FY 2023 Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospitals (LTCH PPS) Proposed Rule

On April 18, Centers for Medicare and Medicaid Services (CMS) issued a proposed rule that would update Medicare payment policies and rates for the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) for Fiscal Year (FY) 2023.

Payment Rates

In the proposed rule, CMS estimates a 3.2% increase to IPPS payments for FY23. Rural IPPS hospitals with 0-49 beds (348 hospitals) and 50-99 beds (211 hospitals) are expected to experience an increase in payments from FY 2021 to FY 2022 of 2.8% and 2.9%, respectively. These changes are primarily driven by the projected hospital market basket update of 3.1% reduced by a 0.4% productivity adjustment and increased by a 0.5% adjustment required by legislation. This rate is further reduced by a 1.8% outlier payment adjustment and other program expirations. CMS estimates total Medicare spending on acute care inpatient hospital services will decrease by about $300 million in FY 2023 compared to FY 2022.

Wage Index: For Area Wage Index, CMS is continuing its FY 2020 low wage index hospital policy to mitigate wage disparities. Additionally, CMS proposes a permanent 5% cap on any decrease in hospitals’ wage index from the previous year.

DSH Payments: CMS estimates that Medicare disproportionate share hospital (DSH) payments will total $6.54 billion, a $834 million decrease compared to FY 2022, due partially to a decrease in the uninsured population. Additionally, for the Medicaid part of this measurement, CMS proposes to define “regarded as eligible” to include only patients who receive health insurance authorized by a section 1115 demonstration or patients who pay for all or substantially all of the cost of such health insurance with premium assistance authorized by a section 1115 demonstration where state expenditures are matched with federal Medicaid funds.

Low Volume Hospitals: Low volume hospital qualifying requirements and payments will end and revert to statutory requirements in effect prior to FY 2011. CMS proposes that a low volume hospital must have less than 200 total discharges per FY and be located more than 25 road miles from another hospital paid under IPPS.

Medicare Dependent Hospitals: The Medicare-dependent hospital (MDH) program will expire at the end of FY 2022 without any congressional action. Alternatively, MDHs may apply for sole community hospital status by the September 1, 2022, deadline to be paid under that scheme.

Quality Reporting Programs

CMS is continuing its COVID-19 measure suppression policy for the Hospital Acquired Condition (HAC) reduction program, which allows it to not use any data that may have been distorted by the pandemic. CMS will suppress all six measures under the HAC program and consequently, hospitals will not be penalized for FY 2023. However, CMS will publicly report on healthcare associated infection (HAI) measures. CMS proposes to suppress HAI measures for FY 2024 with changes to adjust for COVID-19 diagnoses.

CMS proposes to suppress most Hospital Value-based Purchasing (HVBP) Program measures again. CMS plans to resume Hospital Readmission Reduction Program scoring for FY 2024. The measure is suppressed for FY 2023.

For the Hospital Readmissions Reduction Program (HRRP), CMS proposes to restart scoring hospitals on the pneumonia readmissions measure that is suppressed through FY 2023. CMS will add a COVID-19 diagnosis exclusion to the pneumonia measure, as is used for five other measures in HRRP. Last, for all HRRP measures, CMS plans to add patient history of COVID-19 in the past 12 months in the measures’ risk adjustment models.

CMS proposes ten new measures as part of the Inpatient Quality Reporting (IQR) program, including:

  • Hospital Commitment to Health Equality, asking hospitals whether they are implementing certain health equity practices;
  • Two measures regarding Social Drivers of Health, showing whether hospitals screen admitted patients for food insecurity, housing instability, transportation problems, utility needs and interpersonal safety;
  • Two Electronic Clinical Quality Measures (eCQM) on rates of cesarean section births and severe obstetric complications; and
  • Two other eCQMs reflecting hospital performance on opioid-related adverse events and malnutrition.

CMS proposes to continue hospitals’ COVID-19 reporting after the COVID-19 Public Health Emergency expires through April 24, 2024.

Workforce Provisions:

CMS is proposing to allow a rural and an urban hospital in the same Rural Training Program (RTP) to enter a RTP Medicare GME affiliation agreement, giving flexibility to teaching hospitals that cross-train students.

In response to a court striking down CMS’s method of calculating GME payments to teaching hospitals, CMS is proposing a new policy for situations where a hospital’s weighted full-time equivalent (FTE) cap is greater than its FTE cap. This policy would not reduce the weighting factor of residents outside of their initial residency period by more than 0.5.

Requests for Information:

CMS is seeking stakeholder feedback on several topics, including:

  • Principles for measuring health care quality disparities;
  • How hospitals can prepare for effects of climate change on beneficiaries and what CMS can do to help hospitals understand the effects of climate change on their patients;
  • The appropriateness of payment adjustments accounting for the additional costs associated with acquiring NIOSH-approved N95 surgical respirators;
  • A hospital quality and safety for maternal care designation awarded to certain hospitals;
  • Future adoption of National Health Safety Network (NHSN) Healthcare Associated C. diff. Infection Outcome Measure and NHSN Hospital-Onset Bacteremia & Fungemia Outcome Measure to the IQR program.

Please share any questions or concerns with NRHA staff before the June 17, 2022, deadline. CMS’s FY23 Inpatient PPS NPRM Fact Sheet can be found here. The unpublished version of the proposed rule can be found here. The final rule will be published on or around Aug 1 and take effect Oct. 1.

For further questions, please contact Alexa McKinley, NRHA Government Affairs and Policy Coordinator, at amckinley@ruralhealth.us or another member of the Government Affairs team.