HealthcareCMS proposes $1.6 billion increase to inpatient hospital pay...

CMS proposes $1.6 billion increase to inpatient hospital pay for FY23

The Centers for Medicare and Medicaid Services on Monday proposed bumping up inpatient hospital payments by approximately $1.6 billion in fiscal 2023.

The proposed Hospital Inpatient Prospective Payment System rule represents a 3.2% increase in fiscal 2023 payments from the year before.

CMS also wants to add health equity measures to the hospital inpatient quality reporting program, including one that tracks hospital commitment to health equity, and officially suggested the “birthing friendly” hospital designation it announced last week. CMS asked for feedback last year on how to advance health equity through quality measurement.

“This year—through a health equity lens—we are also re-envisioning the next chapter of healthcare quality and patient safety,” CMS Administrator Chiquita Brooks-LaSure said in a news release.

The proposed pay increase applies to general acute-care hospitals that participate in the Hospital Inpatient Quality Reporting Program and use electronic health records. CMS noted that other pay adjustments may impact hospital rates, including adjustments from the Hospital Value-Based Purchasing Program.

Group purchasing organization Premier said the increase was not enough to adequately address hospitals’ increased labor costs. A recent analysis from the group found that hospitals’ labor costs rose 6.5% in fiscal 2022, but CMS finalized a 2.4% rate increase.

“Considering that labor accounts for nearly 68 percent of the CMS market basket calculation, the proposed payment update fails to cover the actual costs,” Blair Childs, senior vice president of public affairs for Premier, said in a statement.

Medicare disproportionate share hospital payments and Medicare uncompensated care payments will decrease by about $800 million next year, CMS estimated. Additionally, payments to Medicare Dependent Hospitals and low-volume hospitals could decrease $600 million if Congress doesn’t extend additional payments that are set to expire this year. Long-term care hospitals could get a $25 million increase.

To stabilize payments year to year, CMS proposed applying a 5% annual cap on wage index decreases. The agency proposed this policy for other healthcare settings this year, too.

Additionally, although the Health and Human Services Department just renewed the COVID-19 public health emergency into July, the agency believes it can return to its traditional approach of using the most recent data to set 2023 rates, with some modifications.

“CMS believes that it is reasonable to assume that some Medicare beneficiaries will continue to be hospitalized with COVID-19 at IPPS hospitals and LTCHs in FY 2023. However, we also believe it is reasonable to assume based on the information available at this time that there will be fewer COVID‑19 hospitalizations in FY 2023 than are reflected in the FY 2021 data,” a fact sheet on the proposed rule said.

But the agency again proposed suppressing and refining measures in the Hospital Readmissions Reduction Program, Hospital-Acquired Condition Program and Hospital Value-Based Purchasing Program to make sure hospitals aren’t rewarded or penalized because of COVID-19.

CMS proposed distributing approximately $6.5 billion in uncompensated care payments for 2023, a more than $650 million decrease from fiscal 2022. The agency wants to use the two most recent years of audited data on uncompensated care costs from hospitals’ 2018 and 2019 cost reports, a change proposed after commenters said basing payments off just one year would lead to significant variations year over year. CMS proposed establishing a new supplemental payment for Indian Health Service and tribal hospitals and Puerto Rican facilities and discontinuing low-income insured days as an uncompensated care stand-in.

Hospitals could see changes to their quality reporting requirements under the proposed rule. Hospitals that fail to submit quality data or meet inpatient quality reporting program requirements are subject to a 25% reduction in their annual payment update.

CMS proposed adding a measure starting in 2023 on a hospital’s commitment to health equity, which would capture strategic planning activities, data collection and analysis, quality improvement and leadership engagement. The agency also wants to add a measure on screening for social drivers of health, which would start with voluntary reporting in 2023 and move to mandatory reporting in 2024.

CMS suggested multiple other new measures, including two electronic clinical quality measures on perinatal health and one on opioid-related adverse events. Beginning with the fiscal 2024 payment determination, CMS proposed requiring a Medicare Spending Per Beneficiary measure.

The agency wants to make several changes to the Medicare Promoting Interoperability Program as well, including beginning to publicly report certain program data starting with the 2023 electronic health record reporting period.

Additionally, the rule suggested requiring hospitals and critical access hospitals to continue reporting COVID-19 and seasonal flu data until April 30, 2024. If officials declare an infectious disease or pathogen-related emergency in the future, CMS proposed requiring hospitals to report data elements determined by the HHS secretary to the Centers for Disease Control and Prevention.

The proposal asked for feedback on several questions, including how to adjust payment to account for to cost of purchasing domestically-produced N95 masks, how the agency can help hospitals determine the threats climate change present to operations, what CMS should consider when using measurement and stratification to advance health equity and potential revisions to a future definition of digital quality measures.

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