Fact sheet

Fiscal Year 2023 Medicare Inpatient Psychiatric Facility Prospective Payment System Final Rule (CMS-1769-F)

On July 27, 2022, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update Medicare payment policies and rates for the Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) for fiscal year (FY) 2023. CMS is publishing this final rule consistent with the legal requirements to update Medicare payment policies for IPFs on an annual basis.

This fact sheet discusses the major provisions of the final rule, including a permanent 5% cap policy to smooth the impact of year-to-year changes in IPF payments related to decreases in the IPF wage index. CMS is not finalizing any changes for the IPF Quality Reporting Program in this FY 2023 final rule.

The FY 2023 IPF PPS final rule can be downloaded from the Federal Register at:

Final Changes to Payments Under the IPF PPS

Final Updates to IPF Payment Rates 

Total estimated payments to IPFs are estimated to increase by 2.5% or $90 million in FY 2023 relative to IPF payments in FY 2022. For FY 2023, CMS is updating the IPF PPS payment rates by 3.8%, based on the final IPF market basket update of 4.1% less a 0.3 percentage point productivity adjustment. CMS is finalizing the FY 2023 market basket update and productivity adjustment based on the latest available data for this final rule.  Additionally, CMS is updating the outlier threshold so that estimated outlier payments remain at 2.0% of total payments. CMS estimates that this will result in a 1.2% decrease to aggregate payments due to updating the outlier threshold.  (Note: due to rounding, the 3.8% increase to payment rates and the 1.2% decrease to outlier payments result in a 2.5% overall increase in IPF payments). 

Comment Solicitation on IPF PPS Refinement Analysis

The IPF PPS was implemented in 2005 and uses the adjustment factors derived from the original regression model. Working in collaboration with a contractor, CMS has undertaken further analysis of more recent IPF cost and claim information, which is summarized in a report available on the CMS website at  CMS sought comments in the proposed rule on the results summarized in the report and on ways that CMS could better account for the effects that social determinants of health and low-income patient status have on the cost of providing IPF services. CMS received comments from MedPAC, state-level and national provider and patient advocacy organizations, and individual IPF hospitals and health systems in response to the comment solicitation, which we will take into consideration to potentially inform future rulemaking.

Permanent Cap on Wage Index Decreases

In order to mitigate instability in IPF PPS payments due to significant wage index decreases that may affect providers in any given year, CMS will apply a 5% cap on decreases in the IPF PPS wage index for FY 2023 and subsequent years, in a budget neutral manner. Specifically, CMS is finalizing that an IPF’s wage index for FY 2023 and subsequent years will not be less than 95% of its final wage index calculated in the prior FY.

Principles for Measuring Healthcare Quality Disparities

Consistent with Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities through the Federal Government, CMS’ Equity Plan for Improving Quality in Medicare, and CMS’ strategic pillar to advance equity, CMS is also committed to addressing persistent inequities in health outcomes in the U.S. through improving data collection to better measure and analyze disparities across programs and policies. As disparity initiatives expand, it is important to model efforts off existing best practices.

CMS sought comments in the proposed rule, via a request for information (RFI), on considerations for the agency when advancing the use of measurement and stratification as tools to address healthcare disparities and advance healthcare equity. CMS sought comments on key considerations in five specific areas that could inform our approach: identification of goals and approaches for measuring healthcare disparities and using measure stratification across CMS quality programs; guiding principles for selecting and prioritizing measures for disparity reporting across CMS quality programs; principles for social risk factor and demographic data selection and use; identification of meaningful performance differences; and guiding principles for reporting disparity results. CMS received many comments in response to this RFI, reflecting the importance of advancing health equity within CMS quality programs. We will consider this input carefully in developing future policies.