Fact Sheets

Fiscal Year 2021 Final Medicare Payment and Policy Changes for Inpatient Psychiatric Facilities (CMS-1731-F)

On July 31, 2020, the Centers for Medicare & Medicaid Services (CMS) is finalizing a rule that further advances our efforts to strengthen the Medicare program by better aligning payments for inpatient psychiatric facilities (IPFs) with the costs of providing care. The final rule will update Medicare payment policies and rates for the IPF Prospective Payment System (PPS) for Fiscal Year (FY) 2021.  These policies support the agency’s priority of “Strengthening Medicare” and help guarantee that seniors can access the care they need at the site of care they choose.     

In this final rule, CMS is finalizing a 2.2 percent payment rate update and finalizing its proposal to adopt revised Office of Management and Budget (OMB) statistical area delineations resulting in wage index values being more representative of the actual costs of labor in a given area.

This fact sheet discusses major provisions of the final rule. 

Background on the IPF Prospective Payment System 

 The Balanced Budget Refinement Act of 1999 required CMS to pay for inpatient psychiatric services on a per diem basis under IPF PPS.  IPFs include Medicare participating psychiatric hospitals and certified psychiatric units in acute care hospitals or critical access hospitals.  

This IPF PPS final rule will update the payments for FY 2021 using the most recent available data.  The IPF PPS applies to approximately 1,550 inpatient psychiatric facilities.    


Changes to Payments under the IPF PPS  

Update to IPF Payments 

CMS estimates total IPF payments to increase by 2.3 percent or $95 million in FY 2021.  The IPF market basket increase, which is used to update IPF payment rates, is 2.2 percent.  This is further adjusted by the productivity adjustment of 0 percentage point resulting in an IPF payment rate update of 2.2 percent.  Additionally, total estimated payments to IPFs are estimated to increase 0.1 percentage point due to updating the outlier threshold amount to maintain estimated outlier payments at 2 percent of total estimated payments.   

Adoption of revised Office of Management and Budget (OMB) Statistical Area


CMS is adopting revised Office of Management and Budget (OMB) delineations from OMB Bulletin No. 18-04.  This bulletin established revised delineations for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided guidance on the use of the delineations of these statistical areas, thereby, resulting in wage index values being more representative of the actual costs of labor in a given area.    

Wage Index Transition for All Providers Negatively Impacted

CMS is finalizing its proposed policy that any decline in a provider’s wage index value from its FY 2020 wage index, regardless of the circumstance causing the decline, will be capped at a 5 percent decrease for FY 2021.    

Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program

For FY 2021 CMS adopts policies for the IPFQR Program that remain in effect for subsequent years after adopting those policies.   

Changes to Scope-of-Practice Regulations under the IPF PPS

CMS is finalizing updates to the regulatory language to allow advanced practice providers, including physician assistants, nurse practitioners, psychologists, and clinical nurse specialists, to operate within the scope of practice allowed by state law by documenting progress notes in the medical record of patients, for whom they are responsible, receiving services in psychiatric hospitals. The current regulation is inconsistent with other recent changes finalized throughout the hospital conditions of participation and unnecessarily imposes regulatory burden on psychiatric hospitals.

The FY 2021 IPF PPS final rule can be downloaded from the Federal Register at: