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CMS Issues FFY 2021 IPPS Final Rule

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The Centers for Medicare & Medicaid Services (CMS) has issued its federal fiscal year (FFY) 2021 inpatient prospective payment system final rule. The final rule is effective Oct. 1.  

In addition to annual payment and quality program updates, CMS finalizes requirements for hospitals to report certain payer-specific negotiated rates on the Medicare cost report, modifies its projection of the uninsured rate to determine Medicare disproportionate share hospital (DSH) payments in response to the COVID-19 public health emergency, and establishes a new Medicare Severity-Diagnosis Related Group (MS-DRG) payment for Chimeric Antigen Receptor T-cell (CAR T) therapy. 

CMS finalizes an overall payment update of 2.7%, or $3.5 billion, which is an increase of approximately $1.5 billion compared to the proposed rule. Key highlights of the final rule include: 

  • Market-Based MS-DRG Relative Weight Data Collection: Despite opposition from CHA and other stakeholders, CMS finalizes its proposal to require that hospitals report on the Medicare cost report the median payer-specific negotiated rates for inpatient services, by MS-DRG, for Medicare Advantage organizations. This policy is effective for cost reporting periods ending Jan. 1, 2021, or after. CMS also finalizes a policy to use the reported Medicare Advantage data to revise its method of setting the relative weights for DRGs, beginning with FFY 2024. 
  • Medicare DSH Payments: For FFY 2021, CMS estimates it will distribute $8.29 billion in Medicare DSH payments, a small decrease compared to $8.55 billion in 2020. Notably, in response to comments from CHA, CMS increased its projection of the uninsured due to the COVID-19 public health emergency, increasing estimated DSH payments from a proposed $7.81 billion. In addition, CMS will use a single year of uncompensated care data from the 2017 Medicare cost report to determine the distribution of DSH uncompensated care payments for FFY 2021. CMS also finalized its policy to use the most recently available single year of audited uncompensated care data going forward.  
  • Area Wage Index: CMS continues its previously finalized area wage index policy by increasing the wage index for hospitals with a wage index value below the 25th percentile and applying an adjustment to the standardized payment amount for all hospitals to ensure budget neutrality. 
  • CAR T-cell Therapy: CMS establishes a new MS-DRG for CAR T-cell therapy payments, which are no longer eligible for new technology payments. 
  • Quality Reporting Programs: CMS finalizes limited changes to the hospital Inpatient Quality Reporting (IQR) Program, Hospital-Acquired Conditions Program, Readmissions Reduction Program, and Value-Based Purchasing Program. CMS also finalizes minor changes to the Promoting Interoperability Program. 
  • Electronic Clinical Quality Measures (eCQMs): For both the hospital IQR and promoting interoperability programs, CMS finalizes a policy to gradually increase the number of quarters of eCQM data required until it reaches a full year for the calendar year (CY) 2023 reporting period. Beginning with CY 2021, hospitals will be required to report on two self-selected quarters of data. CMS will also begin publicly reporting eCQM measure results in fall 2022, with data from CY 2021. 

A fact sheet on the final rule is available on CMS’ website. CHA will provide members with a detailed summary of the final rule in the coming weeks.