On the evening of April 27, 2021, the Centers for Medicare & Medicaid Services (CMS) released its proposed rule, Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long Term Care Hospital Prospective Payment System and Final Policy Changes and Fiscal Year 2022 Rates (link), which updates the FY 2022 payment systems and quality reporting programs for these providers and proposes other specified policies as shown below:

• Increases operating payment rates by 2.8 percent;[1]
• Continues low wage index policy;
• Rebases the IPPS operating market basket from 2014 to 2018;
• Delays application of the NonCC subgroup criteria to existing DRGs until FY 2023;
• Reduces DSH payments by $660 million due to impact of COVID-19;
• Adds 200 new Medicare-funded GME positions per year over five years, starting in 2023;
• Increases the EHR reporting period to a minimum of a continuous 180-day period for CY 2024;
• Allows CMS to suppress data used in HRRP, HACRP, and VBP programs for the duration of the PHE;[2]
• Extends New COVID-19 Treatments Add-on Payment (NCTAP) until end of the fiscal year after PHE ends;
• Repeals the collection of market-based rate information for future MS-DRG weights;
• Changes, clarifies, and codifies organ acquisition payment policies;
• Requires state Medicaid agencies to accept enrollments from Medicare-enrolled providers;
• Adds new codes and renames the new Chimeric Antigen Receptor T-cell (CAR-T) DRG;
• Proposes 2.2 percent increase for Long Term Care Hospitals (LTCH);
• Requests for information regarding Digital Quality Measures (dQMs) and health equity; and
• Adds an extra year to products with add-on payments ending in 2022.

Because of COVID-19, CMS proposes to use FY 2019 data for this rule instead of FY 2020 data and asks for comments on this proposal. The proposed rule is scheduled to be published in the Federal Register on May 10, 2021 and comments are due by 5 p.m. EDT on June 28, 2021.

CMS Predicts Payments to Hospitals Increase by 2.5 Billion

The Inpatient Prospective Payment System (IPPS) per-discharge payment is based on two national standardized base payment rates, one for operating costs and the other for capital-related costs. CMS adjusts each of these rates for geographic, case-mix, and other factors.[3]

For FY 2022, CMS proposes a 2.8 percent increase in its operating payment rates for hospitals that submitted quality data and were meaningful EHR users (see Tables 1 and 2). This increase and other payment changes in the proposed rule are expected to result in a $3.4 billion increase in FY 2022.

Operating Payments

Table 1. Proposed Update Factors for Hospital Operating Payment Rates (FY 2022)[4]

Submitted Quality Data	Meaningful EHR User	Number of Hospitals (2021)	Gross      FY2022 Market Basket	Adjustment for Failure to Submit Quality Data	Adjustment for Failure to be Meaningful EHR User	Multifactor Productivity Adjustment	MACRA Documentation & Coding Adjustment	Net Increase in Operating Payment Rates
Yes	Yes	2981	+2.5	N/A	N/A	-0.2	+0.5	+2.8
No	Yes	37	+2.5	-0.625	N/A	-0.2	+0.5	+2.175
Yes	No	153	+2.5	N/A	-1.875	-0.2	+0.5	+0.925
No	No	30	+2.5	-0.625	-1.875	-0.2	+0.5	+0.3

 

Table 2. Resulting Standardized Operating Amounts (FY 2022)[5]

Submitted Quality Data	Meaningful EHR User	Standardized Operating Amounts (Wage Index > 1)		Standardized Operating Amounts (Wage Index <= 1)
		Labor	Non-Labor	Labor	Non-Labor
Yes	Yes	$4,150.84	$1,989.45	$3,806.98	$2,333.31
No	Yes	$4,125.48	$1,977.30	$3,783.72	$2,319.06
Yes	No	$4,074.76	$1,952.99	$3,737.21	$2,290.54
No	No	$4,049.40	$1,940.83	$3,713.94	$2,276.29

 

Capital-Related Payments

The basic methodology for determining capital payments for each discharge is below:

• Capital-Related Payment = (Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment Factor (GAF)) x (COLA for hospitals located in Alaska and Hawaii) x (1 + Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if applicable)[6]

For FY 2022, the capital standardized Federal Rate is $471.89, which is 1.2 percent more than FY 2021.

