CMS ponders alternative to typical rate-setting in 2022 IPPS proposed rule

CMS is considering alternatives to established practice for setting payment rates in the fiscal year (FY) 2022 Inpatient Prospective Payment System (IPPS) proposed rule. The agency cites the need to address changes in hospital utilization due to the COVID-19 pandemic, but its proposal raises questions about future rate-setting and how to account for the ongoing impact of COVID-19.

Typically, CMS uses hospital utilization data from the previous FY when setting payment rates for the upcoming FY, but the agency believes that wouldn’t be appropriate for FY 2022. The COVID-19 pandemic drastically changed inpatient hospital utilization in FY 2020. However, the agency believes that, due to the rapid pace of vaccinations and the effectiveness of vaccines, hospitals will face far fewer COVID-19 infections and hospitalizations in 2022 than in 2020. Therefore, the agency is proposing to use FY 2019 hospital utilization data, although it is also seeking comment on using FY 2020 data.

Using FY 2019 data may be the simplest option, but it does raise questions that CMS and hospitals will need to address, experts agree.

Data from 2020 may contain important information, such as improvements to provider charging practices or other significant charging differences, says NAHRI Advisory Board member Jugna Shah, MPH, CHRI, president of Nimitt Consulting, Inc., in Spicer, Minnesota.

The proposed rule raises a valid point about 2020 hospital volumes, but there are options beyond omitting 2020 data entirely, Shah points out. For example, claims data from FYs 2019 and 2020 could be combined to allow the agency to base rates on more recent claims as well as more representative pre-pandemic claims.

Using claims data that cross two fiscal years should not be too cumbersome, so it’s an option that should at least be considered and discussed, Shah adds.

CMS’ proposal also raises the question of when and how it would return to typical rate-setting practice, says NAHRI Advisory Board member Valerie Rinkle, MPA, CHRI, president of Valorize Consulting, Inc.

Using multiple years of data could allow for a smoother transition back to normal rate-setting in the future, Rinkle and Shah agree. For example, CMS could use 75% 2019 data and 25% 2020 data. For FY 2023, CMS could use 50% 2019 data, 25% 2020 data, and 25% 2021 data, Rinkle suggests.

Revenue integrity professionals should carefully review CMS’ proposal. CMS is seeking feedback on using FY 2020 claims data, so revenue integrity professionals with alternative suggestions should consider submitting them. Comments on the proposed rule are due June 28. For tips on how to write and submit comments on proposed rules, see NAHRI’s white paper “Advocacy in Action: Commenting on Proposed Rules.”

CMS is also proposing multiple changes to MS-DRGs and complications/comorbidities and major complications/comorbidities. Learn more about those proposals in this Q&A with Shah and listen to the May 20 episode of The Revenue Integrity Show: A NAHRI Podcast to hear Shah discuss the proposed rule in more detail.