Fact sheet

Fiscal Year (FY) 2022 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) Rates Proposed Rule (CMS-1752-P)

On April 27, 2021, the Centers for Medicare & Medicaid Services (CMS) issued the proposed rule for fiscal year (FY) 2022 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH). The proposed rule would update Medicare payment policies and rates for operating and capital‑related costs of acute care hospitals and for certain hospitals and hospital units excluded from the IPPS for FY 2022.

The proposed policies in the IPPS and LTCH PPS rule builds on key priorities to close health care equity gaps and support greater access to life-saving diagnostics and therapies during the public health emergency (PHE) and beyond. The rule’s provisions seek to sustain hospital readiness to respond to future public health threats, enhance the health care workforce in rural and underserved communities, and revise scoring, payment and public quality data reporting methods to lessen the adverse impacts of the pandemic and future unplanned events.

The proposed rule would update Medicare fee-for-service payment rates and policies for inpatient hospitals and long-term care hospitals for fiscal year (FY) 2022. CMS is publishing this proposed rule to meet the legal requirements to update Medicare payment policies for IPPS hospitals and LTCHs on an annual basis. This fact sheet discusses major provisions of the proposed rule, which can be downloaded from the Federal Register at:

CMS proposes to establish new requirements and revise existing requirements for the Hospital Value-Based Purchasing (VBP) Program, Hospital Readmissions Reduction Program, Hospital-Acquired Condition (HAC) Reduction Program, Hospital Inpatient Quality (IQR) Reporting Program, Long Term Care Hospital (LTCH) Quality Reporting Program, PPS-Exempt Cancer Hospital Reporting (PCHQR) Program, and the Medicare Promoting Interoperability Program.  In addition, CMS is requesting comments regarding the modernization of the quality measurement enterprise to digital quality measurement.

Consistent with Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities through the Federal Government, CMS is seeking stakeholder feedback on ways to attain health equity for all patients through policy solution. This includes enhancing hospital-specific reports that stratify measure results by Medicare/Medicaid dual eligibility and other social risk factors, ways to improve demographic data collection, and the potential creation of a hospital equity score to synthesize results across multiple measures and social risk factors. 

CMS also proposes to extend New Technology Add-on Payments for 14 technologies that otherwise would be discontinued in FY 2022. CMS also propose to extend New COVID-19 Treatments Add-on Payment (NCTAP) for eligible products through the end of the fiscal year in which the COVID-19 PHE ends.

CMS is proposing to repeal the collection of market-based rate information on the Medicare cost report and the market-based MS-DRG relative weight methodology as finalized in the FY 2021 IPPS/LTCH PPS final rule, this proposal will avoid imposing additional unnecessary burden on hospitals.

In this FY 2022 proposed rule, CMS states it will continue policies finalized in the FY 2020 IPPS/LTCH PPS final rule to address wage-index disparities affecting low wage index hospitals. Additionally, this proposed rule also includes a proposal to implement the imputed floor wage index provision of the American Rescue Plan Act of 2021. This proposed rule also includes proposals to implement provisions of the Consolidated Appropriations Act of 2021 relating to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs.

Background on the IPPS and LTCH PPS

CMS pays acute care hospitals (with a few exceptions specified in the law) for inpatient stays under the IPPS. LTCHs are paid under the LTCH PPS. Under these two payment systems, CMS sets base payment rates prospectively for inpatient stays based on the patient’s diagnosis and severity of illness. Subject to certain adjustments, a hospital receives a single payment for the case based on the payment classification assigned at discharge. The classification systems are:

IPPS: Medicare Severity Diagnosis-Related Groups (MS-DRGs) and LTCH PPS: Medicare Severity Long-Term Care Diagnosis-Related Groups (MS‑LTC‑DRGs).

The law requires CMS to update payment rates for IPPS hospitals annually and to account for changes in the prices of goods and services used by these hospitals in treating Medicare patients, as well as for other factors. This is known as the hospital “market basket.” The IPPS pays hospitals for services provided to Medicare beneficiaries using a national base payment rate, adjusted for a number of factors that affect hospitals’ costs, including the patient’s condition and the cost of hospital labor in the hospital’s geographic area. CMS updates to LTCHs payment rates annually according to a separate market basket based on LTCH-specific goods and services.

