CMS Releases FY 2024 IPPS Proposed Update - McDermott+Consulting

CMS Releases FY 2024 IPPS Proposed Update

On April 10, 2023, the Centers for Medicare & Medicaid Services (CMS) posted the fiscal year (FY) 2024 Inpatient Prospective Payment System (IPPS) proposed update, along with proposed policy and regulation changes. The proposed rule would update Medicare payment policies and quality reporting programs relevant for inpatient hospitals, and would build on key agency priorities, including advancing health equity and improving the safety and quality of care.

The proposed rule is available here. A CMS factsheet on the proposed rule is available here. The proposed rule is scheduled to be published in the Federal Register on May 1, 2023, and comments are due on June 9, 2023.


Key Takeaways

  1. CMS proposes an increase of 2.8% in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) program and are meaningful electronic health record (EHR) users. This reflects a projected FY 2024 hospital market basket percentage increase of 3.0%, reduced by a 0.2 percentage point productivity adjustment.
  2. CMS proposes to distribute roughly $6.87 billion in uncompensated care payments for FY 2024, a decrease of approximately $161 million from FY 2023, using the three most recent years of audited Worksheet S-10 data.
  3. CMS proposes to treat hospitals that undergo urban-to-rural reclassification as rural for all wage index calculation purposes. These changes would cause disturbances in the wage index that would affect all hospitals. CMS also proposes to continue the low wage index hospital policy that supplements wage index values for hospitals with a wage index value below the 25th percentile, notwithstanding several federal district court cases that have ruled this policy unlawful.
  4. With respect to quality reporting program changes, CMS proposes to make health equity adjustments in the Hospital Value-Based Purchasing Program and requests comments on how to further address geriatric care, including the future establishment of a geriatric hospital designation.
  5. For FY 2024, CMS proposes 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 proposes to continue delay of the non-complication or comorbidity (NonCC) subgroup criteria for FY 2024 and seeks feedback from stakeholders to inform application of the criteria for FY 2025 rulemaking.
  6. CMS proposes to treat rural emergency hospitals (REHs) similarly to critical access hospitals (CAHs) for purposes of determining graduate medical education (GME) payments.
  7. Advancing health equity is a major theme throughout the proposed rule. CMS proposes to increase the severity of the designation of homelessness from NonCC to complication or comorbidity as an indicator of increased resource utilization, which may result in higher payment for certain hospital stays. CMS also proposes to provide incentives to hospitals in the Hospital Value-Based Purchasing Program to perform well on existing measures, and to those that care for high proportions of individuals dually insured by Medicare and Medicaid.
  8. CMS proposes to revise the criteria that applicants must meet in order to apply for new technology add-on payments (NTAP).
  9. CMS solicits feedback on several requests for information (RFIs), including RFIs focusing on safety net hospitals, health equity and the long-term care hospital quality reporting program.

For more information, contact Emily Cook (McDermott Will & Emery – Partner), Deborah Godes, Rachel Hollander, Kayla Holgash, Marie Knoll, Kristen O’Brien, Priyadharshini Rathakrishnan, Erica Stocker, Katie Waldo or Eric Zimmerman.