Comments to CMS on its FY 2023 Proposed Inpatient Prospective Payment System

June 17, 2022

The Honorable Chiquita Brooks-LaSure Administrator
Centers for Medicare & Medicaid Services
Hubert H. Humphrey Building
200 Independence Avenue, S.W.
Room 445-G
Washington, DC 20201

RE: CMS-1771-P, Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2023 Rates; Quality Programs and Medicare Promoting Interoperability Program Requirements for Eligible Hospitals and Critical Access Hospitals; Costs Incurred for Qualified and Non-qualified Deferred Compensation Plans; and Changes to Hospital and Critical Access Hospital Conditions of Participation: Proposed Rule (Vol. 87, No. 90), May 10, 2022.

Dear Administrator Brooks-LaSure:

On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the American Hospital Association (AHA) appreciates the opportunity to comment on the Centers for Medicare & Medicaid Services’ (CMS) hospital inpatient prospective payment system (PPS) proposed rule for fiscal year (FY) 2023. We are submitting separate comments on the agency’s proposed changes to the long-term care hospital PPS.

We support a number of the inpatient PPS (IPPS) proposed rule’s provisions, such as those related to the full-time equivalent cap calculation in the graduate medical education (GME) program and the cap on area wage index decreases. We also support several aspects of CMS’s quality-related proposals, including additional steps to recognize the ongoing impact of the COVID-19 pandemic on its programs, and important steps to advance health equity.

At the same time, we have strong concerns about the proposed payment updates, which, together with the rule’s policy changes, would result in a net decrease in payments to IPPS hospitals in FY 2023 compared to FY 2022.

In particular, we are deeply concerned about the inadequacy of the proposed market basket update given the extreme inflationary environment in which we continue to operate. As such, we strongly urge CMS to utilize its authority to provide a market basket adjustment to account for the unexpected and persistent increase in inflation. We also are concerned about the agency’s proposed cuts to disproportionate share hospital (DSH) payments and the lack of transparency in the underlying calculations. Additionally, we are concerned about the dramatic increase in the proposed high-cost outlier threshold. Finally, we have concerns about several of the agency’s quality-related proposals. A summary of our key recommendations follows.

IPPS Payment Update

CMS proposes a market basket update of 3.1%, less a productivity adjustment of 0.4 percentage points, plus a documentation and coding adjustment of 0.5 percentage points, resulting in an update of 3.2%. This update, combined with the FY 2022 payment update hospitals received last year for IPPS, are woefully inadequate and do not capture the unprecedented inflationary environment hospitals and health systems are experiencing. Appropriately accounting for recent and future trends in inflationary pressures and cost increases in the hospital payment update is essential to ensure that Medicare payments for acute care services accurately reflect the cost of providing hospital care. Therefore, we urge CMS to use its "special exceptions and adjustments" authority to make a retrospective adjustment to account for the difference between the market basket update that was implemented for FY 2022 and what the market basket is currently projected to be for FY 2022. We also urge the agency to use the same authority to eliminate the productivity cut for FY 2023.

Disproportionate Share Hospital (DSH) Payments

The AHA continues to be concerned about the agency’s lack of transparency with regard to how it is calculating DSH payments. Specifically, we disagree with the agency’s estimates of both the inpatient discharge volume for FY 2023 and the number of uninsured. For instance, signs of volume recovery are emerging and it is clear that a large increase in the number of the uninsured, not a decrease, will occur as the public health emergency coverage provisions being to unwind. We ask that CMS use more recent data and update its estimates of the Medicare DSH amount to more accurately reflect both discharge volume and the uninsured rate.

High-cost Outlier Threshold

We appreciate that CMS has taken steps to account for some of the pandemic-related factors that may have driven an increase in the high-cost outlier threshold. However, we remain concerned about the dramatic scale of the proposed change — a 39% increase from the FY 2022 threshold. We ask CMS to examine its methodology more closely and consider making additional, temporary changes to help mitigate the substantial increases that are still occurring in the outlier threshold.

Hospital Quality and Value-based Programs

Consistent with hospitals and health systems’ steadfast commitment to advancing health equity, the AHA is pleased to support the addition of health equity-related measures to the inpatient quality reporting (IQR) program. At the same time, we offer several recommendations to ensure the measures are meaningful, feasible, and accurate and achieve their critically important objectives. This includes providing more specific implementation guidance on and revising the scoring methodology of the Hospital Commitment to Equity Measure. We also ask that CMS adopt its proposed health related social needs screening measures for voluntary reporting for now, and revisit a date for mandatory reporting after it has assessed the first year of voluntary reporting.

The AHA also thanks CMS for recognizing the continued disruption posed by the COVID-19 public health emergency (PHE) on its quality measurement and value programs, and support CMS’s proposals not to penalize hospitals under the Hospital Value-Based Purchasing and the Hospital-Acquired Condition Reduction Program for FY 2023. However, the AHA has significant concerns about several of CMS’s proposed new quality measures, and urges CMS to reconsider their implementation. In addition, we object to the heavy-handed proposed use of Conditions of Participation to compel data reporting for COVID-19 and future PHEs, and instead urge CMS to work with hospitals to obtain needed data in a more collaborative and sustainable fashion.

We appreciate your consideration of these issues. Our detailed comments are attached.