Proposed Changes to Payment Rates under IPPS

The proposed increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users is approximately 2.8 percent. This reflects the projected hospital market basket update of 2.5 percent reduced by a 0.2 percentage point productivity adjustment and increased by a 0.5 percentage point adjustment required by legislation.

Hospitals may be subject to other payment adjustments under the IPPS, including:

  • Payment reductions for excess readmissions under the Hospital Readmissions Reduction Program;
  • Payment reduction (1 percent) for the worst-performing quartile under the Hospital-Acquired Condition Reduction Program;
  • Upward and downward adjustments under the Hospital Value-Based Purchasing Program.

Before taking into account Medicare disproportionate share hospital (DSH) payments and Medicare uncompensated care payments, the proposed increase in operating payment rates, increases in capital payments, increases in payments for new medical technologies, increases in payments due to implementation of the imputed floor, and other proposed changes will increase hospital payments in FY 2022 by $3.4 billion, or 2.8 percent. CMS projects Medicare DSH payments and Medicare uncompensated care payments to decrease in FY 2022 compared to FY 2021 by approximately $0.9 billion.  Overall, CMS estimates hospitals payments will increase by $2.5 billion.

Use of the FY 2019 Inpatient Hospital Utilization Data Instead of the FY 2020 Data Due to the COVID-19 PHE

CMS’s goal is to use the best available data overall when setting inpatient hospital payment rates for the upcoming fiscal year.  For FY 2022, ordinarily the best available full year of data to approximate the expected FY 2022 inpatient hospital utilization would be data from FY 2020.  However, the FY 2020 data reflects changes in inpatient hospital utilization driven by the COVID-19 PHE.  The continuing rapid increase in vaccinations coupled with the effectiveness of the vaccines leads us to believe that there will be significantly lower risk of COVID-19 infection and fewer hospitalizations for COVID-19 in FY 2022 than occurred in FY 2020.  We are proposing to use the FY 2019 data from prior to the COVID-19 PHE to approximate the expected FY 2022 inpatient hospital utilization. As an alternative considered, we are also seeking comment on the use of the FY 2020 data.

Implications of Using FY 2019 Data for New Technology Add-on Payment

Since IPPS payments are generally based on the most recently available Medicare claims and cost report data, which tends to have a lag of 2-to-3 years, the statute provides temporary additional payments for cases with high costs under the New Technology Add-on Payment (NTAP) policy.  Under this policy, Medicare pays the applicable MS-DRG payment rate and up to an additional 65 percent (75 percent for certain antimicrobials) of the cost approved new technology.  The new technology add-on payment is not budget neutral and is generally limited to the 2-to 3-year period following the date of the FDA approval or clearance for marketing.

For FY 2022, in connection with CMS’s proposal to use FY 2019 instead of FY 2020 data for FY 2022 IPPS rate setting, CMS is proposing a one-year extension of new technology add-on payments for 14 technologies for which the new technology add-on payment would otherwise be discontinued beginning FY 2022.


Changes to the New COVID-19 Treatments Add-on Payment (NCTAP)

In response to the pandemic, CMS established the New COVID-19 Treatments Add-on Payment (NCTAP) for eligible discharges during the PHE. CMS anticipates inpatient cases of COVID-19 beyond the end of the public health emergency (PHE). Therefore, to continue to mitigate potential financial disincentives for hospitals to provide new COVID-19 treatments and to minimize any potential payment disruption immediately following the end of the PHE, CMS is proposing to extend the NCTAP payments for eligible COVID-19 products for through the end of the fiscal year in which the PHE ends. CMS is also proposing to discontinue NCTAP for discharges on or after Oct. 1, 2021 for a product that is approved for new-technology add-on payments beginning in FY 2022.

