Inpatient PPS Final Rule for FY 2022

AHA Regulatory Advisory
August 19, 2021

Download the Regulatory Advisory

At Issue

The Centers for Medicare & Medicaid Services (CMS) Aug. 2 issued its hospital inpatient prospective payment system (PPS) and long-term care hospital (LTCH) PPS final rule for fiscal year (FY) 2022. In addition to finalizing a 2.5% increase in inpatient PPS payments for 2022 and other policy changes, the rule repeals the requirement to report certain payer-negotiated rates and makes changes to quality measurement and value programs. Highlights of the LTCH PPS final rule are covered in a separate AHA Regulatory Advisory. Provisions of the final rule take effect Oct. 1.

AHA Take

We appreciate CMS listening to our concerns by repealing the requirement that hospitals and health systems disclose privately negotiated contract terms with payers on the Medicare cost report. We are also pleased that the agency recognizes that the COVID-19 pandemic has resulted in non-representative performance in its hospital quality measurement and value programs, requiring temporary policy adjustments. While CMS’ new quality measure on the rate of health care personnel COVID-19 vaccination likely needs further refinement to ensure it accurately reflects hospitals’ progress in vaccinating their workforce, we will work with CMS, CDC and hospitals to facilitate the reporting of the measure starting Oct. 1. Lastly, we appreciate that CMS is continuing to review comments on its organ acquisition and Medicare-funded residency slot proposals. We look forward to working with the agency to develop workable policies. See AHA’s full statement that was shared with the media here.

What You Can Do

  • Share this advisory with your senior management team and ask your chief financial officer to examine the impact of the payment changes on your Medicare revenue for FY 2022. Hospitals may assess the impact of these provisions on their organizations by using AHA’s calculators on readmissions and Medicare DSH:
  • Share this advisory with your billing, medical records, quality improvement and compliance departments, as well as your clinical leadership team — including the quality improvement committee and infection control officer — to apprise them of the provisions around the diagnosis-related groups and quality measurement requirements.
  • If applicable, apply for low-volume hospital status by written request to your Medicare Administrative Contractor (MAC) by Sept. 1 in order to receive the low-volume adjustment beginning Oct. 1.

Further Questions

Please contact Shannon Wu, AHA senior associate director of policy, at 202-626-2963 or if you have further questions.

Key Takeaways

CMS’ finalized policies will:

  • Increase inpatient PPS payments by 2.5% in FY 2022.
  • Repeal the requirement to report the median payer-specific negotiated rates for inpatient services, by Medicare Severity-Diagnosis-related Group (MS-DRG), for Medicare Advantage organizations.
  • Use data from Worksheet S-10 in the FY 2018 cost report to determine the distribution of FY 2022 DSH uncompensated care payments.
  • Extend New COVID-19 Treatments Add-on Payments for eligible COVID-19 products through the end of the fiscal year in which the public health emergency (PHE) ends.
  • Change the Promoting Interoperability Program, including requiring a 180-day reporting period for CY 2024 and increasing the minimum required score to be considered a meaningful electronic health record (EHR) user.
  • Suppress certain measures in hospital quality reporting and value programs, applying neutral payment adjustments under hospital value-based purchasing (VBP) for FY 2022, to account for the impact of the COVID-19 PHE.
  • Adopt new measure reflecting COVID-19 vaccination coverage among health care personnel.