On March 31, 2022, the Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2023 proposed rule for inpatient psychiatric facilities (IPFs), which includes proposed policies for payment and quality reporting in these facilities. CMS also released a fact sheet on the proposed rule. This year’s proposals are primarily payment related including a proposed permanent 5% cap on wage index decreases related on IPF payments. CMS also requests comment on the results of a recent IPF PPS data analysis and seeks input on healthcare disparities and equity via a Request for Information (RFI). No changes were proposed for the IPF Quality Reporting Program.

This proposed rule is scheduled to be published in the Federal Register on April 4, 2022. Comments on the proposed rule are due on May 31, 2022.

CMS Predicts 1.5% Increase in IPF Payments for FY 2023 and Solicits Comments on Analysis to Inform Future Payments

IPFs are paid a daily base rate intended to cover all routine, ancillary, and capital costs. The per-diem payment may be adjusted based on a patient’s Diagnosis-Related Group (DRG) assignment and comorbidities. Payments are also adjusted to reflect higher expenses at the beginning of a patient’s stay and lower expenses towards the end of the stay.

CMS is estimating that aggregate payments to inpatient psychiatric facilities (IPFs) will increase by 1.5 percent in FY 2023, which means an estimated $50 million increase in payments compared to FY 2022. This 1.5 percent increase is the result of a 2.7 percent increase in IPF payment rates (annual market basket update of +3.1 percent and productivity offset of -0.4 percent), and updates to the outlier threshold (-1.2 percent).

Inpatient Psychiatric Facility Proposed Payment System (IPF PPS)	FY 2022 (Final)	FY 2023 (Proposed)
Per-Diem Base Rate	$832.94	$856.80
Electroconvulsive Therapy Payment (per treatment)	$358.60	$368.87
Fixed Dollar Loss Threshold	$16,040	$24,270

 

CMS also is soliciting comments on a recent analysis performed on IPF PPS adjustments. The current IPF PPS system uses adjustment factors derived from a regression model developed when the system was first implemented in 2005. As such, CMS’ recent analysis looks to update this with more recent IPF cost and claim information. A report on this analysis is posted on the CMS website at https://www.cms.gov/medicare/medicare-fee-for-service-payment/inpatientpsychfacilpps. The analysis concludes that the existing IPF PPS model is generally still appropriate in terms of aligning payments with costs of providing services, but suggests that certain updates to the codes, categories, adjustment factors, and Electroconvulsive Therapy payment amount per treatment could improve payment accuracy. CMS is seeking comments about the results summarized in the report, additional analyses that could help the agency better understand how these issues affect the costs of IPF services, and how the IPF PPS could better account for these costs.

CMS Proposes Permanent 5% Cap on Wage Index Decreases to Stabilize Year-to-Year Payment fluctuations

To address fluctuations in IPF PPS payments due to wage index decreases, beginning in FY 2023, CMS is proposing to apply a 5% permanent cap on decreases in the IPF PPS wage index. Specifically, CMS is proposing that an IPF’s wage index for FY 2023 and subsequent years would not be less than 95 percent of its final wage index calculated in the prior FY. The cap would apply on any decrease to a provider’s wage index from its wage index in the prior year, regardless of the circumstances causing the decline.

CMS is proposing the cap to smooth the impact of year-to-year changes in IPF payments related to changes in the IPF wage index. As typical year-to-year variation in the IPF PPS wage index has historically been within 5 percent and CMS believes that providers would be experienced with this level of wage index fluctuation, the agency believes applying the 5-percent cap on all wage index decreases each year would mitigate instability in IPF PPS payments due to any significant wage index decreases that may affect providers in a year.

No Changes Proposed to IPF Quality Reporting Program, But CMS RFI May Impact Future IPFQRP proposals

IPFs are required to submit quality data to CMS under the IPF Quality Reporting Program (IPFQRP) or receive a payment deduction of 2.0 percentage points to their annual update. Data reported through the IPFQRP are publicly reported on the CMS Care Compare website. In this rule, CMS proposed no changes for the IPF Quality Reporting Program.

While CMS did not propose any changes to the IPFQR, the agency did add a request for information (RFI) on the Overarching Principles for Measuring Healthcare Quality Disparities Across CMS Quality Programs which asks for input on health equity measures for consideration for the IPFQR. Responses will assist future CMS Quality program efforts and could be introduced in the IPFQR as future RFIs or proposals.

Proposed Rule Includes Request for Information on Health Disparities and Health Equity

Consistent with the Executive Order, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, CMS’ Equity Plan for Improving Quality in Medicare, and CMS’ strategic pillar to advance equity, CMS is seeking on addressing healthcare disparities and healthcare equity in the IPFs through its Request for Information (RFI), Overarching Principles for Measuring Healthcare Quality Disparities Across CMS Quality Programs.

In this RFI, CMS is seeking additional input on the areas outlined below:

1. General framework to assess healthcare quality disparities across CMS quality programs
   1. Goals and approaches for measuring healthcare disparities and using measures stratification across CMS quality programs
   2. Guiding principles for selecting and prioritizing measures for disparity reporting
   3. Principles for social risk factor and demographic data selection and use
2. Approaches to assessing drivers of healthcare quality disparities and developing measures of healthcare equity in the IPFQRP
   1. Meaningful performance differences
   2. Measures related to health equity that could be adapted for the IPFQRP

2. General comments on principles and approaches listed in the first two sections as well as additional thoughts about disparity measurement guidelines for the IPFQR Program

Comments to the RFI will inform equity efforts both in behavioral health (mental health and substance use) by CMS as well as the IPFQRP.