CHA News

CMS Issues Inpatient Psychiatric Facility Prospective Payment System Final Rule

On July 27, the Centers for Medicare & Medicaid Services (CMS) issued the federal fiscal year (FFY) inpatient psychiatric facility (IPF) prospective payment system (PPS) final rule. CMS estimates that in FFY 2024, total payments to IPFs will increase by 2.3% ($70 million) compared with 2023. This is an increase from the 1.9% ($55 million) that was recommended in the proposed rule.    

Key provisions in the final rule include: 

  • Market Basket Update: CMS is increasing the IPF PPS market basket by 3.3% net of the Affordable Care Act mandated productivity cut of .2%. This is an increase over the proposed rule’s net market basket update of 3%. 
  • Rebased Market Basket: CMS finalizes its proposal to adopt a 2021-based IPF market basket and finalizes changes to the market basket cost weights, price proxies, the market basket percentage increase, and labor-related share. 
  • Labor-Related Share: As a result of rebasing the market-basket, CMS also finalizes an update to the wage index labor-related share (LRS). The final FFY 2024 LRS is 78.7%, which is a 1.3 percentage point increase relative to the FFY 2023 LRS of 77.4%. 
  • Faster Enrollment of New Excluded Units: Beginning in FFY 2024, CMS amends the regulations to allow hospitals to open a new excluded IPF unit at any time during the cost-reporting period rather than only at the start of a hospital’s cost-reporting period. This change will allow a hospital’s excluded IPF unit to start being paid under the IPF PPS if the hospital provides at least 30 days’ notice to the CMS Regional Office and Medicare Administrative Contractor.   
  • Inpatient Psychiatric Quality Reporting Program: The final rule adopts, as proposed, three new measures related to health equity, modifies the health care staff COVID-19 vaccination measure, and removes two measures.  

CMS has also issued a fact sheet. CHA is reviewing the rule and will make a detailed summary available shortly.