Inpatient Prospective Payment System Final Rule Released for FY 2022

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

  • 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 is also repealing the market-based MS-DRG relative weight methodology it had planned to implement in FY 2024 and will continue using the existing cost-based methodology.
  • Provide hospitals with a neutral score for the FY 2022 Value-based Purchasing (VBP) program due to suppressing many of the measures impacted by the public health emergency (PHE). The CMS also finalized a measure suppression policy for certain measures in the Readmissions and Hospital-acquired Conditions (HAC) Reduction programs impacted by the PHE. Unlike the FY 2022 VBP program, hospitals will be scored for the FY 2022 Readmissions and HAC Reduction programs using the remaining measures.
  • Extend the New COVID-19 Treatments Add-on Payment for certain eligible products through the end of the fiscal year in which the PHE ends and provide a one-year extension of the Technology Add-on Payments for 13 technologies that otherwise would be discontinued in FY 2022.
  • Provide a net 2.7% increase to the standard operating rate, after budget neutrality, for hospitals that comply with the CMS quality reporting program (QRP) requirements and a 1.4% increase in the federal capital rate. Hospitals that fail to comply with the QRP or electronic health record (EHR) meaningful use requirements are subject to a lower operating rate update.
  • Increase the cost outlier threshold by 6.6% from the current $29,064 to $30,988, resulting in fewer cases qualifying for an outlier payment.
  • Decrease the Medicare uncompensated care pool by approximately $1.1 billion, resulting in a pool of roughly $7.2 billion that would be distributed using Worksheet S-10 data from FY 2018 cost reports.
  • Adopt five new measures in the hospital inpatient QRP, most notably the COVID-19 Vaccination Coverage Among Health Care Personnel (HCP) and adoption of practices to reduce maternal morbidity. These two measures must be reported starting Oct. 1, 2021, and will impact FY 2023 payment determinations.
  • Remove three measures from the inpatient QRP beginning with the FY 2026 payment determination:
    • Exclusive Breast Milk Feeding (PC-05) (NQF #0480).
    • Admit Decision Time to Emergency Department Departure Time for Admitted Patients (ED-2) (NQF # 0497). 
    • Discharged on Statin Medicaid electronic clinical quality measure (STK-06) (NQF #0439).
  • Continue the EHR reporting period of a minimum of any continuous 90-day period for new and returning eligible hospitals for calendar years 2022 and 2023 and increasing it to a minimum of any continuous 180-day period for calendar year 2024.

The CMS had proposed to implement several provisions of the Consolidated Appropriations Act, including its requirement for 1,000 new Medicare-funded medical residency positions over five years; however, due to the number and nature of comments received, the agency will address those provisions in future rulemaking. In addition, the agency had proposed to codify into Medicare regulations some longstanding Medicare organ acquisition payment policies but will also address those regulations in future rulemaking.

The MHA will provide hospitals with an updated impact analysis of the final rule soon. Members with questions should contact Vickie Kunz at the MHA.