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CMS Releases FY 2024 IPPS Proposed Rule

On April 10, the Centers for Medicare & Medicaid Services (CMS) released its proposed fiscal year (FY) 2024 Inpatient Prospective Payment System (IPPS) rule, which includes payment and quality reporting provisions, health equityrelated proposals, and a request for feedback on defining safety net hospitals.

In a statement, America’s Essential Hospitals applauded CMS for acknowledging the need to support safety net hospitals and committed to working with the agency to define this group of hospitals. The association also expressed concern about the effect of reduced Medicare disproportionate share hospital (DSH) payments on essential hospitals.

Payment Rates

CMS proposes to increase operating payment rates for general acute care hospitals by 2.8 percent. This payment update results from a market basket increase of 3 percent reduced by a 0.2 percentage point productivity adjustment.

CMS proposes to use the most recently available data — FY 2022 claims and FY 2021 cost reports — to set IPPS payment rates and Medicare severity diagnosis related group (MS-DRG) weights. Unlike previous years, CMS does not propose to adjust for the effect of COVID-19 cases on utilization for FY 2024.

Medicare DSH Payments

For FY 2024, CMS estimates total Medicare disproportionate share hospital (DSH) payments will be $10.12 billion — $240 million less than FY 2023. Of these payments, $6.7 billion will be uncompensated care (UC)–based payments — nearly $200 million less than UC payments in FY 2023.

CMS proposes to use the average of three years 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 2024 UC-based DSH payments, CMS proposes to use the average of UC costs reported on FY 2018 through FY 2020 cost reports, which the agency says have been audited.

Safety Net Hospital Request for Information

Citing the importance of safety net hospitals in advancing health equity and their unique financial challenges, CMS requests information on defining safety net hospitals and the challenges these hospitals face. Among the questions included in the RFI, CMS asks for feedback on:

  • How to define safety net hospitals.
  • The different types of safety net hospitals.
  • Whether there should be multiple definitions for different types of safety net hospitals, such as rural safety net hospitals.
  • If the Medicare Payment Advisory Commission’s Medicare safety net index (MSNI) recommendation is an appropriate basis for identifying safety net hospitals for Medicare purposes and how the MSNI can be improved.
  • If area-level indices, such as the area deprivation index, should be part of an approach to identify safety net hospitals.
  • Approaches to mitigate challenges safety net hospitals, including rural safety net hospitals, face.
  • Whether safety net hospitals’ reporting burden and compensation should be different than other hospitals.

Wage Index

CMS proposes to continue for an additional year the policy finalized in the FY 2020 IPPS rule to reduce wage index disparities affecting low–wage index hospitals and to continue a permanent policy to cap year-over-year wage index decreases for a hospital at five percent.

Graduate Medical Education at Rural Emergency Hospitals

The Consolidated Appropriations Act of 2021 established a new provider type, the rural emergency hospital (REH), effective Jan. 1, 2023. These hospitals provide exclusively emergency department services and observation care, as well as other outpatient services. In the rule, CMS proposes that REHs be an approved nonprovider training site for graduate medical education (GME) purposes. For cost report periods beginning on or after Oct. 1, teaching hospitals would be able to include residents training at REHs in their direct GME and indirect medical education (IME) full-time equivalent (FTE) counts. Alternatively, REHs may claim the direct training costs of training residents and be paid at 100 percent of the reasonable costs for training those residents, in which case a teaching hospital would not be able to include training occurring at the REH in its direct GME and IME FTE counts.

Quality Reporting

CMS proposes updates to the Hospital Inpatient Quality Reporting (IQR) Program, Hospital-Acquired Condition (HAC) Reduction Program, and Hospital Value-Based Purchasing (VBP) Program. CMS does not propose any changes to the Hospital Readmissions Reduction Program.

Hospital IQR Program

CMS proposes to add three measures, remove three measures, and revise three quality measures in the IQR Program. The three measures CMS proposes to add are electronic clinical quality measures (eCQMs):

  • Hospital Harm — Pressure Injury eCQM.
  • Hospital Harm — Acute Kidney Injury eCQM.
  • Excessive Radiation Dose or Inadequate Image Quality for Diagnostic CT in Adults (Hospital Level — Inpatient) eCQM.

Notable among the revisions to existing measures is CMS’ proposal to update the COVID-19 vaccination among health care personnel measure beginning with the fourth quarter reporting period of calendar year (CY) 2023 (FY 2025 payment determination). CMS proposes to collect data on the number of health care personnel who are up to date with recommended COVID-19 vaccinations, as opposed to having received only a primary vaccination series.

HAC Reduction Program

For the HAC Reduction Program, CMS proposes to create a validation reconsideration process for hospitals that fail to meet data validation requirements, beginning with the FY 2025 program year (for CY 2022 discharges).

Hospital VBP Program

CMS proposes changing the VBP Program scoring methodology to include a health equity adjustment in a hospital’s total performance score (TPS), which would be based off the hospital’s performance across the four measure domains in the VBP program and the proportion of the hospital’s patients that are dually eligible for Medicare and Medicaid.

Promoting Interoperability Program

CMS includes several proposals for the Medicare Promoting Interoperability (PI) Program, including establishing a 180-day reporting period for CY 2025. CMS also proposes to adopt the three new eCQMs proposed for the IQR Program, beginning with the CY 2025 reporting period. Additionally, CMS proposes various changes to existing measures and other technical changes to the program.

Social Determinants of Health Codes

In the past, CMS sought comment on the reporting and use of ICD-10 codes that describe social determinants of health, known as Z codes. CMS now proposes to change the severity level of three ICD-10 Z codes for homelessness from noncomplication or comorbidity (nonCC) to complication or comorbidity (CC). This would mean that reporting these three Z codes as secondary diagnoses on inpatient claims could result in higher payment.

New COVID-19 Treatments Add-on Payment (NCTAP)

CMS proposes to discontinue add-on payments for new COVID-19 treatments. The NCTAP provides a 20 percent add-on for COVID-19related discharges that include the use of certain new products with current Food and Drug Administration approval or emergency use authorization to treat COVID-19. Due to the expected May 11 expiration of the COVID-19 public health emergency, the NCTAP policy will sunset at the end of this fiscal year, on Sept. 30.

America’s Essential Hospitals is analyzing the proposed rule for comment and will send members a detailed Action Update in the coming days. CMS will accept comments on the proposed rule until June 9.

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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