CMS Releases FY 2024 Hospital Inpatient Prospective Payment System Proposed Rule

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) 2024. The MHA is concerned since the proposed increase is inadequate given the historical inflationary increases hospitals are facing in labor, equipment, supplies and drug costs. The proposed rule would:

  • Increase the total standard operating rate by 2.3%, from $6,375.74 to $6,524.94 for hospitals that successfully comply with the CMS quality reporting program and electronic health record requirements. Hospitals that do not meet requirements for these programs are subject to a lower annual update.
  • The labor-related share remains at 67.6% for hospitals with a wage-index greater than 1.0. The labor-related share remains  62% for  hospitals with a wage-index equal to or less than 1.0.
  • Increase the federal capital by 4.5%, from $483.76 to $505.54.
  • Increase the cost outlier threshold by 4.8%, from $38,859 to $40,732, to maintain the target of paying 5.1% of aggregate IPPS payments as outlier. This will result in fewer cases qualifying for an outlier payment.
  • Add 15 new Medicare-severity diagnosis related groups (MS-DRGs) and delete 16 MS-DRGs, many of which are Diseases and Disorders of the Circulatory System.
  • Decrease disproportionate share hospital (DSH) and uncompensated care payments by $115 million, largely due to the CMS’ estimated decrease in the number of uninsured. The MHA opposes this reduction and will request the CMS not reduce DSH as most states are in the process of completing Medicaid redeterminations for the first time since early 2020.
  • Decrease new medical technology payments by $460 million.
  • Allow Rural Emergency Hospitals to train medical residents and receive graduate medical education payments beginning Oct. 1, 2023.
  • Clarify the data and information that is required under the physician self-referral law and reinstate program integrity restrictions removed in the 2021 outpatient prospective payment final rule for physician-owned hospitals meeting “high Medicaid facilities” requirements.
  • Return to pre-pandemic procedures for quality-based programs, with hospitals subject to a payment penalty or reward under the value-based purchasing program and potential payment penalties under the readmissions reduction and hospital acquired conditions program depending on performance scores.
  • Seek public comments on approaches to support safety-net hospitals and the patients they serve.
  • Update the VBP program by modifying two quality measures and adopting a new measure on sepsis care. The CMS also proposes to adopt a health equity adjustment that would add bonus points to a hospital’s VBP Total Performance Score beginning with the FY 2026 program year to reward  care to underserved populations.

The MHA is continuing to review the proposed rule and will provide hospitals with an estimated impact analysis soon. The MHA will also share its draft comments with members when available and encourages hospitals to notify Renée Smiddy regarding issues identified by June 1 for consideration in the MHA’s comments. The CMS will accept comments on the proposed rule through June 9 and is expected to release a final rule around Aug. 1, for the Oct. 1, 2023 effective date.

Members with questions should contact Renée Smiddy at the MHA.