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Special Edition - Inpatient Prospective Payment System & Long-Term Care Hospital Prospective Payment System Final FY 2023 Payment Rule
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Monday, August 1, 2022

New CMS Rule Increases Payments for Acute Care Hospitals & Advances Health Equity, Maternal Health

On August 1, CMS issued a final rule for inpatient and long-term care hospitals that builds on the Biden-Harris Administration’s key priorities to advance health equity and improve maternal health outcomes. As required by statute, the fiscal year (FY) 2023 Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) rule updates Medicare payments and policies for hospitals, drives high-quality, person-centered care, and promotes fiscal stewardship of the Medicare program. In addition, the rule finalizes new measures to encourage hospitals to build health equity into their core functions. These actions will improve care for people and communities who are disadvantaged or underserved by the health care system.

The rule includes three health equity-focused measures in hospital quality programs and establishes a “Birthing-Friendly” hospital designation. CMS will award this new designation to hospitals that participate in a statewide or national perinatal quality improvement collaborative program and have implemented the recommended quality interventions.

For acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record users, the final rule will result in an increase in operating payment rates of 4.3%. This reflects a FY 2023 projected hospital market basket update of 4.1%, reduced by a statutorily required productivity adjustment of a 0.3 percentage point and plus a 0.5 percentage point adjustment required by statute. This is the highest market basket update in the last 25 years and is primarily due to higher expected growth in compensation prices for hospital workers. Under the LTCH PPS, CMS expects payments in FY 2023 to increase by approximately 2.4% or $71 million.

"CMS is taking action to support hospitals, including updating payments to hospitals by a significantly higher rate than in the proposed IPPS rule. This final rule aligns hospital payments with CMS’ vision of ensuring access to health care for all people with Medicare and maintaining incentives for our hospital partners to operate efficiently," said CMS Administrator Chiquita Brooks-LaSure. "It also takes important steps to advance health equity by encouraging hospitals to implement practices that reduce maternal morbidity and mortality."

Advancing Health Equity

Consistent with the agency’s definition of health equity, CMS is working to advance health equity by designing, implementing, and operationalizing policies and programs that support health for all the people served by our programs, eliminating avoidable differences in health outcomes experienced by people who are disadvantaged or underserved, and providing the care and support that our enrollees need to thrive.

To address health care disparities in hospital inpatient care and beyond, CMS is adopting three health equity-focused measures in the IQR Program. The first measure assesses a hospital’s commitment to establishing a culture of equity and delivering more equitable health care by capturing concrete activities across five key domains, including strategic planning, data collection, data analysis, quality improvement, and leadership engagement. The second and third measures capture screening and identification of patient-level, health-related social needs — such as food insecurity, housing instability, transportation needs, utility difficulties, and interpersonal safety. By screening for and identifying such unmet needs, hospitals will be in a better position to serve patients holistically by addressing and monitoring what are often key contributors to poor physical and mental health outcomes.

In the near future, CMS is also interested in using measures focused on connecting patients with identified social needs to community resources or services. CMS sought comment on the proposed rule. In the final rule, CMS acknowledges the robust comments received on key considerations that inform our approach to improving data collection, to better measure and analyze disparities across programs and policies, and approaches for updating the Hospital Readmissions Reduction Program (HRRP) that encourage providers to improve performance for socially at-risk populations.

CMS is also discontinuing the use of proxy data for uncompensated care costs in determining uncompensated care payments for Indian Health Service and Tribal hospitals, and hospitals in Puerto Rico, and we are establishing a new supplemental payment to prevent undue long-term financial disruption for these hospitals and to promote long-term payment stability. CMS is also finalizing new flexibilities for graduate medical education for rural hospitals participating in rural track programs, which will help promote workforce development in rural areas.

Improving Maternal Health Outcomes:

CMS is creating a new hospital designation to identify “Birthing-Friendly” hospitals and additional quality measure reporting to drive improvements in maternal health outcomes. CMS is finalizing this designation following the release of the comprehensive CMS Maternity Care Action Plan (PDF).

The Biden-Harris Administration has championed policies to improve maternal health and equity since taking office. Earlier this year, Vice President Harris convened a first-ever White House meeting with Cabinet Secretaries and agency leaders, including Secretary Becerra and CMS Administrator Chiquita Brooks-LaSure, to discuss the Administration’s whole-of-government approach to reducing maternal mortality and morbidity. In December 2021, Vice President Harris announced a historic call to action to improve health outcomes for parents and their young children in the United States. Implementing this new hospital designation is part of the Biden-Harris Administration’s continued response to that call to action, as noted in the CMS Maternity Care Action Plan.

The “Birthing-Friendly” hospital designation will provide important information to consumers about hospitals with a demonstrated commitment to reducing maternal morbidity and mortality by implementing best practices that advance health care quality and safety for pregnant and postpartum patients.

Conditions of Participation Pandemic Reporting for Hospital and Critical Access Hospitals (CAH):

CMS proposed to continue the current COVID-19 reporting requirements for hospitals and CAHs as well as establish new reporting requirements for future public health emergencies (PHE). Based on public feedback, CMS is finalizing the proposed requirements for continued COVID-19-related reporting for hospitals and CAHs with a reduced number of data categories as an off ramp to the current PHE. CMS is not finalizing the proposed reporting requirements for future PHEs.

Continued Public Reporting of Patient Safety Metrics:

CMS uses quality measures to ensure safety and quality within the health care system and to pay providers through value-based programs. For the FY 2023 Hospital-Acquired Condition (HAC) Reduction Program, CMS proposed to pause — meaning not calculate and subsequently not publicly report — the data for the PSI-90 measure, which is a composite measure that covers multiple patient safety indicators, such as pressure sores, falls, and sepsis. CMS’ proposal reflected concerns about the impact COVID-19 would have on the ability to interpret data and was also sensitive to the risks of financially penalizing hospitals for factors potentially out of their control. CMS recognizes the importance of this measure for patients and providers and is finalizing the calculation and public reporting of the CMS PSI-90 measure results. CMS will include the measure in Star Ratings in alignment with the feedback we received. Although this measure will be publicly reported, it will not be used in payment calculations in the HAC to avoid unintentional penalties related to the uneven impacts of COVID-19 across the country.

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