Low Wage Index Policy to Continue

The IPPS base payment rate is comprised of a standardized amount that is divided into a labor-related share and a nonlabor-related share. The applicable labor-related share is multiplied by a wage index for the area where the hospital is located and then added to the nonlabor-related share (see Appendix A). CMS implemented a low wage index policy in FY 2020 for certain hospitals to increase their employee compensation and announced the policy would be effective for 4 years. CMS made the policy budget-neutral by adjusting standardized amounts for all hospitals and will continue this policy for FY 2022.

CMS Plans to Rebase the IPPS Market Basket

In the proposed rule, CMS describes the difference between “rebasing” and “revising” and states that rebasing means moving the base year for the structure of costs of an input price index. For this FY 2022 IPPS/LTCH PPS proposed rule, CMS proposes to rebase the IPPS operating market basket to reflect the 2018 cost structure for IPPS hospitals and to revise applicable cost categories and price proxies used to determine the IPPS market basket. CMS also proposes to rebase and revise the Capital Input Price Index.

Delay Proposed in Application of Three-Way Severity Split for MS-DRGs

In previous rulemaking, CMS expanded the existing criteria for creating subgroups with MS-DRGs to allow for a three-way severity level split: complication or comorbidity (CC), major CC (MCC), and the new NonCC. Using FY 2019 and FY 2020 MedPAR files, CMS found that approximately 32 DRGs would be changed based on the three-way severity level split criterion and that cases would be redistributed based on these changes, impacting relative weights and payment rates. In light of the ongoing public health emergency (PHE), CMS is concerned about the impact of implementing such a volume of changes and is proposing to delay the application of the NonCC subgroup criteria to existing DRGs until FY 2023. The current structure of the 32 MS-DRGs that currently have a three-way severity level split (for a total of 96 MS-DRGs) will be maintained in FY 2022.

CMS to Add New Codes to CAR T-Cell (CAR-T) MS-DRG

In the final FY 2021 IPPS rule, CMS created a new MS-DRG for cases that include CAR T-cell therapies and finalized a payment adjustment for applicable clinical trial and expanded access immunotherapy cases grouped to this DRG. CMS proposes to assign new procedure codes to the CAR T-cell MS-DRG that were adopted during 2020, such as XW043K7, “Introduction of lifileucel immunotherapy into peripheral vein, percutaneous approach, new technology group 7.”

CMS also proposes changing the name of the MS-DRG from “Chimeric Antigen Receptor (CAR) T-cell Immunotherapy” to “Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies” to reflect the addition of non-CAR T-cell therapies and other immunotherapies. For FY 2022, CMS proposes to continue to apply a payment adjustment to clinical trial cases grouped to the CAR-T DRG. CMS plans to use the same methodology for this adjustment as that utilized for relative weight calculations.

Reduction in DSH Payments Due to COVID-19

CMS proposes to distribute roughly $7.6 billion in uncompensated care (UCP) payments for FY 2022, a decrease of approximately $660 million from FY 2021. This estimate reflects CMS Office of the Actuary’s projections that incorporate the estimated impact of the COVID-19 pandemic. CMS will use a single year of data on uncompensated care costs from Worksheet S-10 of hospitals’ FY 2018 cost reports to distribute these funds.

CMS to Repeal New Market-Based Data Collection

CMS proposes to repeal the requirement from the FY 2021 final rule that a hospital report the median payer-specific negotiated change for all Medicare Advantage payers on their cost report for cost reporting periods ending on or after January 1, 2021. The Agency also proposes to repeal the related weighting methodology planned for FY 2024 and subsequent years. The Agency asks for comments on alternate approaches or data sources that may help improve Medicare rate-setting.

CMS Proposes Major Changes to Graduate Medical Education Program

CMS is proposing to implement significant changes to the nation’s graduate medical education (GME) program. The program dates back to 1984 and has long been criticized for its lack of flexibility and difficulty to manage by participating teaching hospitals. Congress passed legislation in the Consolidated Appropriations Act of 2021 (CAA), which adds 1,000 new Medicare-funded GME positions.

