The Centers for Medicare and Medicaid Services (CMS) recently published a final rule to update Medicare’s fee-for-service (FFS) prospective inpatient payment system (IPPS) for fiscal year 2023. The rule goes:

  • Reduce disproportionate hospital and unpaid care pool (UCC) payments by $314 million, instead of the proposed $800 million. CMS projects a UCC pool of approximately $6.87 billion to be allocated to hospitals based on verified S-10 worksheet data from fiscal year 2018 and 2019 cost reports. ‘use a 3-year average to calculate UCC payments from fiscal year 2024.
  • Eliminate payment enhancements for Medicare-dependent hospitals (MDH) and low-volume hospitals in the absence of congressional action to extend these payments that expire on September 30, 2022. The MHA, along with the American Hospital Association and others, continue to advocate for making the low volume hospital adjustment and MDH program permanent.
  • Provide a 4.15% net increase in the federal operating rate for hospitals that successfully participate in the Inpatient Quality Reporting Program and are significant users of electronic health records. This is an increase from the proposed net increase of 3.17% in response to comments received regarding the inflationary increase facing hospitals and is the largest increase in more than two decades.
  • Increase the standard federal capital rate by 2.4% from $472.60 to $483.76, which is also higher than the proposed increase of 1.6%.
  • Establish an outlier cost threshold of $38,859, up 25% (from 39% in the proposed rule) from the current threshold of $30,988, which reduces the number of cases eligible for payment for value aberrant. The CMS adjusts the threshold annually to ensure that outlier payments do not exceed the established target of 5.1% of overall IPPS payments.
  • Establish a permanent 5% annual cap on wage index declines.
  • Modify graduate medical education policy related to full-time equivalent caps and increased flexibility for hospitals that participate in a rural stream program.
  • Remove the COVID-19 measure in the Hospital Value-Based Purchases and Hospital Acquired Ailment Reduction programs, resulting in FY2023 neutral payment adjustments.
  • Add 10 new metrics to the Inpatient Quality Reporting (IQR) program, including two health equity metrics.
  • Adopt a new “delivery-friendly” designation for hospitals that respond positively to both questions of the structural measure of maternal morbidity previously adopted by the IQR.

The MHA continues to review the final rule and will provide hospitals with an updated impact analysis in the near future. Members with questions should contact Vickie Kunz at MHA.

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