Fact Sheets

Fiscal Year 2024 Medicare Inpatient Psychiatric Facility Prospective Payment System and Quality Reporting Final Rule

On July 27, 2023, the Centers for Medicare & Medicaid Services (CMS) issued a final rule (CMS-1783-F) to update Medicare payment policies and rates for the Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) for fiscal year (FY) 2024. 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 annual updates to the prospective payment rates and the outlier threshold. In addition, the rule finalizes CMS’s proposals to rebase and revise the IPF market basket and to modify regulations to allow hospitals to open and begin billing Medicare for an excluded IPF unit anytime within the cost reporting year. CMS believes this will help increase access to essential inpatient psychiatric services and available beds.

This final rule also includes a summary of the request for information (RFI) that was included in the proposed rule to inform future revisions to the IPF PPS, which are required by the Consolidated Appropriations Act, 2023 (CAA, 2023) (Pub. L. 117- 328).

Lastly, for the IPF Quality Reporting (IPFQR) Program, CMS is adopting four new measures, modifying one existing measure, removing two existing measures, and adopting and implementing a data validation pilot. Three of the measures being adopted will help integrate information about facility commitment to health equity and social drivers of health data into IPF quality performance measurement as part of our broader commitment to health equity. One of the measures being adopted is a patient experience survey measure, which satisfies a requirement of the CAA, 2023, to adopt such a measure no later than FY 2031. CMS is also codifying the IPFQR Program’s requirements and policies at 42 C.F.R. § 412.433 in alignment with CMS’s other quality reporting programs.

The FY 2024 IPF PPS final rule can be downloaded from the Federal Register at:

Changes to Payments Under the IPF PPS

Updates to IPF Payment Rates

Total estimated payments to IPFs are estimated to increase by 2.3%, or $70 million, in FY 2024 relative to IPF payments in FY 2023. For FY 2024, CMS is updating the IPF PPS payment rates by 3.3%, based on the final 2021-based IPF market basket increase of 3.5% less a 0.2 percentage point productivity adjustment. Additionally, CMS is updating the outlier threshold so that estimated outlier payments remain at 2.0% of total payments. CMS estimates that updating the outlier threshold will result in a 0.9% decrease to aggregate payments. (Note: Due to rounding, the 3.3% increase to payment rates and the 0.9% decrease due to outlier payment changes result in a 2.3% overall increase in IPF payments). 

Rebasing and Revising the IPF PPS Market Basket

Since the IPF PPS was implemented, the market basket used to update IPF PPS payments has been rebased and revised to reflect more recent data on IPF cost structures. CMS last rebased and revised the IPF market basket in the FY 2020 IPF PPS final rule, where a 2016-based IPF market basket, using Medicare cost report data for both Medicare-participating freestanding psychiatric hospitals and hospital-based psychiatric units, was adopted. For FY 2024, we are adopting a 2021-based IPF market basket and finalizing changes to the market basket cost weights, price proxies, the market basket percentage increase, and labor-related share.

Update to the Labor-Related Share

As a result of the rebasing and revising of the IPF market basket, the final FY 2024 labor-related share (LRS) is 78.7%, which is a 1.3 percentage point increase relative to the FY 2023 LRS of 77.4%.  This higher labor-related share is primarily due to the incorporation of the 2021 Medicare cost report data, which increased the Compensation cost weight by 0.9 percentage point compared to the 2016-based IPF market basket.

Modification to the Regulation on Excluded Units Paid Under the IPF PPS

In response to increased behavioral health needs nationwide, including the need for the availability of inpatient psychiatric beds, CMS is finalizing changes to the regulations to allow greater flexibility for hospitals to open and bill Medicare for new excluded inpatient psychiatric distinct part units. Beginning in FY 2024, CMS is amending the regulations at 42 C.F.R. § 412.25(c) to allow hospitals to open a new excluded IPF unit at any time during the cost-reporting period rather than only at the start of a hospital’s cost-reporting period. This change will allow a hospital’s excluded IPF unit to start being paid under the IPF PPS if the hospital provides at least 30 days’ notice to the CMS Regional Office and Medicare Administrative Contractor. CMS believes this change will alleviate unnecessary burden and administrative complexity placed upon hospitals when opening new excluded psychiatric units, helping to expand access to behavioral health care in line with the CMS Behavioral Health Care Strategy.

RFI to Inform the Revisions to the IPF PPS Required by the Consolidated Appropriations Act, 2023 (CAA, 2023)

New provisions in the CAA, 2023, require CMS to revise payments under the IPF PPS for Rate Year 2025 (which, under the IPF PPS, is FY 2025) as the Secretary determines appropriate. Accordingly, CMS included an RFI in the proposed rule that will be used to inform future payment revisions. In the proposed rule, CMS addressed the specific types of data and information that the CAA, 2023 suggests CMS may collect and solicited comments on additional data and information that could be collected to inform future payment revisions. Commenters offered various suggestions of patient characteristics and factors we could consider for analysis. CMS will take these comments into consideration for future rulemaking.