CMS proposes to distribute additional FTE slots starting in 2023 with a maximum of 200 slots established per year across all hospitals until 1,000 new slots are distributed. CMS believes that the demand for these new slots will far exceed the 200 per year being made available so it is proposing to limit each requesting hospital to one new FTE per year. CMS proposes to prioritize teaching hospitals applying for these new GME slots by using the following four categories:

1. Located in rural areas or that are treated as being located in a rural area;
2. Reference resident level of the hospital is greater than the otherwise applicable resident limit;
3. Located in states with new medical schools or additional locations/branches of existing schools; and
4. Serve areas designated as Health Professional Shortage Areas (HPSAs).

CMS is also proposing to revise the existing Rural Track Training Program to expand and eliminate restrictions that the current program has in place as well as to make adjustments to the indirect medical education (IME) calculations to align with the changes the CAA is requiring.

Fast Healthcare Interoperability Resources (FHIR) in Support of Digital Quality Measurement- Request for Information

Consistent with other FY 2022 payment rules, CMS requests information on adopting a standardized definition of Digital Quality Measures (dQMs) across all quality programs. The proposed definition is, “Digital Quality Measures (dQMs) are quality measures that use one or more sources of health information that are captured and can be transmitted electronically via interoperable systems.” CMS also requests information on the potential development and implementation of a consistent portfolio of dQMs across quality programs (including LTCH QRP). This would require alignment of measure concepts and the individual data elements used to build the measure specifications and calculate the measures.

Suppression of Data Proposed for HRRP, HACRP, and VBP Programs

For the Hospital Readmission Reduction Program (HRRP), Hospital Acquired Conditions Reduction Program (HACRP), and Hospital Value-Bases Purchasing (VBP) Program, CMS proposes to allow suppression of measure data for the duration of the PHE if the agency determines that circumstances caused by covid-19 have affected those measures and the resulting quality scores significantly.

For the HRRP program, CMS also proposes 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.

For the VBP Program, because of the proposed suppression policy, CMS believes calculating a total performance score (TPS) or hospitals using the remaining clinical outcome measures would not provide for a fair national comparison. Therefore, CMS is proposing to not calculate a TPS for any hospital for one domain and will instead award all hospitals value-based payment for each discharge that is equal to the amount withheld.

Hospital IQR Program Receives New Potential Measures

The Hospital Inpatient Quality Reporting (IQR) Program reduces payment to hospitals that do not meet the program requirements. For FY 2022, CMS proposes to adopt five new quality measures including:

• Maternal Morbidity Structural Measure with a shortened CY 2021 reporting period/FY 2023 payment determination;
• COVID-19 Vaccination Coverage Among Health Care Personnel (HCP) measure with a shortened CY 2021 reporting period and FY 2023 payment determination and for subsequent years;
• A Hybrid Hospital-Wide All-Cause Risk Standardized Mortality (Hybrid HWM) measure, initially with voluntary reporting from July 2022 to June 2023 followed by mandatory reporting from July 2023 through June 2024, affecting the FY 2026 payment determination and for subsequent years; and
• Two medication-related adverse event electronic clinical quality measures (eCQMs) – Hospital Harm-Severe Hypoglycemia and Hospital Harm-Severe Hyperglycemia eCQM beginning with the CY 2023 reporting period/FY 2025 payment determination.

CMS seeks comment on the following:

• Potential future adoption of a COVID-19 mortality measure;
• Potential future adoption of a patient reported outcome measure following elective primary total hip and/or knee arthroplasty;
• Potential future expansion of measure data stratification for the Hospital-Wide All-Cause Unplanned Readmissions measure; and
• Potential future adoption of a structural measure to assess the degree of hospital leadership engagement in health equity performance data.

CMS also proposes to remove five existing quality measures, makes changes to the existing Electronic Health Record (EHR) certification requirement, and proposes requiring hospitals to use certified technology that can support reporting requirements for all eCQMs and meets the 2015 Edition Cures Update beginning with the CY 2023/FY 2025 payment determination.

Changes Proposed for Promoting Interoperability Program

The Promoting Interoperability Program encourages eligible professionals and hospitals to adopt, implement, and demonstrate meaningful use of certified EHR technology (CEHRT). CMS proposes to increase the EHR reporting period to a minimum of a continuous 180-day period for new and returning eligible hospitals for CY 2024. CMS also proposes the adoption of two new eCQMs to the Medicare Promoting Interoperability Program’s eCQM measure set beginning with the CY 2023 reporting period and proposes to remove four eCQMs from the measure set beginning with the CY 2024 reporting period. CMS proposes other additional changes to reporting requirements and measures.

