CMS Releases FY 2023 Proposed Rule to Update Hospital IPPS

The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule to update the Medicare fee-for-service (FFS) hospital inpatient prospective payment system (IPPS) for fiscal year (FY) 2023. When all proposed changes are considered, the rule is expected to result in a net decrease due to proposed cuts to disproportionate share hospital (DSH) and other payments. The MHA considers these cuts to be unacceptable given the extraordinary inflationary environment and extreme labor and supply cost pressures that hospitals continue to experience.  The proposed rule would:

  • Reduce national DSH and uncompensated care (UCC) pool payments by $800 million. The CMS projects a UCC pool of roughly $6.5 billion to be allocated to hospitals based on audited Worksheet S-10 data from FY 2018 and FY 2019 cost reports. The CMS proposes to use a three-year average to calculate payments starting in FY 2024.
  • Eliminate payment enhancements for Medicare-dependent hospitals and low-volume hospitals absent congressional action to extend those payments beyond the Sept. 30, 2022, expiration date.
  • Provide a net 3.2% increase in the federal operating rate for hospitals that successfully participate in the inpatient quality reporting program (QRP) and are meaningful electronic health record users.
  • Increase the standard federal capital rate by 1.6% from $472.60 to $480.29.
  • Establish a cost outlier threshold of $43,214, up 39% 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.
  • Cap wage index decreases at 5%, ensuring each hospital’s wage index is at least 95% of its final wage index for the prior fiscal year. This policy would be funded by a national adjustment to the standard federal operating rate. The CMS proposes to continue the current policy that provides a wage index increase for hospitals in the bottom quartile.
  • Modify graduate medical education policy related to full-time-equivalent caps and increase flexibility for rural hospitals that participate in a rural track program.
  • Suppress several measures in the hospital value-based purchasing program and continue the special scoring methodology used for FY 2022 to ensure hospitals are neither penalized nor rewarded due to the COVID-19 public health emergency.
  • Suppress all six measures in the hospital acquired conditions (HAC) reduction program. If finalized as proposed, hospitals will not be given a measure score, a total HAC score, or a payment penalty for FY 2023.
  • Establish a publicly reported hospital designation on the quality and safety of maternity care in efforts to reduce maternal mortality and morbidity, a priority of the Biden-Harris administration. The CMS would award this designation to hospitals that report “Yes” to both questions in the Maternal Morbidity Structural Measure, previously finalized in the Hospital Inpatient QRP.
  • Seek input on ways to advance health equity. The CMS is seeking comment on key considerations to improve data collection to better measure and analyze disparities across CMS programs and policies and approaches for updating the Hospital Readmission Reduction Program to encourage providers to improve performance for socially at-risk populations.
  • Seek input on the appropriateness of a payment adjustment for FY 2023 and beyond to recognize the additional resource costs associated with acquiring surgical N95 respirators that are approved by the National Institute for Occupational Safety and Health and are wholly domestically made.

The MHA is continuing to review the proposed rule and will provide hospitals with an estimated impact analysis soon. The association will also share its draft comments with members when available. The CMS will accept comments on the proposal through June 17. Members with questions should contact Vickie Kunz at the MHA.