CMS Issued Hospital IPPS Final Rule for Fiscal Year 2023

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  • CMS Final Rule updated the IPPS rates by 2.6% in FY 2023 compared to FY 2022. 
  • The rule will be effective on October 1, 2022.  
  • AHA thanked CMS for increasing the IPPS instead of cutting them as proposed. However, the association said the update still falls short regarding the healthcare needs during these times.  

On August 1, 2022, the Centers for Medicare & Medicaid Services (CMS) issued the Fiscal Year (FY) 2023 Medicare Hospital Inpatient Prospective Payment System (IPPS) final rule.  

This policy updates Medicare fee-for-service payment rates and policies for inpatient hospitals for FY 2023, as required. The final rule updated the IPPS rates by 2.6% in FY 2023 compared to FY 2022.  

The increase reflects a 4.1% market base update, less 0.3 percentage point for productivity, plus 0.5 percentage point required by statute.  

Some other provisions CMS added in this final rule are: 
  • Returns to using the most recent data available for rate setting, but with modifications to account for the COVID-19 pandemic. 
  • Uses more than one year of Worksheet S-10 cost report data to determine uncompensated care costs, specifically FY 2018 and 2019 data to distribute FFY 2023 payments and a 3-year average for FY 2024 and beyond.  
  • Permanently applies a budget-neutral 5% on any decrease to a hospital´s wage index from the prior FY. 
  • Uses a modified policy for direct graduate medical education full-time equivalent cap calculations. 

The American Hospital Association (AHA) thanked the CMS for deciding increased inpatient payments next year rather than the cut they proposed. However, according to Stacey Hughes, AHA´s Executive Vice President, on a statement, 

“This update still falls short of what hospitals and health systems need to continue to overcome the many challenges that threaten their ability to care for patients and provide essential services for their communities.”  

Due to the impact of COVID-19 PHE (Public Health Emergency) on measure data used in the Hospital VBP (Value Based Payment) Program and HAC (Hospital Acquired Condition) Reduction Program, the CMS will be finalizing its proposals to suppress several measures in both programs for purposes of FY 2023 scoring and payment adjustments.  

This final rule is effective October 1, 2022. Read more about this inpatient prospective payment system (IPPS) on the Final Rule document or visit the CMS IPPS Final Rule Home Page.  

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