Extension of New COVID-19 Treatment Add-on Payments Proposed

In their November 2020 Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency Interim Final Rule, CMS established the New COVID-19 Treatments Add-on Payments (NCTAP) which provides add-on payments for inpatient cases of COVID-19 involving the use of new COVID-19 treatments during the PHE. The rule provides payments to hospitals effective November 2, 2020 until the end of the PHE to mitigate potential financial disincentives for hospitals to provide new COVID-19 treatments, which are defined as those with current FDA approval or emergency use authorization (EUA) to treat COVID-19. For eligible cases, add-on payments are the lesser of either 65% of the operating outlier threshold for the claim or 65% of the amount by which the costs of the case exceeds the standard DRG payment (including adjustment under Section 3710 of the CARES Act).

The FY 2022 proposed rule would extend these NCTAP payments for eligible COVID-19 therapies through the end of the fiscal year in which the pandemic ends. CMS also proposes to discontinue these payments for discharges on or after October 1, 2021 when a product is already approved for new technology add-on payments for FY 2022.

CMS Considering More than 30 Technologies for Add-on Payments

CMS received new technology add-on payment applications for 37 technologies for FY 2022.  Five applicants withdrew their application prior to the publication of the proposed rule.   Of the remaining applications, 16 used an alternative approval pathway and CMS is proposing to approve 14 of those. Altogether, CMS expects to spend an additional $300 million beyond what it would otherwise pay hospitals as a result of its approval and continuation of new technology add on payments in FY 2022.

CMS Plans to Add an Extra Year to Products with Add-on Payments Ending in 2022

Due to the unique circumstances of 2020 and 2021, CMS is proposing to use its authority under section 1886(d)(5)(I) of the Social Security Act to provide for a 1-year extension of new technology add-on payments for FY 2022 for those technologies for which the new technology add-on payment would otherwise be discontinued beginning with FY 2022 and is requesting comments on this proposal.

2.2 Percent Increase Proposed for Long Term Care Hospitals

Long-Term Care Hospitals (LTCHs) play a vital role within the Medicare program by caring for many patients that suffer from long-term debilitating illness. In 2017, the average length of stay (ALOS) in LTCHs was 26.2 days compared to 5.0 days for IPPS hospitals. Because of this difference in complexity, resource use, and lengths of stay, LTCHs are excluded from the IPPS and are paid under the LTCH PPS.

For FY 2022, CMS estimates that the aggregate long-term care hospital (LTCH) prospective payment system (PPS) payments will increase by 1.4 percent or $52 million. The annual payment update for discharges using standard LTCH PPS is estimated to increase by 2.2 percent and, for LTCHs that fail to submit quality reporting data, the proposed payment update is 0.2 percent (2.2 minus 2.0 percentage points). The proposed LTCH PPS standard Federal payment rate is $44,827.87. The proposed rule affects 363 LTCHs nationwide, for discharges occurring on or after October 1, 2021.

In FY 2021, CMS eliminated the 25 percent threshold policy and applied a permanent one0time budget neutrality factor of 0.991249 for FY 2021 and subsequent years. For FY 2022, no site neutral payment rate cases will be eligible for the transitional payment method.

Updates Are Coming to the LTCH Quality Reporting Program

LTCHs will be allowed to publicly report quality measures for fewer than the standard number of quarters due to the COVID-19 PHE exemptions. Proposed updates to the LTCH QRP are as follows:

• Add the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure; and,
• Update the denominator for the Transfer of Health (TOH) Information to the Patient-Post Acute Care (PAC) quality measure to exclude patients discharged home under the care of an organized home health service or hospice

Proposed policies also include public reporting of two other measures for the LTCH QRP.

 

 

[1] For general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users.

[2] PHE – Public Health Emergency

[3] The basic methodology for determining operating payments is included in Appendix A.

[4] Source(s): Tables on page 1908 of the unpublished proposed rule.

[5] Source(s): Tables on page 1713 of the unpublished proposed rule.

[6] Hospitals also may receive outlier payments for high-cost cases that qualify under thresholds established for each fiscal year.