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CMS Finalizes FY 2021 IPPS Rule

The Centers for Medicare & Medicaid Services (CMS) finalized the fiscal year (FY) 2021 Inpatient Prospective Payment System (IPPS) rule, which includes payment and quality reporting provisions.

The rule goes into effect Oct. 1. CMS has waived the 60-day delay in effective date due to the COVID-19 public health emergency. Provisions of interest to essential hospitals are summarized below.

Payment Rates

CMS will increase operating payment rates for general acute care hospitals by 2.9 percent. This payment update is a result of a market basket increase of 2.4 percent (no multifactor productivity adjustment) and a 0.5 percentage point adjustment required by legislation.

Medicare DSH Payments

For FY 2021, CMS estimates total Medicare disproportionate share hospital (DSH) payments will be $12.1 billion — $400 million less than FY 2020.

About $8.3 billion of these payments will be based on uncompensated care (UC). CMS’ calculation of UC-based payments, which depends in part on the change in the uninsured rate between 2013 and 2021, is $500 million higher than the estimate its proposed IPPS rule. This is a result of CMS updating its estimates of the uninsured rate to incorporate the effects of COVID-19. In comments on the proposed IPPS rule, America’s Essential Hospitals urged CMS to update its estimate of the uninsured rate to account for the expected uptick in uninsurance due to the pandemic.

CMS will continue using one year of UC data from worksheet S-10 of the Medicare cost report to determine each hospital’s share of UC in the DSH calculation. For FY 2021 UC-based DSH payments, CMS will use FY 2017 cost report data, which the agency says has been audited. In subsequent years, CMS will continue to use one year of S-10 data from the most recent audited cost reports.

Data Collection, Market-Based MS-DRGs

Per the final rule, CMS will collect a summary of certain data already required to be disclosed pursuant to last year’s hospital price transparency final rule, released in conjunction with the calendar year (CY) 2020 Outpatient Prospective Payment System final rule. Specifically, hospitals will report median payer-specific negotiated inpatient services charges for Medicare Advantage organizations by Medicare severity diagnosis related group (MS-DRG). In addition, beginning in FY 2024, CMS will adopt the use of these data in a new market-based methodology to set the MS-DRG relative weights, which are used in determining Medicare payment rates for inpatient hospital stays.

CAR T-cell Therapy

CMS created a chimeric antigen receptor (CAR) T-cell therapy MS-DRG to help appropriately reimburse hospitals for the costs of delivering necessary care to Medicare beneficiaries and provide payment flexibility as new CAR T-cell therapies become available.

Graduate Medical Education

Due to the occasional closing of teaching hospitals and residency programs, CMS has finalized policies to assist residents attempting to find alternative hospitals in which to complete their training and to continue graduate medical education (GME) funding to the receiving teaching hospital or residency program without hassle. The policies, including expanding the definition of who is considered a displaced resident, aim to provide greater flexibility for residents and ease the burden associated with transferring GME funds.

Quality Reporting

CMS finalized as proposed updates to the quality reporting programs, including changes to the reporting of electronic clinical quality measures (eCQMs) and the validation process in the Inpatient Quality Reporting (IQR) Program.

The agency also finalized policies to automatically adopt applicable periods (i.e., performance periods for measures used in a quality program) in the Hospital Readmissions Reduction Program (HRRP) and the Hospital-Acquired Condition (HAC) Reduction Program for the 2023 program year and all subsequent program years.

Further, CMS establishes new performance standards for certain measures in the Hospital Value-Based Purchasing (VBP) Program for program years 2023 through 2026.

In accordance with its Aug. 25 interim final rule, CMS notes that no claims data reflecting services provided Jan. 1 through June 30 will be used in calculations for the HRRP, HAC Reduction Program, and VBP Program. For example, the FY 2022 HRRP will only use data from July 1, 2017, through Dec. 31, 2019.

Promoting Interoperability Program

CMS finalized several proposals for the Medicare Promoting Interoperability Program, including

  • a minimum reporting period of any continuous 90-day period in CY 2022 for new and returning participants (eligible hospitals and critical access hospitals);
  • continuing the the query of prescription drug monitoring program measure as an optional measure worth five bonus points in CY 2021 (originally proposed and finalized in the IPPS 2020 rule); and
  • increasing the length of eCQM reporting periods and requiring public reporting of eCQM data, to align with the Hospital IQR Program.

New Technology Add-On Payment Updates  

CMS finalized its proposal to expand the alternative new technology add-on payment (NTAP) pathway for Qualified Infectious Disease Products to include products approved through the Food and Drug Administration’s (FDA’s) limited population pathway for antibacterial and antifungal drugs.

Additionally, CMS will provide conditional NTAP approval for antimicrobial products that otherwise meet the NTAP alternative pathway criteria but do not receive FDA approval in time for consideration in the final rule (i.e., by July 1). As such, cases involving eligible antimicrobial products would begin receiving the NTAP sooner.

America’s Essential Hospitals is analyzing the final rule and will send members a detailed Action Update.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Abigail Painchaud is a policy associate at America's Essential Hospitals.

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