May 4, 2021

CMS Releases FY 2022 IPPS and LTCH Proposed Rule

Holland & Knight Alert
Miranda A. Franco | Suzanne Michelle Joy

Highlights

  • The Centers for Medicare & Medicaid Services (CMS) on April 27, 2021, released the Fiscal Year (FY) 2022 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) Prospective Payment System (PPS) Proposed Rule, which will affect discharges occurring on or after Oct. 1, 2021.
  • The Proposed Rule would update the payment policies and annual payment rates for the inpatient payment system, update various quality programs and evaluate New Technology Add-On Payment (NTAP) applications, among other changes.
  • Comments on the Proposed Rule are due by June 28, 2021, and a final rule is expected by Aug. 1, 2021.

The Centers for Medicare & Medicaid Services (CMS) on April 27, 2021, released the Fiscal Year (FY) 2022 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) Prospective Payment System (PPS) Proposed Rule, which will affect discharges occurring on or after Oct. 1, 2021. A CMS fact sheet is available.

The Proposed Rule would update the payment policies and annual payment rates for the inpatient payment system, update various quality programs and evaluate New Technology Add-On Payment (NTAP) applications. The Proposed Rule also contains several graduate medical education (GME) proposals that implement three sections of the Consolidated Appropriations Act, 2021. Specifically, 1,000 new slots will be phased in at no more than 200 slots per year beginning in FY 2023.

The rule also proposes to abandon market-based rate setting for hospitals and updates the wage index calculations for hospitals. CMS is also proposing to allow eligible accountable care organizations (ACOs) participating in the BASIC track of the Medicare Shared Savings Program (MSSP) to elect to forgo automatic advancement along the glide path's increasing levels of risk and potential reward for the 2022 performance year.

Several significant issues were not addressed in the Proposed Rule, including enforcement of hospital price transparency requirements and implementation of surprise medical billing requirements. It is expected that there will be future agency action on these issues in a separate rulemaking.

Comments on the Proposed Rule are due by June 28, 2021. A final rule is expected by Aug. 1, 2021.

This Holland & Knight alert details several of the Proposed Rule's most noteworthy components.

Proposed Changes to Payment Rates Under IPPS: CMS estimates that the proposed update would increase IPPS payments to hospitals in FY 2022 by approximately $2.5 billion. The proposed FY 2022 standardized amount for hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and that are meaningful electronic health record (EHR) users would be approximately $6,140, an increase of 3 percent compared to the final FY 2021 standardized amount.

Proposed Changes to Payment Rates Under LTCH PPS: For FY 2022, CMS expects LTCH payments to increase by approximately 1.4 percent or $52 million. Payments for discharges paid the standard LTCH payment rate is expected to increase by 1.2 percent, primarily due to the standard annual update of 2.2 percent and a projected 0.8 percent decrease in high-cost outlier payments. LTCH PPS payments for FY 2022 for discharges paid the site-neutral payment rate is expected to increase by 3 percent. CMS estimates that discharges paid the site-neutral payment rate will represent approximately 25 percent of all LTCH cases and 10 percent of all LTCH PPS payments in FY 2022.

Health Equity Request for Information (RFI): In line with Executive Order 13985, "Advancing Racial Equity and Support for Underserved Communities Through the Federal Government," CMS is seeking public input on how it can address health disparities through program policy. The agency requests feedback on:

  • additional stratification of quality measure results by race, Medicare/Medicaid dual-eligible status, disability status, LGBTQ+ and socioeconomic status
  • collection of a minimum set of demographic data elements by hospitals at the time of admission, and using electronic data definitions to permit nationwide, interoperable health information exchange to incorporate into measure specifications and other data collection efforts relating to quality
  • development of a health equity score measure modeled off the Health Equity Summary Score (HESS) used for Medicare Advantage plans, adapted to the context of risk-adjusted hospital outcome measures and potentially other hospital quality measures used in CMS programs; CMS is seeking information on the possibility of creating such a model that can synthesize results across multiple social risk factors and disparity measures, and
  • interventions that hospitals can implement to improve low-quality hospital equity scores

Repeal of the Market-Based Rate Setting: Notably, CMS proposes to repeal the requirement it had finalized last year that hospitals report their median Medicare Advantage payer-specific negotiated rates for inpatient services, by Medicare Severity-Diagnosis Related Group (MS-DRG), on the Medicare cost report for reporting periods ending on or after Jan. 1, 2021. CMS estimates this would reduce the administrative burden on hospitals by approximately 64,000 hours. CMS also proposes to repeal the market-based MS-DRG relative weight methodology that it had planned to implement in FY 2024; instead, it would continue using its existing cost-based methodology. In addition, the agency would use FY 2019 data, rather than FY 2020 data, in approximating expected FY 2022 inpatient hospital utilization for weight-setting purposes.

