CMS Releases FY 2023 Final Rule to Update Hospital IPPS

The Centers for Medicare and Medicaid Services (CMS) recently released a final rule to update the Medicare fee-for-service (FFS) hospital inpatient prospective payment system (IPPS) for fiscal year (FY) 2023. The rule will:

  • Reduce disproportionate share hospital and uncompensated care pool (UCC) payments by $360 million, rather than $800 million as proposed. The CMS projects a UCC pool of roughly $6.87 billion to be allocated to hospitals based on audited Worksheet S-10 data from FY 2018 and FY 2019 cost reports. The CMS finalized its proposal to use a 3-year average to calculate UCC payments starting in FY 2024.
  • Eliminate payment enhancements for Medicare dependent hospitals (MDHs) and low-volume hospitals absent Congressional action to extend those payments which expire Sept. 30, 2022. The MHA, along with the American Hospital Association and others, continue to advocate for making the enhanced low volume hospital adjustment and MDH program permanent.
  • Provide a net 4.15% increase in the federal operating rate for hospitals that successfully participate in the inpatient quality reporting program and are meaningful electronic health record users. This is up from the proposed 3.17% net increase in response to comments received regarding the inflationary increase hospitals are facing and is the highest increase in more than two decades.
  • Increase the standard federal capital rate by 2.4% from $472.60 to $483.76, also higher than the proposed 1.6% increase.
  • Establish a cost outlier threshold of $38,859, up 25% (compared to 39% in the proposed rule) from the current $30,988 threshold, resulting in fewer cases qualifying for an outlier payment. The CMS adjusts the threshold annually to ensure that outlier payments do not exceed the established target of 5.1% of aggregate IPPS payments.
  • Establish a permanent 5% annual cap on wage index decreases.
  • Modify graduate medical education policy related to full time equivalent caps and increased flexibility for hospitals that participate in a rural track program.
  • Suppress measures in the hospital VBP and HAC reduction programs, resulting in neutral payment adjustment for FY 2023.
  • Add 10 new measures to the inpatient quality reporting (IQR) program, including two health equity measures.
  • Adopt a new “birthing friendly” designation for hospitals that attest positively to both questions in the IQR’s previously adopted Maternal Morbidity Structural Measure.

The MHA is continuing 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 the MHA.