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What to Know: CMS Hospital 2023 IPPS Final Rule

August 02, 2022

This week, CMS announced its final rule increasing inpatient hospital payment rates 1.1 percentage point above the agency’s original proposal and providing an additional $2.6 billion to U.S. hospitals.

In a statement Monday, the agency announced it would increase operating payment rates to 4.3 percent, up from its April proposal that would have updated rates to 3.2 percent.

The final rule follows advocacy from HAP, federal lawmakers, the American Hospital Association (AHA), and other organizations who urged the agency to ensure its inpatient prospective payment system (IPPS) final rule for fiscal year (FY) 2023 reflected the costs of patient care.

Here’s what you need to know:

  • The details:  The updated 4.3 percent rate reflects a 4.1 market basket update, including a -0.3% productivity adjustment and a +0.5% increase required by statute.
  • Offsetting cuts:  The rate increase will be partially offset by decreases in the disproportionate share hospital (DSH) and Medicare uncompensated care payments, which will decline in FY 2023 by about $300 million. CMS also estimates additional payments for inpatient cases involving new medical technologies will decrease by $750 million.
  • GME slots:  The rule updates the cap calculations for direct graduate medical education (GME) full-time equivalent positions and includes a provision allowing additional slots for urban hospitals that establish Rural Training Programs.
  • Data for Rate Setting:  The agency is returning to its use of the most recent available data to determine payment rates, while adding modifications to account for the COVID-19 pandemic.
  • Quotable:  “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,” said Stacey Hughes, AHA executive vice president.

The new rule also includes new measures for the Inpatient Quality Reporting Program, including health equity and electronic clinical quality measures.

As reported in HAP Daily, eight members of Pennsylvania’s Congressional delegation joined a bipartisan group of representatives last week requesting CMS ensure payments to hospitals better reflect the cost of patient care.  In a statement, Hughes thanked the bipartisan group of lawmakers who urged CMS to support hospitals in the IPPS Final Rule, but noted that the rule 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.”

In a recent letter to CMS, HAP highlighted hospitals’ continued labor and supply cost pressures and the financial challenges that threaten their ability to care for patients. HAP will continue to advocate to ensure that hospitals have the resources they need to deliver extraordinary care in their communities.

A fact sheet about the final rule is available online.

For questions, contact John Myers, HAP’s vice president, federal advocacy, or Kate Slatt, vice president, innovative payment and care delivery.