It's that time of year again when the Centers for Medicare and Medicaid Services (CMS) rolls out its proposed rule for the Hospital Inpatient Prospective Payment System (IPPS). For fiscal year 2023, this means a fresh set of adjustments and updates that will touch hospitals across the nation, particularly for discharges happening on or after October 1, 2022. Think of it as the annual tune-up for how hospitals are reimbursed for inpatient care.
What's on the table for acute care hospitals this year? Well, CMS is proposing a general increase of about 3.2% in IPPS operating payments. This figure isn't just pulled out of thin air; it's a carefully calculated market basket update, nudged by a productivity adjustment and a legislative bump. On the surface, this sounds like a good chunk of change, potentially adding around $1.6 billion to hospital coffers. However, it's not all straightforward gains. We're also seeing projections for significant payment decreases, particularly in disproportionate share and uncompensated care payments, potentially shaving off about $800 million. And another $800 million might be trimmed from payments related to inpatient cases involving new medical technologies.
For those Medicare Dependent and low-volume hospitals, there's a notable change on the horizon: the additional payments they've been receiving are set to expire. This expiration could mean an estimated reduction of $600 million for these specific facilities in FY 2023. It's a reminder that payment structures can shift, impacting different hospital types in distinct ways.
When it comes to calculating payments, the Medicare Severity Diagnosis-Related Group (DRG) system is central. For FY 2023, CMS is looking at using the most current data available, specifically FY 2021 MedPAR data and FY 2020 cost reports, with some tweaks to account for how Medicare beneficiaries use hospital services. Interestingly, to get a clearer picture for DRG relative weights, they're proposing to average results from two sets of data: one that includes COVID-19 claims and one that excludes them. They're also seeking feedback on whether to use the 2021 data set without these proposed modifications. It’s a thoughtful approach to ensure the data reflects the reality of patient care.
The Medicare Wage Index, a crucial factor in payment calculations, is also seeing a proposed adjustment. Following discussions about a "hold harmless" transition policy, CMS is now proposing a cap: a 5% limit on year-over-year decreases in wage index values, regardless of what's causing the dip. This aims to provide a bit more stability for hospitals experiencing fluctuations.
On the national front, the adjusted operating standardized amounts are slated for a 3.2% increase, with the federal capital payment rate seeing a 1.63% rise. These figures are tied to whether a hospital is a meaningful user of electronic health records (EHR) and if they've submitted quality data. The breakdown of labor and nonlabor shares for these standardized amounts also varies depending on whether the hospital's wage index is above or below one.
Graduate Medical Education (GME) and Indirect Medical Education (IME) are also part of the conversation. CMS is proposing a modified policy for applying the full-time equivalent (FTE) cap, especially when the weighted count exceeds it. Plus, they're allowing teaching hospitals to enter into affiliation agreements to share and redistribute FTE slots, and even permitting urban and rural hospitals in the same Rural Training Programs to do the same, starting with the academic year beginning July 1, 2023. This is all about fostering collaboration and ensuring training slots are used effectively.
Finally, the Medicare Disproportionate Share Hospital (DSH) estimate for FY 2023 is projected at $13.266 billion, a decrease from the previous year. This impacts the calculation of uncompensated care (UC) payments, with CMS proposing updates to the three key factors involved. It's a complex web of adjustments, all aimed at refining how Medicare supports hospitals and the care they provide.
