On August 1, 2023, the Centers for Medicare & Medicaid Services (“CMS”) issued its Final Hospital Inpatient Prospective Payment System (“IPPS”) and Long-Term Care Hospital (“LTCH”) PPS rule for fiscal year (“FY”) 2024 (“Final Rule”). The Final Rule increases the rate for IPPS payments by 3.3% in FY 2024 but applies a 0.2% productivity downward adjustment for a net increase of 3.1% from FY 2023 to FY 2024. Provisions in this Final Rule are effective October 1, 2023, unless otherwise specified.
IPPS Rate Updates
Hospitals will receive a net increase in hospital operating and capital payments of $2.2 billion. This increase represents a combined $3.2 billion increase in FY 2024 operating payments and reflects decreases in disproportionate share hospital (“DSH”) uncompensated care payments, outlier payments, Medicare-dependent hospital and low volume hospital payments and new technology add-on payments.
Disproportionate Share and Uncompensated Care Payments
CMS updates estimates of the three factors used to determine uncompensated care payments for FY 2024. DSH payments are estimated to decline by approximately $115 million. The UC-DSH pool totals approximately $6.7 billion, a decrease of $161 million from FY 2023.
- To calculate Factor 2 of the DSH adjustment, CMS will continue to use the Office of Actuary’s estimates of the uninsured.
- Following the regulation changes at 42 CFR § 412.106(g)(1)(iii)(C)(11) in the FY 2023 IPPS/LTCH PPS final rule, CMS will use the three most recent years of audited data on uncompensated care costs from Worksheet S–10 of the FY 2018, FY 2019 and FY 2020 cost to calculate Factor 3 in the uncompensated care payment methodology for all eligible hospitals in FY 2024. The supplemental payment is not budget neutral and we estimate the impact for FY 2024 to be approximately $90.3 million–a decrease of approximately $6 million from expected supplemental payments in FY 2023.
The Final Rule finalizes the CMS proposal that appeared in the Federal Register on February 28, 2023 (88 FR 12623) to count days associated with individuals eligible for benefits provided under a section 1115 demonstration in the Medicaid fraction of a hospital’s disproportionate patient percentage (“DPP”) used in the DSH calculation. This new Final Rule counts days of patients who receive from the demonstration (1) health insurance that covers inpatient hospital services or (2) premium assistance that covers 100 percent of the premium cost to the patient, which the patient uses to buy health insurance that covers inpatient hospital services. Additionally, those patients whose inpatient hospital costs are paid for with funds from an uncompensated/undercompensated care pool authorized by a section 1115 demonstration will not be patients “regarded as” eligible for Medicaid, and are explicitly excluded from the DPP Medicaid fraction numerator.
Wage Index
Beginning with FY 2024, CMS will include hospitals with 42 CFR §401 or §412.103 reclassification and geographically rural hospitals in all rural wage index calculations (excluding “dual reclass” hospitals, that is, hospitals with simultaneous § 412.103 and Medicare Geographic Classification Review Board reclassification) for purposes of calculating the wage index. Because the Social Security Act requires rural floor policy to be budget neutral, the change significantly increases the wage index in some states but does not represent an overall increase in Medicare payments in all states.
Read Hall Render’s alert on the 2024 rural floor wage index policy changes for more information.
Capital DSH
Conceding to an adverse holding in Toledo Hospital v. Becerra, 621 F. Supp. 3rd 13 (D.D.C. 2021), hospitals reclassified as rural under §412.103 will no longer be considered rural for purposes of capital DSH.
GME
A Rural Emergency Hospital (“REH”) becomes a provider and may receive GME payments for residents training at the REH site.
Nursing and Allied Health Training
Pursuant to a statutory mandate, CMS is waiving the $60 million cap on managed care payments associated with nursing and allied health education payments. CMS’s repayment is limited to hospitals that currently have a nursing and allied health training program (or had a training program as of December 29, 2022) and whose cost reports are currently not yet settled for these years or can be reopened.
New Medical Technologies
Beginning in 2025, CMS will require add-on payment applicants to have completed an FDA marketing request and provide documentation of such filing and FDA acceptance of the application by May 1 (rather than the current July 1 deadline) of the year prior to the beginning of the FY in which CMS is considering the application. For antimicrobial products, the submission date remains July 1.
Hospital Value-Based Purchasing Program
CMS modified various measures in the Value-Based Purchasing (“VBP”) Program relating to hip and knee arthroplasty and sepsis and made technical changes to the administration of the Hospital Consumer Assessment of Healthcare Providers and Systems (“HCAHPS”) survey measure under the Hospital VBP Program.
CMS modified the Total Performance Score maximum to 110 and adopted a health equity scoring change for rewarding excellent care in underserved populations.
CMS included three new clinical quality measures (“eCQM”) to the inventory of eCQMs from which hospitals can select to meet the eCQM reporting requirements for both the Hospital Inpatient Quality Reporting and Medicare Promoting Interoperability programs.
CMS updated the data submission and reporting requirements for the HCAHPS survey measure as well as making procedural changes in the gathering and submitting of survey data.
Physician-Owned Hospitals
For a hospital to submit claims and receive Medicare payment for services referred by a physician owner or investor (or a physician whose family member is an owner or investor), CMS restated that the hospital must satisfy all the requirements of either the whole hospital exception or the rural provider exception to the physician self-referral law, commonly referred to as the Stark Law.
Unless CMS has granted an exception to the prohibition on expansion, a hospital may not increase the aggregate number of operating rooms, procedure rooms and beds above that for which the hospital was licensed on March 23, 2010 (or the effective date of the provider agreement for a hospital that did not have a provider agreement in effect on March 23, 2010). A hospital may request an exception to the prohibition on expansion of facility capacity using the process established in the CY 2012 OPPS and ASC final rules, including clarifying the data and information that must be included in an exception request, identifying factors that CMS will consider when deciding on an exception request and revising certain aspects of the process for requesting an expansion exception.
Z Code Changes to the Severity Level Designation Describing Homelessness
CMS changed the severity level designation for social determinants of health diagnosis codes describing homelessness from non-complication or comorbidity to complication or comorbidity for FY 2024.
If you have any questions on this topic or would like further assistance, please contact the following:
- Sue Andersen at sandersen@hallrender.com or (301) 785-3996;
- Elizabeth Elias at eelias@hallrender.com or (317) 977-1468; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot give legal advice outside of an attorney-client relationship.
