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CMS Releases FY 2022 Inpatient Prospective Payment System Final Rule

August 6, 2021

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CONTACTS
Andrew Amari, Hospital Policy and Regulatory Specialist
Mary Mullaney, Director, Hospital Payment Policies
Phoebe Ramsey, Sr. Regulatory Analyst, Quality & Payment Policy

On Aug. 2, the Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2022 Inpatient Prospective Payment System (IPPS) final rule.

The AAMC submitted comments on several policies in the proposed rule this past June [refer to Washington Highlights, July 1]. Provisions of the final rule are effective Oct. 1, 2021, unless otherwise indicated in the rule.

Notably, in the final rule, the CMS elected not to address the graduate medical education (GME) and organ acquisition policies included in the proposed rule, due to the number and nature of the comments received on the implementation of these proposals. Instead, the CMS noted that it will address these policies, including distribution of the 1,000 new GME slots, in future rule-making.

Listed below are summaries of the finalized provisions of importance to AAMC-member institutions.

Payment Provisions

IPPS Operating Payments: Increase operating payment rates by approximately 2.5% for general acute care hospitals paid under the IPPS (approximately a $3.7 billion increase to hospital payments) that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record users.

Data Source for FY 2022 IPPS Ratesetting: Use FY 2019 data from prior to the COVID-19 public health emergency (PHE) to approximate expected FY 2022 inpatient hospital utilization.

Disproportionate Share Hospital and Uncompensated Care Payments (UCPs): Distribute roughly $7.2 billion in UCPs for FY 2022 — a decrease of approximately $1.1 billion from FY 2021. Use a single year of data on uncompensated care costs from Worksheet S-10 of hospitals’ FY 2018 cost reports to distribute these funds.

Medicaid Fraction: Delay addressing the proposal that would have revised treatment of Section 1115 waiver days for the purposes of the Disproportionate Share Hospital (DSH) adjustment due to the number and nature of the comments received. The agency will address public comments in a separate document.

New COVID-19 Treatments Add-on Payment (NCTAP): Extend the NCTAP for MS-DRG payments for eligible COVID-19 treatments through the end of the fiscal year in which the PHE ends. Hospitals will be eligible to receive both the NCTAP and the traditional new technology add-on payment (NTAP) for qualifying patient stays through the end of the fiscal year in which the PHE ends, with NTAP reducing the amount of the NCTAP.

NTAP: Approve 19 technologies for NTAP in FY 2022, including nine technologies approved under the U.S. Food and Drug Administration (FDA) Breakthrough Devices Program and two technologies approved under the FDA Qualified Infectious Disease Product designation. Provide one-year extension of NTAP for 13 technologies for which NTAP would have otherwise been discontinued beginning FY 2022.

Chimeric Antigen Receptor (CAR) T-cell Therapy: Rename Pre-Major Diagnostic Category (MDC) MS-DRG 018 to “Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies” to reflect reporting of non-CAR T-cell therapies and other immunotherapies that would be assigned to this MS-DRG. List new procedure codes to be reclassified as non-operating room procedures affecting MS-DRG 018.

Reporting of Median Payer-Specific Negotiated Charges: Repeal the requirement that a hospital report on its Medicare cost report the median payer-specific negotiated charge that the hospital has negotiated with all its Medicare Advantage organizations, by MS-DRG, for cost reporting periods ending on or after Jan. 1, 2021. 

MS-DRG Relative Weight Methodology: Repeal the market-based MS-DRG relative weight methodology that was adopted effective for FY 2024. Continue using the existing cost-based MS-DRG relative weight methodology to set Medicare payment rates for inpatient stays for FY 2024 and subsequent fiscal years.

Imputed Floor Wage Index Policy for All-urban States: Implement Section 9831 of the American Rescue Plan Act of 2021, which establishes a minimum area wage index for hospitals in all-urban states. Reinstate the imputed floor wage index policy for all-urban states effective for discharges on or after Oct. 1, 2022, with no expiration date.

Rural Reclassification Interim Final Rule with Comment Period: Amend current regulations at Section 412.230 to allow hospitals with a rural redesignation to reclassify through the Medicare Geographic Classification Review Board using the rural reclassified area as the geographic area in which the hospital is located.

