IPPS Proposed Rule Ushers in Whirlwind of Looming Changes

Adjustments to payments, policies, and more are on the horizon for several types of providers.

The Centers for Medicare & Medicaid Services (CMS) issued its annual Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Proposed Rule on April 27. This rule proposes payment rates, quality measures, reporting, and other policy updates to take effect for the 2022 fiscal year (FY), which begins on Oct. 1. 

The proposed increase in payment rates for hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users is approximately 2.8 percent. Hospitals may be subject to other payment adjustments under the IPPS, including payment reduction for excess readmissions under the Hospital Readmissions Reduction Program; payment reduction (1 percent) for the worst-performing quartile under the Hospital-Acquired Condition Reduction Program; and upward and downward adjustments under the Hospital Value-Based Purchasing Program.

CMS generally uses the latest available hospital utilization data to set payment rates. However, the agency believes that the latest data (from FY 2020) would be non-representative due to the COVID-19 pandemic. CMS proposes to use the FY 2019 data from prior to the COVID-19 public health emergency (PHE) to approximate the expected FY 2022 inpatient hospital utilization. They are also seeking comment on the use of the FY 2020 data.

As part of the effort to close the healthcare equity gap, CMS is proposing to distribute an additional 1,000 new Medicare-funded medical residency positions to train physicians. These slots will be allocated to qualifying hospitals, as specified by law, including those located in rural areas and those serving areas with a shortage of healthcare professionals.

The 1,000 new slots will be phased in at no more than 200 slots per year, beginning in FY 2023. CMS estimates that this additional funding will total approximately $1.8 billion from FY 2023 through FY 2031. CMS is proposing to prioritize applications from qualifying hospitals that serve geographic areas and underserved populations with the greatest need.

To further health equity efforts, in the proposed rule, CMS is seeking stakeholder input, via a request for information (RFI), on ideas to revise several related CMS programs to make reporting of health disparities based on social risk factors and race and ethnicity more comprehensive and actionable for hospitals, providers, and patients. CMS is seeking comment from stakeholders on future potential additional stratification of quality measure results by race, Medicare/Medicaid dual-eligibility status, disability status, LGBTQ+ status, and socioeconomic status.

CMS is proposing to repeal a previous requirement that a hospital report on the Medicare cost report the median payor-specific negotiated charge that the hospital has negotiated with all of its Medicare Advantage (MA) organization payors, by MS-DRG, for cost reporting periods ending on or after Jan. 1, 2021. CMS estimates that this will reduce administrative burden on hospitals by approximately 64,000 hours. CMS is also proposing to repeal the market-based MS-DRG relative weight methodology that was adopted effective FY 2024, and to continue using the existing cost-based MS-DRG relative weight methodology to set Medicare payment rates for inpatient stays for FY 2024 and subsequent fiscal years.

CMS is also proposing changes to certain quality measures, adding some and deleting others, as well as proposing changes to the Interoperability Program. They are requiring the reporting of “yes” on four of the existing Public Health and Clinical Data Exchange Objective measures (Syndromic Surveillance Reporting, Immunization Registry Reporting, Electronic Case Reporting, and Electronic Reportable Laboratory Result Reporting), or requesting applicable exclusion(s).

For LTCHs, CMS expects LTCH-PPS payments to increase by approximately 1.4 percent, or $52 million. CMS is also proposing to facilitate more accurate payment of Medicare’s share of organ acquisition costs by collecting data from transplant hospitals and organ procurement organizations (OPOs) to calculate this share, and to ensure Medicare payment at reasonable costs by requiring donor community (not transplant) hospitals to bill OPOs customary charges that are reduced in costs, in line with Medicare’s reasonable cost principles.

Comments on the proposed rule are due by June 28.