CMS Releases FY 2024 IPPS Final Rule - McDermott+Consulting

On August 1, 2023, the Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2024 Inpatient Prospective Payment System (IPPS) final rule. The rule updates Medicare payment policies and quality reporting programs for inpatient hospital services, and builds on key agency priorities, including advancing health equity and improving the safety and quality of care.

  • The final rule is available here.
  • A CMS fact sheet on the final rule is available here.
  • The final rule is scheduled to be published in the Federal Register on August 28, 2023, and the majority of the rule’s provisions will be effective October 1, 2023.


Key Takeaways

  • The FY 2024 standardized amount for hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and that are meaningful electronic health record (EHR) users will be $6,497.77, representing a payment update of 3.1% over FY 2023.
  • CMS will distribute roughly $5.94 billion in uncompensated care payment (UCP) to eligible disproportionate share hospitals (DSH) for FY 2024, a decrease of approximately $940 million from FY 2023.
  • CMS also finalized the Medicare Disproportionate Share Hospital Payments: Counting Certain Days Associated with Section 1115 Demonstrations in the Medicaid Fraction proposed rule, which was separately proposed in February 2023. This rule changes how Medicare DSH payments are calculated with respect to counting days associated with Section 1115 demonstrations in the Medicaid fraction of the DSH calculation. This change may have negative financial implications for hospitals in states that utilize uncompensated care pools and premium assistance programs through 1115 waivers, and may impact 340B eligibility.
  • Relenting to years of challenges to its implementation of urban-to-rural reclassification rules, CMS will treat hospitals with § 412.103 reclassification as rural when calculating the wage index. This change will cause disturbances in the wage index that will affect all hospitals.
  • With respect to quality reporting programs, CMS finalized its proposals to make health equity adjustments in the Hospital Value-Based Purchasing Program by providing incentives to hospitals to perform well on existing measures and to those that care for high proportions of underserved individuals, as defined by dual eligibility status. CMS plans to use comments received on how to further address geriatric care in its quality reporting programs in future rulemaking. CMS also finalized a proposal to modify the COVID-19 Vaccination Coverage measure by replacing the term “complete vaccination course” with “up to date.”
  • CMS finalized its proposal to return to its pre-pandemic practice of using the most recent available data to calculate Medicare Severity Diagnosis-Related Group (MS-DRG) relative weights. CMS finalized its proposal to continue delay of the non-complication or comorbidity (NonCC) subgroup criteria to existing MS-DRGs with a three-way severity split until FY 2025 or later.
  • Consistent with the Administration’s goals of advancing health equity, CMS will increase the severity of the designation of homelessness from NonCC to complication or comorbidity as an indicator of increased resource utilization.
  • CMS finalized its proposal to treat rural emergency hospitals (REHs) similarly to critical access hospitals (CAHs) for purposes of determining graduate medical education (GME) payments.
  • CMS restored the Medicare-Dependent Hospital (MDH) program and Low-Volume Hospital Payment Adjustment pursuant to legislation enacted in late 2022. The agency also made a small but beneficial change concerning the effective date of sole community hospital (SCH) status related to mergers.
  • CMS finalized as proposed two revisions to the criteria that applicants must meet in order to apply for new technology add-on payments (NTAP).