CMS Rule Proposed for Hospital IPPS

April 28, 2021
Gianna Melillo

A new rule proposed by CMS aims to increase Medicare inpatient prospective payment system rates.

A new proposed rule from CMS would increase Medicare inpatient prospective payment system (IPPS) rates by a net 2.8% during the 2022 fiscal year (FY), compared with FY 2021, the American Hospital Association reports. It would also repeal requirements to report certain payer-negotiated rates and change the Graduate Medical Education (GME) program and related payments, quality measurement and value programs.

The rule would apply to hospitals that meaningfully use electronic health records (EHR) and submit quality measure data.

CMS hopes to rebase and revise the hospital market baskets for acute care hospitals, update the labor-related share, and provide the market basket update to the rate-of-increase limits for some hospitals excluded from the IPPS.

Last year, the Center finalized a requirement that hospitals report median payer-specific negotiated rates for inpatient services for Medicare Advantage organizations. The new rule aims to repeal that requirement while also repealing the market-based Medicare Severity Diagnosis Related Group methodology it planned to implement in FY 2024. As an alternative, CMS would continue to use existing cost-based methodology and FY 2019 data to approximate expected FY 2022 inpatient hospital utilization.

“Based on our initial review, we are very pleased CMS is proposing to repeal the requirement that hospitals and health systems disclose privately negotiated contract terms with payers on the Medicare cost report,” said AHA executive vice president Tom Nickels.

“We have long said that privately negotiated rates take into account any number of unique circumstances between a private payer and a hospital and their disclosure will not further CMS's goal of paying market rates that reflect the cost of delivering care. We once again urge the agency to focus on transparency efforts that help patients access their specific financial information based on their coverage and care.”

The rule also aims to implement provisions of the Consolidated Appropriations Act, including distributing 1,000 Medicare-funded medical residency positions and of the Promoting Rural Hospital GME Funding Opportunity, allowing certain rural training hospitals to receive a cap increase for GME.

Furthermore, “we are proposing to extend New COVID-19 Treatments Add-on Payment (NCTAP) for certain eligible products through the end of the fiscal year in which the public health emergency ends and to discontinue the NCTAP for discharges on or after October 1, 2021, for a product that is approved for new technology add-on payments beginning FY 2022,” the rule reads.

Estimated and newly established performance standards for the Hospital Value-Based Purchasing Program will be provided as well as updated policies for the Hospital Readmissions Reduction Program, among others.

Medicare organ acquisition payment policies relative to organ procurement organizations, transplant hospitals and donor community hospitals will also be changed and clarified.

The rule further proposes to amend the Medicare Shared Savings Program regulations so eligible accountable care organizations can maintain their current level of participations for performance year 2022.

“We are heartened CMS recognizes the COVID-19 pandemic has resulted in non-representative performance in its hospital quality measurement and value programs, requiring temporary policy adjustments,” Nickels said. “We will work with the agency to ensure its finalized policies assess hospitals in a fair and transparent manner.”

Comments on the proposed rule will be accepted through June 28.