CMS Proposes $1.6B Increase in IPPS Payment Rates for FY23

CMS has released its Hospital Inpatient Prospective Payment System (IPPS) proposed rule for fiscal year 2023, which includes a payment rate boost for general acute care hospitals and new measures focused on health equity for the Hospital Inpatient Quality Reporting (IQR) program.

General acute care hospitals that receive reimbursement through the IPPS and participate in the Hospital IQR program will see a 3.2 percent increase in payment rates. This reflects a projected 3.1 percent hospital market basket update, a 0.4 percentage point reduction for productivity adjustment, and a 0.5 percentage point increase for adjustment required by statute.

The proposed update will increase hospital payments by $1.6 billion in FY 2023, CMS said.

Last year, the FY 2022 final IPPS rule included a $2.3 billion increase in hospital payments.

Hospital payment adjustments under the IPPS may change depending on potential payment reductions for excess readmissions under the Hospital Readmissions Reduction Program, payment reductions under the Hospital-Acquired Condition Reduction Program, and adjustments under the Hospital Value-Based Purchasing Program.

CMS also projected that Medicare disproportionate share hospital (DSH) payments and Medicare uncompensated care payments will decrease in FY 2023 by a combined $0.8 billion. In addition, the rule included a projected $0.8 billion decrease in new medical technology payments and a $0.6 billion decrease due to the expiration of the Low-Volume Hospital and Medicare Dependent Hospital programs.

The agency has also proposed a 5 percent cap on any decrease in a hospital’s wage index.

Hospital groups voiced their concern about this payment update.

“We are extremely concerned with CMS’ proposed payment update of only 3.2 percent, given the extraordinary inflationary environment and continued labor and supply cost pressures hospitals and health systems face. Even worse, hospitals would actually see a net decrease in payments from 2022 to 2023 under this proposal because of proposed cuts to DSH and other payments,” Stacey Hughes, executive vice president of the American Hospital Association, said in a statement.

“This is simply unacceptable for hospitals and health systems, and their caregivers, that have been on the front lines of the COVID-19 pandemic for over two years now. While we have made great progress in the fight against this virus, our members continue to face a range of challenges that threaten their ability to continue caring for patients and providing essential services for their communities.”

The agency has also proposed a number of updates to the Hospital IQR program, including the addition of three measures that aim to advance health equity.

The first measure assesses a hospital’s commitment to establishing a culture of equity and delivering more equitable healthcare. The measure monitors hospital actions regarding strategic planning, data collection, data analysis, quality improvement, and leadership engagement.

The second and third measures capture screening and identification of patient health-related social needs, including food insecurity, housing instability, transportation needs, utility difficulties, and interpersonal safety. Hospitals can improve holistic care for patients by screening for and addressing these social determinants of health, CMS said.

The rule includes a proposal for a new hospital designation that aims to help pregnant people choose hospitals that have demonstrated best practices in maternal health that advance care quality, safety, and equity.

The designation would be awarded to hospitals based on their performance on the Maternal Morbidity Structural Measure in the Hospital IQR program.

The proposed rule also introduced two new quality measures for the Hospital IQR program to improve maternal health, including a measure of low-risk Cesarean deliveries and a measure of severe obstetric complications.

CMS proposed to suppress or refine several measures in the Hospital Readmissions Reduction Program, Hospital-Acquired Condition Reduction Program, and Hospital Value-Based Purchasing Program to ensure hospitals are not rewarded or penalized due to circumstances caused by the COVID-19 pandemic.

The agency released the Long-Term Care Hospital (LTCH) Prospective Payment System proposed rule as well, which included a payment increase of $25 million for FY 2023.

CMS said it plans to use the most recent available data—including FY 2021 claims and FY 2020 cost reports—for general acute care hospital and LTCH rate settings, with certain modifications to account for COVID-19 hospitalization declines.