May 5, 2021

Last week, the Centers for Medicare and Medicaid Services (CMS) released its Fiscal Year (FY) 2022 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Rates Proposed Rule, along with a fact sheet that acts to summarize the critical parts of the proposals. The following will highlight some of the more critical components of the Proposed Rule (PR). As the PR is over 1,900 pages long, our summary will be provided in a multi-part series of alerts.

Payment Rates

General acute care hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users will see an increase in operating payment rates of about 2.8 percent. However, hospitals may be subject to other payment adjustments under the PR, 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.
Overall, CMS estimates hospital payments will increase by $2.5 billion in FY 2022.

COVID Treatment Add-on Payment

In response to the pandemic, CMS established the New COVID-19 Treatments Add-on Payment (NCTAP) for eligible discharges during the public health emergency (PHE). The agency anticipates inpatient COVID cases beyond the PHE. To minimize potential payment disruptions associated with providing new COVID treatments, including those following the end of the PHE, CMS is proposing to extend the NCTAP payments for eligible COVID products through the end of the fiscal year in which the PHE ends. The proposal would also 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.

Negotiated Rates Requirement

CMS is proposing to repeal the requirement that a hospital must provide 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. If finalized, this will be seen as a major victory for hospitals that have fought for this change for some time.

MS-DRG Relative Weight Policy

The agency is also proposing to repeal the market-based MS-DRG relative weight methodology that was to be effective for FY 2024 and instead 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.

Hospital Readmissions Reduction Program

The Hospital Readmissions Reduction Program (HRRP) is a Medicare value-based purchasing program that reduces payments to hospitals with excess readmissions. It also supports CMS’ goal of improving outcomes for Medicare beneficiaries by linking payment to the quality of hospital care. Specifically, the 2022 PR is:

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.
Hospital-Acquired Condition Reduction Program

The Hospital-Acquired Condition (HAC) Reduction Program creates an incentive for hospitals to reduce the incidence of hospital-acquired conditions by requiring the secretary of Health and Human Services (HHS) 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. The 2022 PR would 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.

Extraordinary Circumstances Exceptions

With respect to the Hospital Readmissions Reduction Program (HRRP) and HAC Reduction Program, the 2022 PR clarifies 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.

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We plan to provide a second installment of highlights from the 2022 IPPS Proposed Rule in next week’s alert. In the meantime, if you have a question for us, including how we can help with your business needs, please contact us at info@miramedgs.com.