CHA News

CMS Issues FFY 2024 Inpatient Prospective Payment System Final Rule

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The Centers for Medicare & Medicaid Services (CMS) issued its federal fiscal year (FFY) 2024 inpatient prospective payment system (IPPS) final rule.  

CMS increases payment rates for most hospitals paid under the IPPS by 3.1% in FFY 2024. The net impact of the final rule will increase payments nationally in FFY 2024 by an estimated $2.2 billion over FFY 2023. This amount is net of changes to Medicare Disproportionate Share (DSH) and the expiration of eligibility of certain devices for new technology add-on payments (NTAP) decrease the update by approximately $957 million and $364 million respectively.  

Key highlights of the rule include: 

Market Basket Update: CMS finalizes a market basket update of 3.3% (increased from 3% as proposed), reduced by .02% by the Affordable Care Act-mandated productivity adjustment. The resulting net 3.1% market basket update remains inadequate.  

Medicare DSH: CMS will distribute approximately $5.94 billion (down from $6.7 billion as proposed) in uncompensated care payments for FFY 2024. This represents a decrease of approximately $940 million from FFY 2023. Despite projections of significant numbers of Medicaid beneficiaries losing coverage as a result of redeterminations, the payment reduction is largely due to a projected decrease in the uninsured population. As recommended by CHA, CMS will use three years of audited data from worksheet S-10 to distribute uncompensated care DSH in FFY 2024.  

Wage Index: CMS will continue its “bottom quartile” wage index policy, which was first implemented in FFY 2020. 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. Additionally, the agency also finalizes its proposed policy to include certain urban hospitals that reclassify to rural areas as rural for purposes of calculating the statewide rural wage index value.  

New Covid Technology Add-On Payment (NCTAP): Given the COVID-19 PHE ended on May 11, 2023, discharges involving eligible products will be eligible for the NCTAP through Sept. 30, 2023. However, after that, no NCTAP will be made for FFY 2024 or thereafter (that is, for discharges on or after Oct. 1, 2023). 

Graduate Medical Education (GME): The rule finalizes the proposed policy to include rural emergency hospitals to serve as training sites for purposes of Medicare GME payments. 

Hospital Inpatient Quality Reporting (IQR) Program: CMS adopts three new electronic clinical quality measures (eCQMs), removes three existing measures, and modifies three current measures. CMS also finalizes updates to requirements for administration of the Hospital Consumer Assessment of Healthcare Providers and Systems Survey.   

Hospital Value-Based Purchasing Program: CMS finalizes proposals to adopt refined measure specifications for two existing measures and adopt the “Severe Sepsis and Septic Shock: Management Bundle” measure in the safety domain beginning with the FFY 2026 program year. CMS also modifies the program’s scoring methodology to include a health equity adjustment based on both a hospital’s performance on existing program measures and the proportion of individuals with dual-eligibility status that a hospital treats.  

Hospital-Acquired Condition Reduction Program: CMS finalizes its proposals to establish a validation reconsideration process and modify the targeting criteria for data validation.   

Medicare Promoting Interoperability Program: CMS establishes a 180-day reporting period beginning with calendar year 2025, modifies requirements for several existing measures, and adopts three new eCQMs, consistent with the IQR program.   

Long-Term Care Hospitals (LTCHs): For FFY 2024, CMS finalizes policies that will result in an increase to the LTCH standard payment rate of 3.3%. LTCH PPS payments for discharges paid the LTCH standard payment rate will increase by approximately .2% or $6 million due, primarily to a projected 2.9% decrease in high-cost outlier payments as a percentage of total LTCH PPS standard federal payment rate payments. 

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.