Closing Gaps in Health Equity in Graduate Medical Education (GME)

This proposed rule also makes strides in closing gaps in health equity. The training and retention of physicians is critical to ensuring access to health care in underserved communities that have historically experienced workforce challenges.  Section 126 of the Consolidated Appropriations Act (CAA), 2021, division CC (Pub. L. 116-260) requires the distribution of an additional 1,000 new Medicare-funded medical residency positions to train physicians. CMS is proposing to distribute the slots to qualifying hospitals, as specified by the law, including those located in rural areas and those serving areas with a shortage of health care professionals.

The 1,000 new slots will be phased in at no more than 200 slots per year beginning in FY 2023.  CMS estimates that this additional funding will total approximately $1.8 billion from FY 2023 through FY 2031. CMS is proposing to prioritize applications from qualifying hospitals that serve geographic areas and underserved populations with the greatest need.

The proposed rule also makes additional strides to close the health equity gap in rural communities, which tend to experience health care workforce shortages. CMS is proposing to implement section 127 of the CAA, Promoting Rural Hospital GME Funding Opportunity, which allows rural training hospitals participating in an accredited rural training track (RTT) to receive a GME cap increase.

Other GME Provisions

CMS is also proposing to implement section 131of the CAA, Medicare GME treatment of hospitals establishing new medical residency training programs after hosting medical resident rotators for short durations in the past. Because of accepting residents that rotated to the hospital from other training programs in the past, some hospitals inadvertently limited their ability to receive Medicare funding for residents in a new training program. The proposed rule would restore that ability if the hospital begins a new medical residency-training program within the first five years after enactment.

Closing the Health Equity Gap in CMS Quality Programs

Consistent with Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities through the Federal Government, CMS is also committed to addressing significant and persistent inequities in health outcomes in the U.S. through improving data collection to better measure and analyze disparities across programs and policies.

In the proposed rule, CMS is seeking stakeholder input, via a request for information (RFI), on ideas to revise several related CMS programs to make reporting of health disparities based on social risk factors and race and ethnicity more comprehensive and actionable for hospitals, providers, and patients.  CMS is seeking comment from stakeholders on future potential additional stratification of quality measure results by race, Medicare/Medicaid dual eligible status, disability status, LGBTQ+, and socioeconomic status.

CMS is seeking comment from stakeholders on the possible collection of a minimum set of demographic data elements by hospitals at the time of admission, and using electronic data definitions to permit nationwide, interoperable health information exchange, for the purposes of incorporating into measure specifications and other data collection efforts relating to quality.

CMS is also seeking comment on the potential development of a health equity score measure modeled off the Health Equity Summary Score used for Medicare Advantage contracts/plans, but adapted to the context of risk-adjusted hospital outcome measures and potentially other hospital quality measures used in CMS programs.

Uncompensated Care Payments

CMS distributes a prospectively determined amount of uncompensated care payments to Medicare disproportionate share hospitals (DSHs) based on their relative share of uncompensated care nationally. As required under law, this amount is equal to an estimate of 75 percent of what otherwise would have been paid as Medicare DSH payments, adjusted for the change in the rate of uninsured individuals. In this proposed rule, CMS is proposing to distribute roughly $7.6 billion in uncompensated care payments for FY 2022, a decrease of approximately $660 million from FY 2021.

This total uncompensated care payment amount reflects CMS Office of the Actuary’s projections that incorporate the estimated impact of the COVID-19 pandemic. We note that any potential impacts from the American Rescue Plan Act are not reflected in the proposed rule’s estimates, due to the timing for development of the FY2022 IPPS/LTCH PPS proposed rule.

Consistent with the policy adopted in the FY 2021 IPPS/LTCH PPS final rule for FY 2022 and subsequent fiscal years, CMS will use a single year of data on uncompensated care costs from Worksheet S-10 of hospitals’ FY 2018 cost reports to distribute these funds.  CMS is proposing to continue to use data regarding low-income insured days (Medicaid days for FY 2013 and FY 2018 SSI days) to determine the amount of uncompensated care payments for Puerto Rico hospitals, Indian Health Services, and Tribal hospitals for FY 2022, similar to the FY 2021 methodology.