Background on the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

The IPFQR Program requires that all IPFs paid under the IPF PPS must submit certain specified quality data to CMS in a form and manner and within the timeframes that CMS prescribes. IPFs that do not submit the specified data on quality measures as required by the IPFQR Program receive a 2.0 percentage point reduction to their annual payment update. 

The IPFQR Program aims to assess and foster improvement in the quality of care provided to patients in IPFs. By requiring IPFs to submit quality data to CMS annually and by publicly reporting these data under the IPFQR Program, CMS ensures that IPFs are aware of best practices and that patients can make more informed decisions about their healthcare options.

The IPFQR Program began collecting data in FY 2013. Each year since the IPFQR Program began, approximately 97% of participating IPFs meet all IPFQR Program requirements and receive their full payment update.

Final Updates to the IPFQR Program

CMS is adopting three measures focused on health equity for the IPFQR Program. First, CMS is adopting the Facility Commitment to Health Equity measure, beginning with reporting of CY 2024 data for the FY 2026 payment determination. This measure assesses an IPF’s commitment to health equity by asking the IPF to attest to its efforts to address health equity across five domains: (1) Equity is a Strategic Priority; (2) Data Collection; (3) Data Analysis; (4) Quality Improvement; and (5) Leadership Engagement. Second, CMS is adopting the Screening for Social Drivers of Health (SDOH) measure beginning with voluntary reporting of CY 2024 data followed by mandatory reporting of CY 2025 data for the FY 2027 payment determination. This measure assesses the percentage of patients, aged 18 years and over at the time of admission, who are screened for five specific health-related social needs (HRSNs) — food insecurity, housing instability, transportation needs, utility difficulties, and interpersonal safety. Third, CMS is adopting the Screen Positive Rate for SDOH measure beginning with voluntary reporting of CY 2024 data followed by mandatory reporting of CY 2025 data for the FY 2027 payment determination. This process measure assesses the percent of patients screened under the Screening for SDOH measure who screen positive for each of the five HRSNs, which is calculated and reported as five separate rates for each HRSN.

CMS is also adopting one patient experience of care measure (the Psychiatric Inpatient Experience (PIX) survey measure), which would fulfill the requirement under the CAA, 2023, to add a measure to the IPFQR Program on a patient’s experience of care no later than FY 2031. The PIX survey measure calculates scores as five separate rates, one for each of the four domains (relationship with treatment team, nursing presence, treatment effectiveness, and healing environment) and an overall score, based on patient responses to a 23-item survey administered beginning 24 hours prior to discharge. CMS is adopting the PIX survey measure beginning with voluntary reporting of CY 2025 data followed by mandatory reporting of CY 2026 data for the FY 2028 payment determination.

In addition, CMS is modifying the COVID-19 Vaccination Coverage Among Healthcare Personnel measure, beginning with the fourth quarter of CY 2023 and affecting the FY 2025 payment determination. The current version of this measure reports only on whether healthcare personnel (HCP) had received the primary vaccination series for COVID-19, while the modification of this measure would require IPFs to report the cumulative number of HCP who are up-to-date with recommended COVID-19 vaccinations in accordance with the CDC’s most recent guidance. CMS has proposed the same modification to this measure for other quality reporting programs, including, but not limited to, acute care hospitals and long-term care hospitals.

CMS is also removing two measures beginning with the FY 2025 payment determination. The first measure being removed is the Patients Discharged on Multiple Antipsychotic Medications with Appropriate Justification (HBIPS-5) measure. CMS is removing this measure because the clinical guidelines, which form the basis for this measure, have been updated, and the measure no longer aligns with the current clinical guidelines. The second measure being removed is the Tobacco Use Brief Intervention Provided or Offered and Tobacco Use Brief Intervention Provided (TOB-2/2a) measure. Specifically, we found that having two measures addressing tobacco cessation interventions in the IPFQR Program (that is, the TOB-2/2a and the Tobacco Use Treatment Provided or Offered at Discharge and Tobacco Use Treatment at Discharge (TOB-3/3a) measures), is unnecessarily duplicative. In addition, the TOB-2/2a measure is no longer endorsed by the consensus-based entity. The other tobacco cessation intervention measure, the TOB-3/3a measure, will remain in the IPFQR Program’s measure set.

CMS is also adopting a data validation pilot program beginning with data submitted in CY 2025 and continuing until a full data validation program is proposed and adopted in future rulemaking.

Finally, CMS is codifying the IPFQR Program’s requirements and policies related to statutory authority, participation and withdrawal, data submission, quality measure retention and removal, extraordinary circumstances exceptions, and public reporting at 42 C.F.R. § 412.433, in alignment with CMS’s other quality reporting programs.