CMS Finalizes FY 2021 Inpatient Prospective Payment System Rule

UPDATE 09/03/2020: For an in-depth analysis for the FY 2021 IPPS final rule, click here.

CMS recently released the final FY 2021 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) final rules.

According to the FY 2021 IPPS final rule, Medicare spending on acute care inpatient hospital services will increase by approximately $3.5 billion in FY 2021, representing a 2.7 percent increase compared to the previous fiscal year.

The final rule will also notably advance hospital price transparency by using the reimbursement rates hospitals negotiate with private payers as the basis for calculating Medicare Severity-Diagnosis Related Group (MS-DRG) relative weights.

Hospitals will have to report to CMS the median rate negotiated with Medicare Advantage organizations for inpatient services, according to the final rule.

CMS will then use the rates instead of hospital charges to determine inpatient hospital payments starting in 2024.

The agency said in an announcement that the requirement is another step to “ensure that the Medicare FFS program adopts pricing strategies based on real world market forces.”

“Medicare generally pays hospitals a rate that is weighted by the relative cost of providing certain services based on a patient's diagnosis,” CMS added in the announcement. “These weights are currently based in large part on the charges that hospitals report to the federal government, which often have little relevancy to the actual rates paid by insurance companies.”

The data reporting requirements will help to “introduce the influences of market competition into hospital payment,” the agency stated.

Additionally, the FY 2021 IPPS final rule will add a MS-DRG for administering Chimeric Antigen Receptor (CAR) T-cell therapies, as well as 24 new technology add-on payments for eligible new and relatively high-cost technologies.

The rule will also expand the add-on payment alternative payment for antimicrobial products approved under FDA’s Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway).

“President Trump is committed to ensuring that seniors on Medicare have access to the latest life-saving diagnostics and therapies,” CMS Administrator Seema Verma said in the announcement. “This rule is another critical step in our effort to modernize the program and strip away bureaucratic barriers between our seniors and the latest innovative treatments.”  

More on the FY 2021 IPPS final rule to follow.