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The Centers for Medicare & Medicaid Services (CMS) has issued its federal fiscal year (FFY) 2023 inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) PPS final rule.
In response to comments from CHA and others, the final rule increases payment rates for most hospitals paid under the IPPS by 4.3% (up from 3.2% in the proposed rule) in FFY 2023. Key highlights of the rule include:
Medicare Disproportionate Share Hospitals (DSH): CMS will distribute roughly $6.8 billion (up from $6.5 billion as proposed in response to comments from CHA and others) in uncompensated care payments for FFY 2023. Despite the increase from the proposed rule, this is still a decrease of approximately $318 million (compared to a decrease of $654 in the proposed rule) from FFY 2022. As recommended by CHA, CMS will use two years of audited data from worksheet S-10 to distribute uncompensated care payments to DSH in FFY 2023. In FFY 2024, CMS will use three years of cost report data.
In the proposed rule, CMS proposed to revise the regulation governing the calculation of the Medicaid fraction of the Medicare DSH calculation. At this time, CMS is not finalizing any changes in regard to the treatment of section 1115 demonstration days in response to comments from CHA and others.
Wage Index: In FFY 2023, CMS will continue its “bottom quartile” wage index policy that was first implemented in FFY 2023. The policy increases 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. CHA continues to oppose this redistributive policy and encourages members to follow developments in its ongoing legal challenge.
Due to a recent adverse district court decision, CMS is not finalizing the rural floor wage index policy as proposed. The policy would have excluded hospitals that have reclassified from urban to rural from the calculation of the rural floor, and the wage index for rural areas in the state in which the county is located. Instead, CMS is finalizing a policy that calculates the FFY 2023 rural floor as it was calculated before FFY 2020. The final rule is silent on how CMS will handle FFY 2020-22, which is currently the subject of ongoing litigation, including a case similar to the FFY 2020 challenge brought by CHA on behalf of its members.
The rule also caps any decrease to a hospital’s wage index from the prior year at 5%. The cap would be applied in a budget-neutral manner.
IPPS Outlier Threshold: Based on comments from CHA and others, CMS finalized a different methodology to calculate the IPPS fixed-loss outlier threshold from what was proposed. As a result, the final rule fixed-loss outlier is $38,859 (down from $43,214) and will increase outlier payments relative to the proposed rule. However, in aggregate, the final FFY 2023 outlier threshold remains higher than the FFY 2022 amount of $30,988.
Medicare Dependent Hospital (MDH) and Low-Volume Adjustment: By statute, additional payments for MDHs 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 final rule estimates that payments to hospitals that benefit from these policies would decrease by $0.6 billion.
Graduate Medical Education (GME): CMS modifies 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 allows 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 finalizes several policies intended to address the impact of the COVID-19 public health emergency (PHE) on the Hospital Readmissions Reduction Program (HRRP), the Hospital Value-Based Purchasing (VBP) Program, and the Hospital Acquired Conditions (HAC) Reduction Program. CMS will not penalize any hospitals under the VBP or HAC programs in FFY 2023. In a change from the proposed rule, CMS will calculate and publicly report performance information on the HAC Program patient safety composite measure (PSI-90), but it will not be used to penalize hospitals. For the HRRP, CMS will continue to suppress the pneumonia readmissions measure as previously finalized for FFY 2023 and finalizes modifications for the other program measures to adjust for patients with a history of COVID-19. Beginning with FFY 2024, CMS will resume the use of the pneumonia readmission measures, with modifications to exclude patients with COVID-19 diagnosis and risk adjusting for a history of COVID-19 within 12 months of admission.
Hospital Inpatient Quality Reporting (IQR) Program: CMS adopts 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 adopted measures are three related to health equity and two related to maternal health. CMS also finalizes its proposal to establish a publicly reported hospital designation on the quality and safety of maternity care, which will be based on attestation to the existing Maternal Morbidity Structural Measure and published in fall 2023.
Promoting Interoperability Program: CMS finalizes 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. Among the changes, CMS increases the weight of the Public Health and Clinical Data Exchange Objective from 10 to 25 points and adds a new Antimicrobial Use and Resistance Surveillance measure for mandatory reporting. However, in response to comments from CHA, CMS will delay this requirement for one year until the 2024 EHR reporting period.
Reporting of COVID-19 Data and Future Pandemics: CMS revises the infection prevention and control conditions of participation to require hospitals and critical access hospitals to continue COVID-19 and seasonal influenza reporting after the conclusion of the current COVID-19 PHE until April 30, 2024. In response to comments from CHA, CMS has revised reporting requirements to decrease the scope of data categories required for continued COVID-19 and seasonal influenza reporting. In addition, CMS has withdrawn its proposal to establish reporting requirements for future PHEs and will continue to work with stakeholders on a long-term solution for data collection and reporting that ensures the ongoing preparedness of the entire health care system.
LTCHs: For FFY 2023, CMS finalizes a net market basket update of 3.8%. Overall LTCH PPS payments are projected to increase by approximately $71 million.
Additional information is available in a CMS fact sheet. CHA staff are continuing to review the rule and will make a detailed summary available in the coming weeks.
