On July 27, 2022, the Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2023 final rule for Inpatient Psychiatric Facilities (IPFs), which includes final policies for payment and quality reporting in these facilities. CMS also released a fact sheet on the final rule.
In this year’s rule, CMS is finalizing several payment changes including a strategy to lessen the impact of year-to year changes in IPF PPS payment related to the IPF wage index. CMS also summarizes the feedback received on the results of a recent IPF Prospective Payment System (PPS) data analysis and notes input from interested parties on healthcare disparities and equity via a Request for Information (RFI), that they will use to inform future rulemaking. There are no changes to the IPF Quality Reporting (IPFQR) Program for FY 2023. The changes in this rule are effective beginning October 1, 2022.
This final rule is scheduled to be published in the Federal Register on July 29, 2022.
CMS TO INCREASE IPF PPS PAYMENTS BY 2.5% FOR FY 2023 AND RECEIVES 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 aggregate payments to inpatient psychiatric facilities (IPFs) will increase by 2.5 percent in FY 2023, which means an estimated $90 million increase in payments compared to FY 2022. This 2.5 percent increase is the result of a 3.8 percent increase in IPF payment rates (annual market basket update of +4.1 percent and productivity offset of -0.3 percent), and updates to the outlier threshold (-1.2 percent). Due to rounding, the 3.8% increase to payments and the 1.2% decrease to outlier payments results in a 2.5% overall increase in IPF payments.
| Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) | FY 2022 (Final) | FY 2023 (Final) |
| Per-Diem Base Rate | $832.94 | $865.63 |
| Electroconvulsive Therapy Payment (per treatment) | $358.60 | $372.67 |
| Fixed Dollar Loss Threshold | $16,040 | $24,630 |
In their March 2022 proposed rule, CMS had solicited 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 looked to update this with more recent IPF cost and claim information. A report on this analysis is posted on the CMS website. The analysis had concluded that the existing IPF PPS model is generally still appropriate in terms of aligning payments with costs of providing services, but suggested that certain updates to the codes, categories, adjustment factors, and Electroconvulsive Therapy payment amount per treatment could improve payment accuracy. CMS sought and received comments about the results summarized in the report and on ways that CMS could better account for the effects that social determinants of health and low-income patient status have on the cost of providing IPF services. CMS received comments from a number of stakeholders including Medicare Payment Advisory Commission (MedPAC), state-level and national provider and patient advocacy organizations, and individual IPF hospitals and health systems which CMS may consider for future rulemaking.
CMS FINALIZES ITS PROPOSAL TO APPLY A 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 finalized its proposal to apply a 5% permanent cap on decreases in the IPF PPS wage index. The wage index is a relative measure of the value of labor in prescribed labor market areas. Specifically, IPF’s wage index for FY 2023 and subsequent years will not be less than 95% of its final wage index calculated in the prior FY. The cap would apply on any decrease to a provider’s IPF wage index from its wage index in the prior year, regardless of the circumstances causing the decline.
CMS’ aim with the cap is 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. CMS believes the cap would support increased predictability about IPF PPS payments for providers, enabling them to more effectively budget and plan their operations.
NO CHANGES 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 final rule, CMS made no changes to the IPF Quality Reporting Program.
While CMS did not make any changes to the IPFQR for FY 2023, the agency did receive feedback from a request for information (RFI) in the proposed rule 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.
CMS RECEIVED FEEDBACK FROM 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 sought feedback 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. This RFI solicited input on the areas outlined below:
- General framework to assess healthcare quality disparities across CMS quality programs
- Goals and approaches for measuring healthcare disparities and using measures stratification across CMS quality programs
- Guiding principles for selecting and prioritizing measures for disparity reporting
- Principles for social risk factor and demographic data selection and use
- Approaches to assessing drivers of healthcare quality disparities and developing measures of healthcare equity in the IPFQRP
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- Meaningful performance differences
- Measures related to health equity that could be adapted for the IPFQRP
- 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
CMS received a significant number of comments supporting the reporting of stratified IPF measures and collecting data to support increased reporting of this stratified data. There was also significant support for the addition of patient experience of care measures currently used in other settings of care. Further, there was strong interest from stakeholders to include a structural measure assessing the degree of hospital leadership engagement in health equity performance. However, several comments voiced concerns regarding CMS adapting the Health Equity Summary Score (HESS) for this setting. The HESS measure was developed by the CMS Office of Minority Health to identify and to reward healthcare providers (that is, Medicare Advantage [MA] plans) that perform relatively well on measures of care provided to beneficiaries with social risk factors (SRFs), as well as to discourage the non-treatment of patients who are potentially high-risk, in the context of value-based purchasing. Ultimately, many comments supported CMS’ suggested criteria for prioritizing equity measures and recommended additional criteria and asked that CMS look to find ways to link payment to equity performance.
CMS noted that they will use this feedback to inform future rulemaking.
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This Applied Policy® Summary was prepared by Stephanie Lomas with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at slomas@appliedpolicy.comor at 202-558-5272.