Repeal of the Market-Based MS-DRG Relative Weight Policy

CMS is proposing to repeal the requirement that a hospital report on the Medicare cost report the median payer-specific negotiated charge that the hospital has negotiated with all of its MA organization payers, by MS-DRG, for cost reporting periods ending on or after January 1, 2021.  CMS estimates this will reduce administrative burden on hospitals by approximately 64,000 hours. We are also proposing to repeal the market-based MS-DRG relative weight methodology that was adopted effective for FY 2024, and to continue using the existing cost-based MS-DRG relative weight methodology to set Medicare payment rates for inpatient stays for FY 2024 and subsequent fiscal years.

Future of Digital Quality Measurement

CMS is seeking comment on plans to modernize its quality measurement enterprise:

  • Clarifying the definition of digital quality measures;
  • Using the Fast Healthcare Interoperability Resources (FHIR®) standard for eCQMs that are currently in the various quality programs;
  • Standardizing data required for quality measures for collection via FHIR-based Application Programming Interfaces (APIs);
  • Leveraging technological opportunities to facilitate digital quality measurement;
  • Better supporting data aggregation;
  • Developing a common portfolio of measures for potential alignment across CMS regulated programs, federal programs and agencies, and the private sector.

Hospital Inpatient Quality-Reporting (IQR) Program

The Hospital IQR Program is a pay-for-reporting quality program that reduces payment to hospitals that fail to meet program requirements. Hospitals that do not submit quality data or fail to meet all Hospital IQR Program requirements are subject to a one-fourth reduction in their Annual Payment Update under the IPPS. In the FY 2022 IPPS/LTCH PPS proposed rule, CMS is proposing to adopt five new measures, remove five existing measures, and make changes to the existing EHR certification requirements along with other administrative updates. CMS is also requesting comment on the potential future adoption of a COVID-19 mortality measure and patient reported outcome measure following elective primary total hip and/or knee arthroplasty.

Specifically, the rule proposes to adopt:

  • A new structural measure—Maternal Morbidity Structural Measure—beginning with a shortened CY 2021 reporting period/FY 2023 payment determination;
  • The COVID-19 Vaccination Coverage Among Health Care Personnel (HCP) measure beginning with a shortened reporting period from October 1, 2021 through December 31, 2021, affecting the CY 2021 reporting period/FY 2023 payment determination and for subsequent years;
  • Hybrid Hospital-Wide All-Cause Risk Standardized Mortality (Hybrid HWM) measure in a stepwise fashion, beginning with a voluntary reporting period which will run from July 1, 2022 through June 30, 2023, and followed by mandatory reporting beginning with the reporting period which runs July 1, 2023 through June 30, 2024, affecting the FY 2026 payment determination and for subsequent years;
  • Two medication-related adverse event electronic clinical quality measures (eCQMs) (Hospital Harm-Severe Hypoglycemia eCQM (NQF #3503e) and Hospital Harm-Severe Hyperglycemia eCQM (NQF #3533e)) beginning with the CY 2023 reporting period/FY 2025 payment determination.  

CMS is also proposing to remove:

