CMS releases FY 2022 IPPS final rule: MS-DRG overhaul, NTAP/NCTAP updates

Friday, August 6, 2021

CMS released the fiscal year (FY) 2022 IPPS final rule on Monday, August 2, which finalizes its efforts to cushion the ongoing impact of the COVID-19 pandemic on hospital revenue and resources. Along with payment rate updates, the final rule also repealed the MS-DRG relative weight methodology and hospital cost-reporting requirement finalized in the 2021 IPPS final rule. 

Payment updates 

CMS finalized a 2.7% payment increase to hospitals that successfully participate in the Hospital Inpatient Quality Reporting program and are meaningful EHR users. Including disproportionate share hospital and Medicare uncompensated care payments, the agency estimates IPPS hospital payments will increase by $2.3 billion. 

Although CMS typically uses hospital utilization data from the previous FY when setting payment rates for the upcoming FY, the agency believes that wouldn’t be appropriate in this case. The COVID-19 pandemic drastically changed inpatient hospital utilization in FY 2020, according to the final rule. 

Ordinarily, the best available full year of data to approximate the expected FY 2022 inpatient hospital utilization would be data from FY 2020. However, according to the final rule, the FY 2020 data reflects changes in inpatient hospital utilization driven by the COVID-19 public health emergency.  

The vaccinations in the Medicare population, coupled with the effectiveness of the vaccines, leads CMS to believe that there will be significantly lower risk of COVID-19 infection and fewer hospitalizations for COVID-19 in FY 2022 than occurred in FY 2020. Because of this, CMS used the FY 2019 data from prior to the COVID-19 public health emergency to approximate the expected FY 2022 inpatient hospital utilization. 

Market-based MS-DRG policy, hospital cost reporting 

CMS finalized a dramatic overhaul of MS-DRG rate-setting in the 2021 IPPS final rule, but the 2022 final rule has entirely struck out those policies. At the same time, CMS also repealed mandatory reporting of certain charge information on the Medicare cost report. 

CMS finalized its proposal to repeal the market-based MS-DRG relative weight methodology that was adopted effective for FY 2024, and to continue using the existing cost-based MS-DRG relative weight methodology. 

When it comes to reporting payment rates, the 2021 IPPS final rule required hospitals to report the median payer-specific negotiated payment rate by MS-DRG for all contracted Medicare Advantage payers for cost reporting periods ending on or after January 1, 2021. The FY 2022 IPPS final rule repealed this requirement.  

According to the final rule, had hospitals been required to comply with this requirement, it would have resulted in approximately 64,000 hours of administrative burden.  


For FY 2022, in connection with CMS’ decision to use FY 2019 instead of FY 2020 data for FY 2022 IPPS rate setting, CMS is finalizing a one-year extension of new technology add-on payments for 13 technologies for which the new technology add-on payment would otherwise be discontinued beginning FY 2022. 

CMS is extending the New COVID-19 Treatments Add-on Payment (NCTAP) for eligible COVID-19 products through the end of the fiscal year in which the public health emergency ends.  

CMS is not finalizing the proposal to discontinue the NCTAP for discharges on or after October 1, 2021, for a product that is approved for NTAP beginning FY 2022. Instead, hospitals will be eligible to receive both NCTAP and the traditional new technology add-on payment for qualifying patient stays, through the end of the fiscal year in which the PHE ends, with the new technology add-on payment reducing the amount of the NCTAP. 

Editor's note: For more information or to read the FY 2022 IPPS rule in its entirety, visit the CMS website. The finalized FY 2022 IPPS rule updates will be covered in the upcoming webinar 2022 IPPS Final Rule: Compliant Revenue Strategies. Admission to this webinar as well as our 2022 OPPS Final Rule webinar is included when you register for Revenue Integrity Symposium: A NAHRI Virtual Event. This article originally appeared on JustCoding.