the American Association of Colleges of Osteopathic Medicine

This analysis was prepared by McDermott+ Consulting, on behalf of AACOM.

Summary

On August 1, 2023, the Centers for Medicare & Medicaid Services(CMS) released the FY 2024 Inpatient Prospective Payment System (IPPS) final rule. The final rule updates Medicare payment policies and quality reporting programs relevant for inpatient hospital services, and would build on key agency priorities, including advancing health equity and improving the safety and quality of care.

The final rule is available here.

ACMS fact sheet on the final rule is available here.

The final rule is scheduled to be publishedin the Federal Register on August 28, 2023, and the majority of the provisions within the rule will be effective October 1, 2023.

Key Takeaways

The FY 2024 standardized amount for hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and that are meaningful electronic health record (EHR) users will be $6,497.77, representing a payment update of 3.1% over FY 2023.
CMS will distribute roughly $5.94 billion in uncompensated care payment (UCP) to eligible DSH hospitals for FY 2024, a decrease of approximately $940 million from FY 2023.
CMS also finalized the Medicare Disproportionate Share Hospital (DSH) Payments: Counting Certain Days Associated With Section 1115 Demonstrations in the Medicaid Fraction proposed rule. This rule changes how Medicare DSH payments are calculated with respect to counting days associated with Section 1115 demonstrations in the Medicaid fraction of the DSH calculation. CMS is finalizing the rule that was separately proposed in February 2023. This change can have negative financial implications for hospitals in states that utilize uncompensated care pools and premium assistance programs through 1115 waivers, and can impact 340B eligibility.
CMS will relent to years of challenges to its implementation of urban-to-rural reclassification rules and treat hospitals with § 412.103 reclassification as rural when calculating the wage index. These changes will cause disturbances in the wage index that will affect all hospitals.
With respect to quality reporting programs, CMS finalized their proposals to make health equity adjustments in the Hospital Value-Based Purchasing Program by providing incentives to hospitals to perform well on existing measures and to those who care for high proportions of underserved individuals, as defined by dual eligibility status. CMS plans to use comments received on how to further address geriatric care in its quality reporting programs in future rulemaking. CMS finalized a proposal to modify the COVID-19 Vaccination Coverage measure by replacing the term “complete vaccination course” with “up to date.”
CMS finalized its proposal to return to its pre-pandemic practice of using the most recent available data to calculate Medicare Severity Diagnosis-Related Group (MS-DRG) relative weights. CMS finalized its proposal to continue delay of the non-complication or comorbidity (NonCC) subgroup criteria to existing MS-DRGs with a three-way severity split until FY 2025 or later.
Consistent with the Administration’s goals of advancing health equity, CMS will increase the severity of the designation of homelessness from NonCC to complication or comorbidity as an indicator of increased resource utilization.
CMS finalized its proposal to treat Rural Emergency Hospitals (REHs) similarly to Critical Access Hospitals (CAHs) for purposes of determining Graduate Medical Education (GME) payments.
CMS restored the Medicare-Dependent Hospital (MDH) program and Low-Volume Hospital Payment Adjustment pursuant to legislation enacted in late 2022, and made a small but beneficial change concerning the effective date of sole community hospital (SCH) status related to mergers.
CMS finalized, as proposed, two revisions to the criteria that applicants must meet in order to apply for new technology add-on payments (NTAP).

Graduate Medical Education

Key Takeaway: CMS will treat REHs similarly to CAHs for purposes of determining GME payments.

CMS finalized a clarification of the process for calculating the indirect medicaleducation resident-to-bed ratio in circumstances where there is a change in a hospital’s full-time equivalent (FTE) residents due to participation in a GME affiliation agreement under which the hospital shares FTE cap slots with another hospital. CMS finalized a clarification to the specific Medicare cost report data used in the calculation. CMS believes that there will be no financial impact associated with this clarification.

CMS finalized its proposal to treat REHs in a manner similar to CAHs for purposes of determining GME payments. REHs would have the option either to be treated as “non-provider” sites, such that another hospital could report the FTEs of residents training at the REH for Medicare payment purposes, or to incur the costs of the resident training and be reimbursed by Medicare at 100% of reasonable costs. This change would likely be favorable to rural communities and REHs, as it would provide for continued training of residents in rural areas for converting CAHs and would offer the opportunity for additional rural training of residents that might not otherwise be viable without this policy.

Special RuralDesignations

Key Takeaway: CMS restored the Medicare-Dependent Hospital (MDH) program and Low-Volume Hospital Payment Adjustment pursuant to legislation enacted in late 2022 and made a small but beneficial change concerning the effective date of sole community hospital (SCH) status related to mergers.

Medicare-Dependent Hospital and Low Volume Adjustment Programs

The MDH designation is available to hospitals that have a disproportionately high Medicare patient mix. Qualifying hospitals are eligible for higher IPPS payments. The low-volume adjustment is available to rural hospitals with very low inpatient volumes. Qualifying hospitals receive enhanced payments that increase as volumes decrease.Both programs expired at the end of FY 2022, but legislation enacted in late 2022 restored both programs retroactive to October1, 2022. In this final rule, CMS restored all applicable regulations for both programs.

Hospitals that were classified as MDHs as of September 30, 2022, generally continue to be classified as MDHs as of October 1, 2022, with no need to reapply for MDH classification. Hospitals that qualified for the low-volume hospital payment adjustment for FY 2023 may continue to receive a low-volume hospital payment adjustment for FY 2024 without reapplying if they continue to meet both the discharge and mileage criteria. A hospital’s request for low-volume adjustments can include a verification statement that it continues to meet the mileage criterion applicable for FY 2023.

Sole Community Hospitals

SCHs are hospitals that by definition are the sole source of inpatient hospital services in a community. Hospitals typically qualify for SCH designation by being a certain distance or drive-time from other hospitals.

CMS finalized a small but potentially beneficial change relevant to hospitals that may be eligible for SCH status following a merger: CMS finalized its proposal to revise current regulations such that, where a hospital’s SCH approval is dependent on its merger with another nearby hospital, and the hospital meets the other SCH classification requirements, the SCH classification and payment adjustment would be effective as of the effective date of the approved merger if the Medicare Administrative Contractor receives the complete application within 90 days of CMS’s writtennotification to the hospital of the approvalof the merger. As finalized, this change would expedite acquisition of SCH status for hospitals in this circumstance.