AHA Responds to Proposed FY23 Hospital IPPS Payment Updates

The American Hospital Association (AHA) has asked CMS to make several adjustments to the proposed Hospital Inpatient Prospective Payment System (IPPS) payment updates for fiscal year 2023, including revising the market basket update and the productivity cut.

In a letter to CMS Administrator Chiquita Brooks-LaSure, the trade organization expressed support for certain provisions in the proposed rule but shared concerns about the payment updates.

CMS proposed a 3.2 percent increase in payment rates through the IPPS for general acute care hospitals. This reflects a 3.1 percent hospital market basket update, a 0.4 percentage point reduction for productivity adjustment, and a 0.5 percentage point increase for a documentation and coding adjustment.

The proposed updates will increase hospital payments by $1.6 billion in FY 2023. In FY 2022, hospitals saw a $2.3 billion increase, which reflected a 2.7 percent market basket update.

“This update, combined with the FY 2022 payment update hospitals received last year for IPPS, are woefully inadequate and do not capture the unprecedented inflationary environment hospitals and health systems are experiencing,” AHA wrote. “Appropriately accounting for recent and future trends in inflationary pressures and cost increases in the hospital payment update is essential to ensure that Medicare payments for acute care services accurately reflect the cost of providing hospital care.”

AHA urged CMS to use its special exceptions and adjustments authority to adjust for the difference between the FY 2022 market basket update and the projected market basket update for FY 2023. In addition, the organization asked CMS to eliminate the productivity cut for FY 2023.

CMS projected a $0.8 billion decrease in Medicare disproportionate share hospital (DSH) payments and Medicare uncompensated care payments. The agency determined this after projecting a 1 percent increase in discharges and a 9.2 percent decrease in the uninsured rate.

AHA disagreed with these estimates, stating that discharges will likely increase more and that the uninsured rate will rise due to the unwinding of public health emergency coverage provisions. The letter requested that CMS use more recent data and update the Medicare DSH amount to reflect accurate discharge volume and the uninsured rate.

AHA voiced concerns about the steep increase in the high-cost outlier threshold. CMS proposed a 39.0 percent increase from the FY 2022 threshold, going from $30,988 to $43,214 in FY 2023. AHA asked the agency to explain the factors driving this increase, examine the methodology more closely, and consider making additional temporary changes to help mitigate the increase.

The letter also included feedback on the proposed changes to the Hospital Inpatient Quality Reporting (IQR) program. AHA supported adding health equity-related measures to the program but noted that action is needed to ensure the measures are meaningful, feasible, and accurate.

For example, CMS should provide more specific implementation guidance on the scoring and methodology of the Hospital Commitment to Equity measure. In addition, AHA asked CMS to make its proposed health-related social needs screening measures voluntary and revisit making it mandatory reporting after the first year.

While AHA said it appreciates CMS for its proposal not to penalize hospitals under the Hospital Value-Based Purchasing and the Hospital-Acquired Condition Reduction Program for FY 2023, the organization was concerned about some of the new quality measures proposed and urged CMS to reconsider.

AHA supported the provisions regarding the full-time equivalent cap calculation in the graduate medical education program and the 5 percent cap on area wage index decreases.

In a separate letter to Brooks-LaSure, AHA similarly asked the agency to adjust the market basket update, eliminate the productivity cut, and mitigate the increase in the high-cost outlier threshold for Long-Term Care Hospital (LTCH) payments.

CMS proposed a market basket update of 3.1 percent with a 0.4 percentage point reduction for productivity adjustment, amounting to a 2.7 percent increase in LTCH payments for FY 2023.