  • The Death Among Surgical Inpatients with Serious Treatable Complications measure (NQF #0351) beginning with the FY 2023 payment determination. CMS is proposing to remove this measure because it is also proposing a more broadly applicable measure, Hospital HWM, for adoption in this proposed rule. The Hybrid HWM measure captures more conditions or procedures than CMS PSI-04.  The Hybrid HWM measure also captures mortality within 30 days of hospital admission for most conditions or procedures, compared to deaths for surgical discharges (or pregnancy, childbirth, and puerperium) as measured by CMS PSI-04;
  • The Exclusive Breast Milk Feeding (NQF #0480) measure beginning with the FY 2026 payment determination. CMS is proposing to remove this measure because of the availability of a measure that is more strongly associated with desired patient outcomes for the particular topic. Specifically, in keeping with the agency’s focus on maternal health, we are proposing to adopt the Maternal Morbidity Structural Measure for inclusion in the Hospital IQR Program beginning with a shortened CY 2021 reporting period/FY 2023 payment determination;
  • The Admit Decision Time to Emergency Department (ED) Departure Time for Admitted Patients (NQF #0497) measure beginning with the CY 2024 reporting period/FY 2026 payment determination. CMS is proposing to remove this measure because the costs associated with the measure outweigh the benefit of its continued use in the program; 
  • The two stroke-related eCQMs (Anticoagulation Therapy for Atrial Fibrillation/Flutter eCQM (STK-03) (NQF #0436) and Discharged on Statin Medication eCQM (STK-06)  (NQF #0439) beginning with the CY 2024 reporting period/FY 2026 payment determination. While CMS continues to believe that ensuring appropriate pharmacotherapy for stroke patients is an important topic, within the eCQM portfolio of stroke measures, CMS identified STK 03 and STK-06 as candidates for removal. For STK-03 specifically, the patient population (patients prescribed anticoagulation therapy, which is a type of antithrombotic therapy), can be considered a subpopulation of the global population of ischemic stroke patients captured under the STK-02 eCQM, which measures the number of patients prescribed antithrombotic therapy at hospital discharge. For STK-06, CMS believes other measures like STK-02, Discharged on Antithrombotic Therapy, and STK-05, Antithrombotic Therapy by The End of Hospital Day 2, already support the agency’s efforts to improve care and patient outcomes in the acute period.

The agency is requesting comment from stakeholders on the potential future development and inclusion of two measures: a mortality measure for patients admitted with COVID-19; and a patient-reported outcomes measure following elective total hip and/or total knee arthroplasty (THA/TKA).

CMS is also requesting comment specific to the Hospital IQR Program on the potential future expansion of measure data stratification for the Hospital-Wide All-Cause Unplanned Readmissions measure and the possible future adoption of a structural measure to assess the degree of hospital leadership engagement in health equity performance data.

Additionally, beginning with the CY 2023 reporting period/FY 2025 payment determination, CMS is proposing to require hospitals to use certified technology that has been updated consistent with the 2015 Edition Cures Update and is clarifying that certified technology must support the reporting requirements for all available eCQMs.  

Medicare Promoting Interoperability Program

In 2011, CMS established the Medicare and Medicaid EHR Incentive Programs (now known as the Promoting Interoperability Programs) to encourage eligible professionals, eligible hospitals, and critical access hospitals (CAHs) to adopt, implement, upgrade, and demonstrate meaningful use of certified EHR technology (CEHRT). 

CMS specifically proposes the following changes to the Medicare Promoting Interoperability Program for eligible hospitals and CAHs:

  • Continue the EHR reporting period of a minimum of any continuous 90-day period for new and returning eligible hospitals and CAHs for CY 2023 and to increase the EHR reporting period to a minimum of any continuous 180-day period for new and returning eligible hospitals and CAHs for CY 2024;
  • Maintain the Electronic Prescribing Objective’s Query of PDMP measure as optional while increasing its available bonus from 5 points to 10 points;
  • Modify technical specifications of the Provide Patients Electronic Access to Their Health Information measure to include establishing a data availability requirement;
  • Add a new Health Information Exchange (HIE) Bi-Directional Exchange measure as a yes/no attestation, beginning in CY 2022 to the HIE objective as an optional alternative to the two existing measures; 
  • Require reporting “yes” on four of the existing Public Health and Clinical Data Exchange Objective measures (Syndromic Surveillance Reporting, Immunization Registry Reporting, Electronic Case Reporting, and Electronic Reportable Laboratory Result Reporting) or requesting applicable exclusion(s); 
  • Attest to having completed an annual assessment of all nine guides in the SAFER Guides measure, under the Protect Patient Health Information objective;
  • Remove attestation statements 2 and 3 from the Promoting Interoperability Program’s prevention of information blocking attestation requirement;
  • Increase the minimum required score for the objectives and measures from 50 points to 60 points (out of 100 points) to be considered a meaningful EHR user; and
  • Adopt two new eCQMs to the Medicare Promoting Interoperability Program’s eCQM measure set beginning with the reporting period in CY 2023, in addition to removing four eCQMs from the measure set beginning with the reporting period in CY 2024 (in alignment with proposals for the Hospital IQR Program).


PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

The PCHQR Program collects and publishes data on applicable quality measures. CMS is proposing to remove the Oncology Plan of Care for Pain – Medical Oncology and Radiation Oncology (NQF #0383) (PCH-15) measure.  This measure is being removed because it is not feasible to implement the measure specifications.  CMS is also proposing to codify existing PCHQR Program policies in our regulations, and adopt the COVID-19 Vaccination Coverage Among Healthcare Personnel measure.

Establishment of Measure Suppression Policy in Response to COVID-19 PHE in Certain Value-Based Purchasing Programs

In response to the impact of the COVID-19 PHE, CMS is proposing a measure suppression policy in the Hospital Readmissions Reduction Program (HRRP), Hospital-Acquired Condition (HAC) Reduction Program, and Hospital Value-Based Purchasing (VBP) Program that would allow CMS to suppress the use of measure data if the agency determines that circumstances caused by the COVID-19 PHE have affected those measures and the resulting quality scores significantly.  This policy is intended to ensure that these programs do not reward or penalize hospitals based on circumstances caused by the PHE for COVID-19 that the measures were not designed to accommodate.  Examples of the types of external factors that the PHE has had that may affect quality measurement include changes to clinical practices to accommodate safety protocols for medical personnel and patients, as well as unpredicted changes in the number of stays and facility-level cases.              

Hospital Readmissions Reduction Program (HRRP)

The HRRP is a Medicare value-based purchasing program that reduces payments to hospitals with excess readmissions. It also supports CMS’ goal of improving health care for Medicare beneficiaries by linking payment to the quality of hospital care.  In the FY 2022 IPPS/LTCH PPS proposed rule, CMS is:

  • Proposing to adopt a measure suppression policy; and proposing to suppress the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following Pneumonia Hospitalization measure (NQF #0506) beginning with the FY 2023 program year;
  • Modifying the remaining five condition-specific readmission measures to exclude COVID-19 diagnosed patients from the measure denominators, beginning with the FY 2023 program year;
  • Seeking public comment on closing the gap in health equity through possible future stratification of results by race and ethnicity for condition/procedure-specific readmission measures and by expansion of standardized data collection to additional social factors, such as language preference and disability status;
  • Soliciting public comment on mechanisms of incorporating other demographic characteristics into analysis that address and advance health equity, such as the potential to include administrative and self-reported data to measure co-occurring disability status; and
  • Proposing to update the regulatory text to reflect the renaming of the Hospital Compare website now referred to as Care Compare.

Hospital-Acquired Condition (HAC) Reduction Program

The HAC Reduction Program creates an incentive for hospitals to reduce the incidence of hospital-acquired conditions by requiring the Secretary to reduce payment by one percent for applicable hospitals, which are subsection (d) hospitals that rank in the worst performing quartile on select measures of hospital-acquired conditions. In the FY 2022 IPPS/LTCH PPS proposed rule, CMS is proposing to:

  • Establish a measure suppression policy; and proposing to suppress the third and fourth quarters of CY 2020 CDC National Healthcare Safety Network Healthcare-Associated Infection (HAI) and CMS PSI 90 data from performance calculations for the FY 2022 and FY 2023 program years;
  • Update the regulatory text to reflect the renaming of the Hospital Compare website now referred to as Care Compare.

Clarification of Extraordinary Circumstances Exceptions (ECE) Policy due to Public Health Emergency (PHE)

The agency is also clarifying in the rule, with respect to the Hospital Readmissions Reduction Program (HRRP) and HAC Reduction Program, that an approved Extraordinary Circumstances Exceptions (ECE) would not “except” a facility from the quality program, but instead that the facility would be “excepted” from reporting data for the approved data-reporting period.

