: CMS proposes returning to its practice of using the most recent available data (FFY 2021 claims data and the FFY 2020 cost reports), for the FFY 2023 rate setting. However, the agency will base the weights on an average of the weights calculated with and without COVID-19 cases in the data set to account for the anticipated decline in COVID-19 hospitalizations of Medicare beneficiaries at IPPS and long-term care hospitals as compared to FFY 2021. CMS also proposes a budget neutral 10% cap on decreases in the weight of any MS-DRG to protect against payment volatility in low-volume MS-DRGs.
Additional information is available in a CMS fact sheet. CHA staff continue to review the rule and make a detailed summary available in the coming weeks.