Quality Provisions

Addressing the Impact of the COVID-19 PHE on Pay-for-Performance Programs:

  • Adopt a cross-program measure suppression policy for the duration of the COVID-19 PHE, in addition to program-specific proposals.
  • Hospital Value-Based Purchasing (VBP) Program: Suppress the Hospital Consumer Assessment of Healthcare Providers and Systems, Medicare Spend per Beneficiary, and health-acquired infections measures for FY 2022. Suppress the pneumonia mortality rate measure for FY 2023. Revise scoring and payment methodology for FY 2022 to not include calculations based off suppressed measures. Do not award a Total Performance Score to any hospital in FY 2022, resulting in a neutral payment adjustment for hospitals. Update baseline periods for certain measures affected by the prior Extraordinary Circumstances Exception granted in response to the PHE.
  • Hospital-acquired Condition Reduction Program: Suppress the 2020 Q3 and 2020 Q4 for all measures for FY 2022 and FY 2023 (note that the CMS had previously excepted 2020 Q1 and Q2 for all measures earlier during the PHE). Adopt the following applicable periods for FY 2022 in lieu of measure suppressions (PSI-90: July 1, 2018-Dec. 31, 2019, and CDC National Healthcare Safety Network (NHSN) Measures: Jan. 1, 2019-Dec. 31, 2019) and for FY 2023 (PSI-90: July 1, 2019-Dec. 31, 2019, and Jan. 1, 2021-June 30, 2021, and CDC NHSN Measures: Jan. 1, 2021-Dec. 31, 2021).
  • Hospital Readmissions Reduction Program (HRRP): Suppress the pneumonia readmission measure beginning with the FY 2023 program year. Exclude COVID-19 patients from remaining condition-specific readmission measures beginning with FY 2023. Under these proposals, hospitals would not see a payment reduction based on the suppressed pneumonia measure.

Other Changes to Pay-for-Performance Programs:

  • VBP: Remove PSI-90 measure beginning with FY 2023.
  • HRRP: Plan to begin confidential reporting of the six condition-specific readmission measures to hospitals using both dual eligibility and indirect estimation of race and ethnicity in spring 2022. Any potential public display of the disparity results would be proposed and finalized through future rule-making.

Hospital IQR Program:

  • Measure Adoptions: Finalize adoption of five new measures: (1) Maternal Morbidity Structural Measure with reporting beginning with 2021 Q4; (2) COVID-19 Vaccination Coverage Among Health Care Personnel (HCP) with reporting beginning with 2021 Q4; (3) Hybrid Hospital-Wide All-Cause Risk Standardized Mortality with a voluntary reporting period beginning 2022 Q3 and mandatory reporting beginning 2023 Q3; (4) Hospital Harm – Severe Hypoglycemia electronic clinical quality measure (eCQM); and (5) Hospital Harm – Severe Hyperglycemia eCQM (both Hospital Harm measures joining the list of eCQMs a hospital may report beginning with calendar year (CY) 2023 reporting).
  • Measure Removals: Finalize removal of three of the five measures proposed to be removed. The measure removals are: (1) Exclusive Breast Milk Feeding; (2) Admit Decision Time to Emergency Department Departure Time for Admitted Patients; and (3) Discharged on Statin Medication eCQM. Removals proposed vary in timeframes and FY impacts. The CMS declined to finalize the removal of two measures: (1) Death Among Surgical Inpatients with Serious Treatable Complications (PSI-04) and (2) Anticoagulation Therapy for Atrial Fibrillation/Flutter eCQM in response to stakeholder feedback.

Medicare Promoting Interoperability Program (“Meaningful Use”):

  • Measure Addition: Health Information Exchange Bi-Directional Exchange as a yes/no attestation, beginning in CY 2022.
  • Increase the minimum required score from 50 points to 60 points (out of 100) to be considered a meaningful user.
  • Require hospitals to use certified technology consistent with the 2015 Edition Cures Update beginning with CY 2023 reporting, impacting FY 2025 payment determinations.

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