Hospital Value-Based Purchasing (VBP) Program

The Hospital VBP Program is a budget-neutral program funded by reducing participating hospitals’ base operating DRG payments each fiscal year by 2.0 percent and redistributing the entire amount back to the hospitals as value-based incentive payments.  In this proposed rule, CMS is proposing to:

  • Establish the measure suppression policy described above for the duration of the COVID-19 PHE;
  • Suppress the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), Medicare Spending Per Beneficiary (MSPB), and five HAI measures, for the FY 2022 program year, and
  • Suppress the Pneumonia (PN) 30-Day Mortality Rate (MORT-30-PN) measures measure for the FY 2023 program year;
  • Remove the Patient Safety and Adverse Events Composite (CMS PSI 90) measure beginning with the FY 2023 program year. CMS continues to consider patient safety a high priority, but because the CMS PSI 90 measure is also used in the HAC Reduction Program, CMS believes removing this measure from the Hospital VBP Program will reduce the provider and clinician costs associated with tracking duplicative measures across programs.

As a result of the above proposed measure suppressions for the FY 2022 program year, CMS believes that calculating a total performance score (TPS) for hospitals using only data from the remaining measures, all of which are in the Clinical Outcomes Domain would not result in a fair national comparison.  Therefore, CMS is also proposing to not calculate a TPS for any hospital based on one domain and to instead award to all hospitals value based payment amount for each discharge that is equal to the amount withheld.  CMS is also proposing to calculate measure rates for all measures and to publicly report those rates where feasible and appropriately caveated. The agency is also proposing to update the baseline period for certain measures affected by the ECE granted in response to the COVID-19 PHE and to make a few technical administrative updates.

Long Term Care Hospital Quality Reporting Program (LTCH QRP)

The LTCH QRP is a pay-for-reporting program. LTCHs that do not meet reporting requirements are subject to a two-percentage point (2%) reduction in their Annual Increase Factor. In the FY 2022 IPPS/LTCH PPS proposed rule, CMS is proposing to:

  • Adopt the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) Measure;
  • Update the denominator for the Transfer of Health (TOH) Information to the Patient-Post Acute Care (PAC) quality measure;
  • Publicly Report Quality Measures with fewer than Standard Numbers of Quarters due to COVID-19 Public Health Emergency (PHE) exemptions;
  • Publicly Report the Compliance with Spontaneous Breathing Trial (SBT) by Day 2 of the LTCH Stay Beginning with the March 2022 Care Compare refresh or as soon as technically feasible;
  • Publicly Report the Ventilator Liberation Rate for the PAC LTCH QRP Measure, beginning with the March 2022 Care Compare refresh or as soon as technically feasible;
  • Fast Healthcare Interoperability Resources (FHIR) in support of Digital Quality Measurement in Quality Programs – Request for Information (RFI);
  • Closing the Health Equity Gap in Post-Acute Care Quality Reporting Programs – Request for Information (RFI).

Implementation of Section 9831 of the American Rescue Plan Act of 2021 Imputed Floor Wage Index Policy for All-Urban States

Beginning with FY 2022, section 9831 of the American Rescue Plan Act of 2021 requires the permanent reinstatement of the imputed floor wage index methodology for all-urban States, defines the term all-urban State, and exempts the increased payments to hospitals in all-urban States from budget neutrality under the IPPS.  Based on data available for the proposed rule, for FY 2022, the all-urban States of New Jersey, Rhode Island, Delaware, Connecticut, and the District of Columbia are eligible to receive an increase in their wage index due to application of the imputed floor, based on data available for this proposed rule. (The District of Columbia and Puerto Rico generally are treated as States for Medicare payment purposes under section 1861(x) of the Social Security Act.)  We note, given the recent enactment of this policy, there was not sufficient time available to incorporate the changes required by this statutory provision into the calculation of the provider wage index for this proposed rule, and we will include the imputed floor adjustment in the calculation of the provider wage index in the FY 2022 final rule. CMS estimates that this provision will increase FY 2022 Medicare payments to hospitals located in all-urban States by approximately $0.2 billion.  

