CMS IPPS and LTCH PPS Proposed Rules: Health Equity and 3.2% Increase

On Monday, the Centers for Medicare and Medicaid Services (CMS) published the Hospital Inpatient Prospective Payment (IPPS) and Long Term Care Hospitals (LTCH PPS) Proposed Rule, which will update Medicare fee-for-service payment rates and policies for inpatient hospitals and LTCHs for fiscal year 2023. The rule includes a 3.2% increase in fiscal payments and the introduction of health equity metrics into the inpatient quality reporting program.

This will be the first year that CMS is proposing to return to its traditional practice of using the most recent years’ data to set hospital rates. The agency used 2019 data for 2022 rates due to the COVID-19 pandemic, Modern Healthcare reports. Because COVID-19 is still a present threat, CMS said that using 2021 claims and 2020 cost data will assist in the care of COVID-19-positive Medicare patients who are hospitalized with the virus.

CMS proposed changes to the Inpatient Quality Reporting Program (IQRP), which reduces pay to facilities that fail to meet the program’s standards. According to Becker’s, the agency will move to add 10 new measures, one of which will assess a hospital’s commitment to equity and another that will capture screening for social determinants of health (SDoH).

Modern Healthcare also notes that the proposed pay increase of 3.2% applies to general acute-care hospitals that participate in IQRP and use electronic health records (eHR). However, group purchasing organization Premier said that this was not enough to address hospitals’ increased labor costs. Recent analysis from Premier found that those costs rose 6.5% in FY 2022, but CMS finalized a 2.4% rate increase. From Blair Childs, senior vice president of public affairs for Premier:

Considering that labor accounts for nearly 68% of the CMS market basket calculation the proposed payment update fails to cover the actual costs.

The American Hospital Association expressed grave concern about the meager payment increase as well. In a statement from Stacy Hughes, executive vice president of the AHA, the fight against COVID-19 remained paramount:

We are extremely concerned with CMS’ proposed payment update of only 3.2%, 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 other proposed cuts to [Disproportionate Share Hospitals] and other payments.

The fact sheet for the FY 2023 IPPS and LTCH PPS can be found at the CMS website.