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The Centers for Medicare & Medicaid Services today issued a that updates the inpatient prospective payment system rates by 2.6% in FY 2023 compared to FY 2022. The increase reflects a 4.1% market basket update, less 0.3 percentage point for productivity, plus 0.5 percentage point required by statute. The update also includes a 1.7 percentage point cut for outlier payments. In addition, CMS finalized decreases in disproportionate share hospital payments ($300 million), new medical technology payments ($750 million), and enhanced Low-Volume Hospital and Medicare Dependent Hospital payments ($600 million) due to the statutory expiration of these programs.

AHA Executive Vice President Stacy Hughes said in a statement today, “We are pleased that CMS will provide hospitals and health systems with increased inpatient payments next year, rather than a cut as proposed, allowing them to better provide care for their patients and communities. As we urged, CMS will use more recent data to calculate the market basket and disproportionate share hospital payments, which yields far more accurate figures that better reflect the historic inflation and tremendous labor and supply cost pressures hospitals and health systems face. The AHA greatly appreciates the bipartisan groups of senators and representatives who expressed their support for hospitals and health systems by weighing in with CMS on their proposed policy. That said, 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.”

Among other provisions, the final rule:

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

The agency did not finalize its proposed policies related to the treatment of Medicaid Section 1115 demonstrations for purposes of Medicare DSH payments in this rule. Instead, it stated that it would address them in future rulemaking.
CMS adopted changes to its quality reporting and value programs. For FY 2023, CMS will suppress most measures in its Hospital Value-based Purchasing Program, and all measures in its Hospital-Acquired Condition Reduction Program. As a result, hospitals will not experience FY 2023 payment adjustments under either program. However, in a departure from the proposed rule, CMS will publicly report the FY 2023 results of the HAC Reduction Program’s patient safety indicator measure. CMS also adopted 10 new measures for the Inpatient Quality Reporting program, including three health equity-related measures and two perinatal electronic clinical quality measures. In addition, CMS will adopt a new “birthing friendly” designation for its Care Compare website beginning in Fall 2023. The agency also will increase the IQR program’s eCQM reporting requirements from four to six measures beginning with the calendar year 2024 reporting period.

In addition, CMS finalized revisions to the objectives and measures for the Medicare Promoting Interoperability Program, including making prescription drug monitoring program queries mandatory, and adding a new antimicrobial use and resistance surveillance measure.