Medicaid Enrollment of Medicare Providers for Purposes of Determining Medicare Cost Sharing Payments for Dually Eligible Individuals

Through the Medicare Savings Programs and Medicaid statutes, states are required to pay the Medicare cost sharing for over 8 million dually eligible individuals.  However, through what is commonly referred to as “lesser-of” policies, states are allowed to pay less than the full Medicare cost sharing or in certain circumstances, make no payment at all; 43 states currently have lesser-of policies for inpatient hospital cost sharing. If states pay less than such cost-sharing amounts, certain Medicare providers may submit these unpaid cost-sharing amounts to Medicare for payment as reimbursement for “bad debt.”  In order to claim Medicare bad debt, a provider must show it has tried to obtain payment for the debt. There are currently over 1,000 active Provider Reimbursement Review Board (PRRB) appeals across 30 states from Medicare providers seeking Medicare bad debt payments.

Under the proposed rule, CMS would require state Medicaid provider enrollment systems allow valid enrollments from Medicare providers serving certain Medicare-Medicaid dually eligible individuals – even if a provider or supplier is of a type not recognized as eligible to enroll in the state Medicaid program – for purposes of processing cost sharing claims for services furnished to these dually eligible individuals.  This recommended change in regulation would help reduce appeal and litigation costs. 

Medicare Shared Savings Program

CMS proposes to make changes to policies for the Shared Savings Program to allow eligible Accountable Care Organizations (ACOs) participating in the BASIC track’s glide path option to elect to forgo automatic advancement along the glide path’s increasing levels of risk and potential reward for performance year (PY) 2022. Under this proposal, prior to the automatic advancement for PY 2022, an eligible ACO may elect to remain in the same level of the BASIC track's glide path in which it participated during PY 2021.  For PY 2023, an ACO that elects this advancement deferral option would be automatically advanced to the level of the BASIC track's glide path in which it would have participated during PY 2023 if it had advanced automatically to the required level for PY 2022 (unless the ACO elects to advance more quickly before the start of PY 2023).

Changes to Payment Rates under LTCH PPS

For FY 2022, CMS expects LTCH-PPS payments to increase by approximately 1.4 percent or $52 million. LTCH PPS payments for FY 2022 for discharges paid the standard LTCH payment rate are expected to increase by 1.2 percent due primarily to the annual standard Federal rate update for FY 2022 of 2.2 percent and a projected 0.8 percent decrease in high cost outlier payments.

LTCH PPS payments for FY 2022 for discharges paid the site neutral payment rate are expected to increase by 3 percent. CMS estimates that discharges paid the site neutral payment rate will represent approximately 25 percent of all LTCH cases and 10 percent of all LTCH PPS payments in FY 2022.

Organ Acquisition Payment Policies

CMS is proposing to change, clarify, and codify Medicare organ acquisition payment policies relative to organ procurement organizations (OPOs), transplant hospitals, and donor community hospitals.  Specifically, CMS is proposing to facilitate more accurate payment of Medicare’s share of organ acquisition costs by collecting data from transplant hospitals and OPOs to calculate this share; and to ensure Medicare payment at reasonable costs by requiring donor community (not transplant) hospitals to bill OPOs customary charges that are reduced to costs, in line with Medicare reasonable cost principles. 

Extensions of the Rural Community Hospital and Frontier Community Health Integration Project (FCHIP) Demonstrations

Sections 128 and 129 of the Consolidated Appropriations Act of 2021, respectively, authorize a five-year extension for each of the Rural Community Hospital Demonstration and FCHIP Demonstration. CMS is including its proposals for implementing these extensions in the FY 2022 IPPS/LTCH PPS proposed rule.

Interim Final Rule with Comment (IFC)

Along with the FY 2022 IPPS/LTCH PPS proposed rule, CMS is issuing an IFC to amend our current regulations at § 412.230 to allow hospitals with a rural redesignation to reclassify through the Medicare Geographic Classification Review Board using the rural reclassified area as the geographic area in which the hospital is located.  These regulatory changes align our policy with the decision in Bates County Memorial Hospital v. Azar, 464 F. Supp. 3d (D.D.C. 2020)

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