The Centers for Medicare & Medicaid Services today issued a proposed rule that would increase Medicare inpatient prospective payment system rates by a net 3.2% in fiscal year 2023, compared with FY 2022, for hospitals that are meaningful users of electronic health records and submit quality measure data. This 3.2% payment update will increase hospital payments by $1.6 billion, minus an $800 million decrease in disproportionate share hospital payments, $800 million decrease in new medical technology payments, and $600 million decrease due to expiration of the Low-Volume Hospital and Medicare Dependent Hospital programs.

In a statement shared with the media today, AHA Executive Vice President Stacey Hughes said, “We are extremely concerned with CMS’ proposed payment update of only 3.2%, given the extraordinary inflationary environment and continued labor and supply cost pressures hospitals and health systems face. Even worse, hospitals would actually see a net decrease in payments from 2022 to 2023 under this proposal because of proposed cuts to DSH and other payments. This is simply unacceptable for hospitals and health systems, and their caregivers, that have been on the front lines of the COVID-19 pandemic for over two years now. While we have made great progress in the fight against this virus, our members continue to face a range of challenges that threaten their ability to continue caring for patients and providing essential services for their communities.”

Among other provisions, the proposed rule would:

  • Return to applying the most recent data available for rate setting – FY 2021 claims and FY 2020 cost reports — but with several modifications to account for the COVID-19 pandemic.
  • Permanently apply a 5% cap on any decrease to a hospital’s wage index from the prior fiscal year; this would be done in a budget-neutral way.
  • Continue the low wage index hospital policy for FY 2023.
  • Use more than one year of Worksheet S-10 cost report data to determine uncompensated care costs, specifically FY 2018 and FY 2019 data to distribute FY 2023 payments and a three-year average for FY 2024 and beyond. 
  • Revise the Medicaid fraction of the Medicare disproportionate share hospital calculation by only including patients who receive health insurance authorized by a section 1115 demonstration, or who pay for all or substantially all the cost of such insurance with premium assistance authorized by a section 1115 demonstration where state expenditures are matched with federal Medicaid funds. 
  • Revise the COVID-19 hospital data reporting condition of participation adopted in 2020 so that hospital reporting would continue after the current public health emergency through April 30, 2024, unless the Health and Human Services Secretary establishes an earlier end date.
  • Establish new policies for future public health emergencies involving an infectious disease that would require hospitals and critical access hospitals to report certain data to the Centers for Disease Control and Prevention.

In addition, CMS proposes a number of changes to its quality reporting and value programs. For FY 2023, CMS proposes to suppress most of the measures in its Hospital Value-based Purchasing Program, and all of the measures in its Hospital-Acquired Condition Reduction Program. As a result, hospitals would not experience FY 2023 payment adjustments under either program. CMS also proposes 10 new measures for the Inpatient Quality Reporting program, including three health equity-related measures and two perinatal electronic clinical quality measures; and to increase the IQR program’s eCQM reporting requirements from four to six measures beginning with the calendar year 2024 reporting period. 

Finally, CMS proposes several new and revised objectives and measures for the Medicare Promoting Interoperability Program, including making mandatory queries of prescription drug monitoring programs, and adding a new antimicrobial use and resistance surveillance measure.

Hughes said AHA was “pleased to see that the agency has proposed a 5% cap on any decrease to a hospital’s wage index, though we urge that this be applied in a non-budget neutral way. CMS also proposes to use more than one year of data to determine uncompensated care costs. We have long stated that utilizing a single year of S-10 data may increase the potential for anomalies and undue fluctuations in uncompensated care payments especially when hospitals experience unforeseen circumstances such as a pandemic.

“Finally, we thank CMS for recognizing that the COVID-19 pandemic continues to affect hospital performance in its quality measurement and value programs, and appreciate its proposal not to penalize hospitals for non-representative performance under the Hospital-Acquired Condition Reduction and Value-Based Purchasing Programs for FY 2023,” she continued. “Hospitals and health systems share CMS’ deep commitment to advancing health equity. We look forward to reviewing the details of CMS’ proposed health equity-related quality measures and further engaging the agency on how to advance this vital work.” 

CMS will accept comments on the proposed rule through June 17. 

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