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CMS Releases FY 2022 IPPS Proposed Rule

On April 27, the Centers for Medicare & Medicaid Services (CMS) released its proposed fiscal year (FY) 2022 Inpatient Prospective Payment System (IPPS) rule, which includes payment and quality reporting provisions. Outlined below are the major provisions proposed in this rule.

In a statement, America’s Essential Hospitals applauded CMS for its focus on health care equity and its withdrawal of burdensome data collection requirements.

Payment Rates

CMS proposes to increase operating payment rates for general acute care hospitals by 2.8 percent. This payment update is a result of a market basket increase of 2.5 percent reduced by a 0.2 percentage point productivity adjustment and increased by a 0.5 percentage point adjustment required by legislation.

Due to a drop in Medicare utilization in FY 2020 resulting from the COVID-19 pandemic, which could distort rate-setting for FY 2022, CMS proposes to use FY 2019 claims and cost report data to set payment rates and weights for Medicare severity diagnosis related groups (MS-DRGs).

Medicare DSH Payments

For FY 2022, CMS estimates total Medicare disproportionate share hospital (DSH) payments will be $11.15 billion — $930 million less than FY 2021. Of these payments, $7.63 billion will be uncompensated care (UC)–based payments — $660 million less than UC payments in FY 2021.

CMS proposes to continue using one year of UC data from worksheet S-10 of the Medicare cost report to calculate each hospital’s share of UC in the DSH calculation. For FY 2022 UC-based DSH payments, CMS proposes to use FY 2018 cost report data, which the agency says has been audited.

CMS also proposes to change the definition of patients who are deemed Medicaid-eligible for inclusion in the Medicaid fraction of a hospital’s disproportionate patient percentage (DPP), which is a hospital’s number of Medicaid-eligible days over total patient days. The DPP is used in determining eligibility for Medicare DSH payments and in calculating a hospital’s empirically justified payment. Specifically, CMS proposes to limit the types of Medicaid Section 1115 waiver days that can be included in the Medicaid fraction to days for which a patient directly receives inpatient hospital insurance coverage under a Section 1115 waiver. This change excludes from the Medicaid fraction patient days for which hospitals received a payment from a UC pool and the days associated with patients who receive premium assistance under a Section 1115 demonstration program.

Proposed Repeal of Market-based Data Collection, MS-DRG Relative Weights

CMS proposes to repeal the requirement that a hospital include on the Medicare cost report the median payer-negotiated inpatient services charges for Medicare Advantage organizations by MS-DRG, for cost reporting periods ending on or after Jan. 1.

The agency also proposes to repeal, effective FY 2024, the market-based MS-DRG relative weight methodology effective that would have used these data to set relative Medicare payment rates for hospital procedures. Rather, CMS would continue using the existing rate-setting methodology for FY 2024 and subsequent years.

Graduate Medical Education

The rule proposes policies implementing the graduate medical education (GME) provisions in the Consolidated Appropriations Act (CAA) of 2021, including adding 1,000 new teaching slots beginning in FY 2023 by further defining the types of hospitals that should receive priority for these slots. The CAA required CMS to reserve 10 percent of the 1,000 slots to each of four categories:

  • geographically rural hospitals and urban hospitals that reclassified to rural;
  • hospitals training over their Medicare cap;
  • hospitals in states with new residency programs or additional locations and branches of existing medical schools; and
  • hospitals that serve health professional shortage areas.

CMS further defines these categories in the rule. CMS proposes to distribute 200 total slots per year over a five-year period and to cap the number of additional residency positions a hospital can acquire in any year to one full-time equivalent. In alignment with the administration’s goal of addressing health inequities, CMS proposes to prioritize applications for residency programs that serve underserved populations. CMS provides additional details on the application process for the new residency slots, including that a hospital must apply by Jan. 31 of the fiscal year prior to that for which it seeks new slots.

The rule also contains additional rulemaking on other provisions of the CAA, including the accidental triggering of GME caps and rural training track programs.

Quality Reporting

CMS provides estimated and newly established performance standards for the Hospital Value-Based Purchasing (VBP) Program. In addition, it proposes updates for the Hospital Readmissions Reduction Program (HRRP), Hospital Inpatient Quality Reporting (IQR) Program, the Hospital VBP Program, and the Hospital-Acquired Condition (HAC) Program.

Notably, CMS proposes to adopt a cross-program measure suppression policy for certain program data affected by the COVID-19 public health emergency (PHE). Further, the agency proposes the Hospital VBP Program not award a total performance score to any hospital for FY 2022 program year, but rather award each hospital a value-based incentive payment equal to the amount withheld for the fiscal year (i.e., 2 percent).

Among the five measures proposed for adoption in the Hospital IQR Program is a COVID-19 health care personnel vaccination measure. The measure includes a shortened reported period, from Oct. 1 through Dec. 31, affecting the FY 2023 payment determination and quarterly reporting for subsequent years.

The proposed rule also includes changes to the reporting of electronic clinical quality measures (eCQMs) in the IQR Program.

Extension of New COVID-19 Treatments Add-on Payment

In November 2020, CMS established the New COVID-19 Treatments Add-on Payment (NCTAP) to mitigate any potential disincentives for hospitals to provide new COVID-19 treatments during the PHE. CMS proposes to extend the NCTAP for certain technologies through the end of the fiscal year in which the PHE ends.

Medicare Shared Savings Program

CMS proposes changes to the Medicare Shared Savings Program (MSSP) to allow eligible accountable care organizations to remain in the BASIC track for performance year 2022, forgoing the automatic advancement along the program’s glide path with increasing levels of risk.

Promoting Interoperability Program

CMS includes several proposals for the Medicare Promoting Interoperability Program, including:

  • a minimum reporting period of any continuous 90-day period in calendar year (CY) 2023 for new and returning participants (eligible hospitals and critical access hospitals) and a minimum 180-day continuous period for CY 2024;
  • continuing the query of prescription drug monitoring program measure as an optional measure but increasing the available bonus points from 5 to 10;
  • requiring reporting on all four of the existing public health and clinical data exchange objective measures — syndromic surveillance reporting, immunization registry reporting, electronic case reporting, and electronic reportable laboratory result reporting;
  • increasing the minimum required score to be considered a meaningful electronic health record user from 50 to 60 points (out of 100); and
  • making other modifications and additions to existing objects and measures, including adoption of two new eCQMs in CY 2023 and removal of four eCQMs in CY 2024.

RFI: Closing the Health Equity Gap in Hospital Quality Programs

Through a request for information (RFI), CMS seeks to improve data collection to better measure and analyze disparities across programs. The RFI asks for comment regarding potential stratification of quality measure results by race and ethnicity, improvement of demographic data collection, and the potential creation and confidential reporting of a “hospital equity score.” The equity score would summarize hospital performance across multiple social risk factors (including race, ethnicity, and dual eligibility for Medicare and Medicaid).

America’s Essential Hospitals is analyzing the proposed rule for comment and will send members a detailed Action Update in the coming days. CMS is accepting comments on the proposed rule until June 28.

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


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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