Proposed Rule Released on Medicare Inpatient Prospective Payment System

The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule to update the Medicare fee-for-service hospital inpatient prospective payment system for fiscal year (FY) 2022. Provisions of the proposed rule would take effect Oct. 1, 2021, unless otherwise noted. Highlights of the proposed rule would:

  • Repeal the requirement that hospitals report the median payer-specific negotiated rate for inpatient services by Medicare severity diagnosis-related Group (MS-DRG) for Medicare Advantage plans on the Medicare cost report for periods ending on or after Jan. 1, 2021. The CMS proposes to repeal the market-based MS-DRG relative weight methodology the agency had planned to implement in FY 2024 and, instead, would continue using the existing cost-based methodology.
  • Provide hospitals with a neutral score for the FY 2022 value-based purchasing program due to suppressing many of the measures impacted by the public health emergency (PHE). The CMS proposes to score hospitals for the FY 2022 readmissions and hospital-acquired conditions reduction programs.
  • Extend new COVID-19 treatments add-on payment for certain eligible products through the end of the fiscal year in which the PHE ends while also extending technology add-on payments for 14 technologies that otherwise would be discontinued in FY 2022.
  • Provide a net 3% increase to the standard operating rate, after budget neutrality, for hospitals that comply with the CMS quality reporting program (QRP) requirements and a 1.2% increase in the federal capital rate.
  • Increase the cost outlier threshold by 6.5% from the current $29,064 to $30,967, resulting in fewer cases qualifying for an outlier payment.
  • Decrease the Medicare uncompensated care (UCC) pool by approximately $660 million, resulting in a UCC pool of roughly $7.6 billion that would be distributed using Worksheet S-10 data from FY 2018 cost reports.
  • Add 1,000 new medical resident slots that will be phased in at no more than 200 slots per year beginning in FY 2023, with additional funding at approximately $1.8 billion from FY 2023 to FY 2031. The CMS proposes to prioritize applications from hospitals that serve geographic areas and underserved populations with the greatest need.
  • Continue the electronic health record reporting period of a minimum of any continuous 90-day period for new and returning eligible hospitals and increase the reporting period to a minimum of any continuous 180-day period for calendar year 2024.
  • Seek input via a formal request for information on closing the health equity gap in CMS quality programs. Specifically, the CMS seeks input on ways to revise several related CMS programs to make reporting of health disparities based on social risk factors, race and ethnicity more comprehensive and actionable for hospitals, providers and patients.
  • Adopt several new measures in the hospital inpatient quality reporting program, including the COVID-19 Vaccination Coverage Among Health Care Personnel measure for the FY 2023 payment determination.
  • Remove several measures from the inpatient QRP.

The MHA will provide hospitals with an impact analysis within the next month and make its draft comments available prior to the June 28 due date. The association encourages hospitals to review the proposed rule and submit comments to the CMS, which is expected to release a final rule by the beginning of August for the Oct. 1 effective date. Members with questions should contact Vickie Kunz at the MHA.