Here’s what you need to know and how to weigh-in with CMS

by Jenna Stern, Vizient Senior Regulatory Affairs and Public Policy Director
Mina Kato, Vizient Senior Advocacy Communications and Stakeholder Engagement Manager

Each year, the Centers for Medicare & Medicaid Services (CMS) publishes regulations to update the Medicare hospital payment rules, such as for the Inpatient Prospective Payment System (IPPS), Outpatient Prospective Payment System (OPPS) and Physician Fee Schedule (PFS).

In April, CMS issued its annual proposed rule to update the IPPS for fiscal year (FY) 2023. Consistent with prior years, it contains key policy proposals, including both new and reemerging issues, and sets the stage for future rulemaking by issuing requests for information to collect stakeholder feedback. Based upon the policy changes and circumstances described in the proposed rule, CMS estimates acute care hospitals will experience a decrease of approximately $263 million in fiscal year 2023 compared to fiscal year 2022.

Stakeholder feedback is critical to the rulemaking process. Hospitals and other industry stakeholders are encouraged to submit feedback and comments to CMS on the proposed rule by 5 p.m. on June 17, 2022.

However, key themes from the IPPS tend to emerge in other annual payment rules and often reflect priorities identified by the Administration. With the FY 2023 OPPS and PFS proposed rules being released in the coming weeks, it is important to anticipate what may be next, and to also be aware of why such trends may be emerging.

Here are our key takeaways hospitals need to know about the IPPS proposed rule (our full summary of the proposed rule is available online) and what to anticipate for OPPS and PFS.

Proposed payment update may be inadequate

For FY 2023, after accounting for inflation and other adjustments required by law, the proposed rule increases IPPS operating payment rates by 3.2 percent in FY 2023 for hospitals that successfully participate in the Hospital Inpatient Quality Reporting Program and are meaningful electronic health record users. Given other aspects of the proposed rule, such as the $834 million decline in Disproportionate Share Hospital payments and a decrease in new technology add-on payments, hospitals that receive payments under IPPS may continue to feel strained. 

While Vizient has called on Congress to provide additional support to hospitals due to changes related to the pandemic, including a workforce crisis and the impact of inflation on supplies, the proposed payment rate update does not appear to adequately address these challenges. It’s very possible that the OPPS and PFS proposed rules may be similarly disappointing.

Policies address COVID-19 and wind-down of Public Health Emergency

Just as President Biden’s March 2022 National COVID-19 Preparedness Plan aims to “get back to more normal routines” and more information is being shared about the “unwinding” of the COVID-19 Public Health Emergency (PHE), CMS tries to account for the impact of COVID-19 in the IPPS proposed rule. For example, CMS:

  • Anticipates COVID-19 hospitalizations will decline in FY 2023 and proposes to determine the Medicare severity diagnosis-related group (MS-DRG) relative weights for FY 2023 by averaging the relative weights as calculated with and without COVID-19 cases using data from FY 2021
  • Provides a policy for a neutral payment adjustment under the Hospital Value-Based Purchasing Program for FY 2023, and no penalties would be imposed in the Hospital-Acquired Condition Reduction Program for FY 2023
  • Proposes a revision to the Conditions of Participation to report data elements for COVID-19, seasonal influenza and future pandemics, similar to what is currently required during the COVID-19 PHE
  • Seeks feedback on potential payment increases related to wholly domestically made NIOSH-approved surgical N95 respirators

Seeking approaches to address health inequities

Consistent with the Administration’s priorities, including an executive order to advance equity and other efforts by the Department of Health and Human Services, the IPPS proposed rule includes proposals and numerous requests for information regarding potential approaches to address health inequities. For example, CMS:

  • Seeks information on the reporting of social determinant of health diagnosis codes (Z55-Z65) and notes that reporting may improve the agency’s ability to recognize severity of illness, complexity of illness and/or utilization of resources under the MS-DRGs
  • Requests feedback regarding hospital performance for socially at-risk populations in the hospital readmissions reduction program
  • Requests feedback on overarching principles for measuring equity and healthcare quality disparities across CMS quality programs (as in the inpatient rehabilitation facility and skilled nursing facility FY 2023 proposed rules)
  • Proposes adding health equity-related measures in hospital quality programs, including the Hospital Commitment to Health Equity measure, Screening for Social Drivers of Health measure and Screen Positive Rate for Social Drivers of Health measure, among others
  • Proposes to establish a publicly-reported hospital designation on maternity care (for more information, see CMS’s fact sheet on maternal health and equity measures)

Hospitals and other industry stakeholders should evaluate the impact of these potential regulatory changes and consider weighing-in with CMS. And, as we’ve highlighted, you can anticipate key themes from IPPS will emerge in rulemaking that will be released soon. If you have any questions or concerns, don’t hesitate to reach out to Vizient’s Office of Public Policy and Government Relations.

About the authors:

Jenna Stern currently serves as Vizient’s senior regulatory affairs and public policy director. In this role, she identifies and responds to legislative and regulatory developments of most interest to Vizient’s members. Medicare reimbursement and drug policy are among the topics which Jenna focuses on at Vizient. Prior to joining Vizient, Jenna was the director for health policy at the American Pharmacists Association and a senior associate with Avalere Health, a health care consulting firm in Washington, DC. In her previous roles, she specialized in regulatory affairs, strategy, policy and data analysis for life sciences, health plans and providers. Jenna has also worked at various non-profit organizations focusing on public health and patient advocacy. Her educational background includes a Bachelor of Science in Health Sciences (Hons.) from Brock University and a Juris Doctor with a concentration in health law from Case Western Reserve University. She is admitted to the Maryland bar.

Mina Kato is the senior advocacy communications and stakeholder engagement manager for Vizient. Prior to joining Vizient, Mina managed advocacy communications initiatives for the Council for Advancement and Support of Education (CASE). She also worked in educational advancement at American University and started her career on Capitol Hill. Mina received her bachelor’s degree in political science with a focus on international affairs from the University of California, Riverside, and her master’s degree in political science from American University.

Published: June 2, 2022