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  • Washington Highlights

    CMS Proposes Hospital Payment and Quality Changes in FY 2023 IPPS Proposed Rule


    Mary Mullaney, Director, Hospital Payment Policies
    Phoebe Ramsey, Director, Physician Payment & Quality
    For Media Inquiries

    The Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2023 hospital Inpatient Prospective Payment System (IPPS) proposed rule on April 18. The AAMC will provide comments to the CMS, which are due by June 17. In addition to the hospital payment and quality provisions detailed below, the rule contains two graduate medical education (GME) proposals relating to the weighted Full Time Equivalent caps and 1-2 Rural Training Programs [refer to related story].

    The proposed rule includes the following key points addressing hospital payment and quality:

    Payment Proposals:

    FY 2023 IPPS Payment Update

    The CMS proposed to increase operating payment rates by 3.2% 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 the projected hospital market basket update of 3.1%, reduced by a 0.4 percentage point productivity adjustment, and increased by a 0.5 percentage point for a statutorily required documentation and coding adjustment. The proposed increase in operating and capital IPPS payment rates, partially offset by decreases in outlier payments for extraordinarily high-cost cases, will generally increase hospitals’ payments in FY 2023 by $1.6 billion.

    Medicare Disproportionate Share Hospital (DSH) and Uncompensated Care Payments

    The CMS proposed to distribute roughly $6.5 billion in uncompensated care payments for FY 2023, a decrease of approximately $654 million from FY 2022. The CMS would use the two most recent years of Worksheet S-10 audited data, from FY 2018 and FY 2019, to distribute these funds. Beginning in FY 2024, the CMS proposed to use a three-year rolling average of audited Worksheet S-10 data. The CMS anticipates that this will be the first year that three years of audited data will be available. Beginning FY 2023, the CMS will stop using low-income insured days as a proxy for uncompensated care payments for the Indian Health Service and Tribal Hospitals and hospitals located in Puerto Rico; instead, the CMS proposed to establish a new supplemental payment for these hospitals.

    Medicaid Fraction

    The CMS proposed to change the calculation of the Medicaid fraction of the DSH calculation by revising the definition of patients that are “regarded as eligible for Medicaid” to only include patients who receive health insurance through a Section 1115 demonstration itself or purchase such insurance with the use of premium assistance authorized under an 1115 demonstration.

    New Technology Add-on Payment (NTAP)

    The CMS proposed that beginning FY 2024, completed applications for NTAP would be publicly posted online. The CMS also proposed to use National Drug Codes instead of ICD-10-PCS Section “X” codes to identify cases involving the use of therapeutic agents approved for NTAPs beginning with a transitional period in FY 2023.

    Wage Index

    The CMS proposed to continue the low wage index policy in FY 2023 in a budget-neutral manner by applying an adjustment to the standardized amount. Beginning in FY 2023 and subsequent years, the CMS proposed to apply a 5% cap on any decrease to a hospital’s wage index from its wage index in the prior fiscal year, regardless of the circumstances causing the decline.

    COVID-19 and Seasonal Influenza Data Reporting Standards

    As part of the Conditions of Participation, the CMS proposed to require hospitals, including critical access hospitals (CAHs), to continue COVID-19 and seasonal influenza reporting after the COVID-19 public health emergency (PHE) ends. Beginning at the conclusion of the current COVID-19 PHE declaration or the effective date of the IPPS proposed rule, whichever is later, and continuing until April 30, 2024, a hospital or CAH must electronically report information daily about COVID-19 and seasonal influenza in a standardized format specified by the secretary. Additionally, the CMS proposed to set up a framework for future reporting in the event of another PHE based on the National Healthcare Safety Network because it is a vendor-neutral, federally owned system that can accept data submissions from a variety of non-governmental entities.

    Quality Proposals:

    Changes to Pay-for-Performance Programs

    The proposed rule would remove penalties under the Hospital-Acquired Condition Reduction Program (HACRP) and apply a neutral payment adjustment under the Hospital Value-Based Purchasing Program for FY 2023 due to proposals to suppress measures in the programs to address continuing impacts of the COVID-19 PHE. The CMS proposed updated risk adjustment for the HACRP to account for COVID-19 diagnosis in the PSI-90 measure, to publicly and confidentially report the healthcare-associated infection measure results (but not report the PSI-90 measure for FY 2023), and to suppress calendar year (CY) 2021 healthcare-associated infection measure data from FY 2024. Also proposed was the inclusion of a covariate adjustment for patient history of COVID-19 within one year prior to the index admission for all readmission measures in the Hospital Readmission Reduction Program (HRRP) beginning with FY 2023, the resumption of the pneumonia readmission measure in FY 2024, and a request for feedback on how to update HRRP scoring to encourage hospitals to improve performance for socially at-risk populations.

    Addressing Health Equity

    Three new equity-specific quality measures for the IQR Program were proposed: Hospital Commitment to Health Equity, Screening for Social Drivers of Health, and Screen Positive Rate for Social Drivers of Health. The first measure would begin with mandatory CY 2023 reporting while the screening measures would begin with voluntary CY 2023 reporting before mandating reporting of each measure in CY 2024. Maternal health was addressed through the adoption of a new “Birthing-Friendly” hospital designation [refer to Washington Highlights, April 15] and two new maternal health measures for the IQR: Cesarean Birth electronic clinical quality measure (eCQM) and Severe Obstetric Complications eCQM; each would begin with voluntary reporting for CY 2023, followed by mandatory reporting beginning with CY 2024. Finally, the agency seeks feedback through two requests for information (RFIs) — one specific to assessing the impact of climate change on health equity and the other regarding cross-setting framework for assessing health care quality disparities across Medicare’s quality programs.

    Other Changes to the IQR Program

    Five new measures were proposed in addition to the equity-focused measures mentioned above, along with the refining of two other existing measures. Proposals also included changes to reporting requirements for eCQMs and hybrid measures, including increasing the total number of eCQMs hospitals must report beginning with CY 2024 reporting and requiring 100% completeness for medical records requests for validating eCQM reporting beginning with validation of CY 2022 reported data (impacting FY 2025 payment). The CMS also proposed new data submission and reporting requirements for patient-reported, outcomes-based performance measures for the future.

    Medicare Promoting Interoperability Program (“Meaningful Use”)

    The CMS proposed to modify the scoring methodology beginning with the CY 2023 EHR reporting period, including beginning to require hospitals to report the Query of Prescriptive Drug Monitoring Program measure. The addition of a new optional measure was introduced, Enabling Exchange under the Trusted Exchange Framework and Common Agreement (TEFCA) under the Health Information Exchange Objective for CY 2023 EHR reporting. Also added was a new Antibiotic Use and Antibiotic Resistance measure as a required measure under the Public Health and Clinical Data Exchange Objective beginning with CY 2023 EHR reporting and consolidation options for reporting active engagement under the objective. Finally, to publicly report certain program data beginning with CY 2023 EHR reporting period and adopt IQR eCQM measure additions and reporting requirements for alignment across the two programs were also proposed.

    RFIs Regarding Use of Health IT to Improve Quality Measurement and Reporting

    The first RFI expanded on last year’s RFI regarding the advancement of digital quality measurement and use of Fast Healthcare Interoperability Resources (more commonly known as FHIR) in hospital quality programs. The second RFI is specific to advancing the TEFCA.