2023 IPPS proposed rule: CMS proposing modifications to data used for rate setting

Wednesday, April 20, 2022

CMS published the Inpatient Prospective Payment System (IPPS) proposed rule for fiscal year (FY) 2023 on April 18. Among the proposed changes, many of which affect quality and data reporting programs, are proposed changes to claims data used for rate setting, a delay of the three way split criteria for Medicare Severity Diagnosis-Related Groups (MS-DRG), and more.

Market basket update

The proposed payment increase for IPPS hospitals is 3.2%. This increase reflects the 3.1% projected hospital market basket update for FY 2023.

For FY 2023, this proposed change in payment rates would increase hospital payments by $1.6 billion.

Modifications to rate setting

Although CMS is proposing to use FY 2021 data for FY 2023 rate setting, the agency is proposing a modified methodology to account for the historical and potential future impact of COVID-19. The agency expects a decline in the number of Medicare beneficiaries hospitalized with COVID-19 but believes it’s reasonable to expect that some beneficiaries will continue to be hospitalized due to COVID-19.With these considerations in mind, CMS is considering a unique method for calculating MS-DRG weights. CMS is proposing to use two sets of weights to calculate MS-DRGs, one including COVID-19 claims and one excluding COVID-19 claims. Then, they’re proposing to average the two sets of weights and using that to determine the 2023 relative weights.

CMS is also proposing to use charge inflation factors and cost-charge-ratio adjustment factors to modify FY 2021 data used to determine the FY 2023 outlier fixed-loss amount. The agency believes this would create a more reasonable approximation of actual cost increases as it does not expect that the charge inflation that occurred during the public health emergency will continue.

Alternatively, CMS is seeking feedback on the use of FY 2021 without any of the proposed modifications.

MS-DRG changes delayed

No new MS-DRGs have been proposed. It’s unclear how this will affect assignment of any technologies approved for new technology add-on payment for FY 2023.

CMS is continuing its review of diagnosis codes and a comprehensive review of the procedure code list, including when a procedure should affect MS-DRG assignment. The agency is pondering various technical adjustments and is asking for comment on issues related to classification of low-volume rare diseases.

The agency is proposing to delay implementation of changes to the criteria to create new complication/comorbidity (CC) and major CC (MCC) classification subgroups in a base MS-DRG, including expanding the criteria to non-CC subgroups for three-way severity level splits.

Other proposals and commenting

Additional proposals include efforts to encourage reporting of social determinants of health diagnosis codes, updates to uncompensated care payments and disproportionate share hospital payments, a cap on wage index decreases, and reporting of certain data elements beyond the end of the COVID-19 public health emergency.

Revenue integrity professionals should review the proposed rule, paying particular attention to sections and proposals that affect their organization, department, and job duties. Consider submitting comments to CMS to explain why you believe a particular proposal will be beneficial or detrimental and to offer feedback where the agency is explicitly soliciting comments. For tips on how to write and submit a comment, see NAHRI’s white paper Advocacy in Action: Commenting on Proposed Rules.

Comments on the proposed rule are due no later than 5 p.m. Eastern on June 17.