Cell Therapy Rate-Setting: In last year's IPPS rule, CMS finalized the creation of a new MS-DRG for Chimeric Antigen Receptor (CAR) T-cell immunotherapy. The agency proposes adding additional immunotherapies to MS-DRG 018 and updating its name to "Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies" to account for non-CAR T-cell therapies to be grouped into the MS-DRG for FY 2022. Given the continued use of 2019 data, FY 2022 rates for MS-DRG 018 will be based on the $373,000 list price for Kymriah and Yescarta.

New COVID-19 Treatments Add-On Payment (NCTAP): CMS is proposing to extend NCTAP for eligible products through the end of the fiscal year in which the COVID-19 public health emergency (PHE) ends. CMS is also proposing to discontinue the NCTAP for discharges on or after Oct. 1, 2021 for a product approved for new technology add-on payments beginning FY 2022. CMS is asking for stakeholder feedback regarding how data reflecting the costs of a product with an emergency use authorization (EUA) should be considered for purposes of the two-year to three-year period of newness for new technology add-on payments for a product with or expected to receive an EUA, including whether the newness period should begin with the date of the EUA. CMS is also soliciting comment on whether the newness period for baricitinib, a Janus kinase (JAK) inhibitor that has been used for COVID-19 treatment, would begin on Nov. 19, 2020, the date of its EUA, or when the product became available on the market.

New Technology Add-On Payment (NTAP) Extension: Because of the PHE, CMS proposes the extension of the New Technology Add-On Payments (NTAP) for 14 products, for which the NTAP was scheduled to expire for FY 2022. The administration explains that because it will use FY 2019 data for rate-setting, the costs for a new technology for which the three-year anniversary date of the product's entry into the U.S. market may not be fully reflected in the data used to recalibrate associated MS-DRG relative weights for FY 2022. CMS is inviting public comment on its proposal to extend these NTAPs.

NTAP Applications: For FY 2022, CMS received 36 new applications for NTAP and, in connection with CMS' proposal to use FY 2019 instead of FY 2020 data for FY 2022 IPPS rate-setting, proposes to continue NTAP for 25 existing technologies. For FY 2022, CMS:

  • is proposing to continue nine technologies approved for NTAP still considered to be new
  • as noted above, is proposing to extend 14 new technologies by one year that would otherwise be discontinued in FY 2022 due to technologies for which the third anniversary of receiving marketing approval is in the latter half of the upcoming FY
  • received 21 new applications for NTAP via the traditional pathway
  • received 12 new applications for NTAP via the Alternative Pathway for Breakthrough Devices
  • received three applications for NTAP via the Alternative Pathway for Qualified Infectious Disease Products

Organ Acquisition: CMS proposes several changes to Medicare's organ acquisition payment policies. CMS proposes to codify into regulation Medicare organ acquisition payment policies that have long been in existence and some new organ acquisition payment policies relative to organ procurement organizations (OPOs), transplant hospitals and donor community hospitals. Specifically, CMS is proposing to facilitate more accurate payment of Medicare's share of organ acquisition costs by collecting data from transplant hospitals and OPOs to calculate this share; and to ensure Medicare payment at reasonable costs by requiring donor community (not transplant) hospitals to bill OPOs customary charges that are reduced to costs, in line with Medicare reasonable cost principles.

Graduate Medical Education (GME) Proposals: CMS proposes implementing several provisions of the Consolidated Appropriations Act (CAA), including distributing 1,000 new Medicare-funded medical residency positions starting in FY 2023, with up to 200 slots distributed per year. No hospital would receive more than 1.0 full-time equivalent (FTE) per year under either of the two alternative methodologies proposed for the distribution of the slots. The first alternative would prioritize hospitals with the highest Health Professional Shortage Area (HPSA) scores. In this proposal, CMS estimates that all residency positions would be distributed through HPSA scoring. The second alternative would give CMS additional time to work with stakeholders to develop a "more refined approach for future years." The agency would distribute 200 additional residency slots for FY 2023 among hospitals in four categories – rural hospitals, hospitals above their current cap, hospitals located in states with new medical schools or branch campuses, and hospitals that serve HPSAs – with higher priority given to hospitals that qualify in more categories. Applications for new slots are due by Jan. 31 of the preceding fiscal year. CMS also proposes implementing the Promoting Rural Hospital GME Funding Opportunity, which would allow certain rural training hospitals to receive a GME cap increase.

Finally, CMS proposes to permit certain hospitals with less than 3.0 FTEs on their cost report (starting Oct. 1, 1997 to the date of enactment of the CAA, Dec. 27, 2020) to reset their per resident amount (PRA) for direct graduate medical education (DGME) payments and establish a new cap for DGME and indirect medical education.

Advancing to Digital Quality Measurement and the Use of Fast Healthcare Interoperability Resources (FHIR) in Hospital Quality Programs: CMS is issuing a request for information (RFI) to support the complete transition to digital quality measurement in CMS quality reporting and value-based purchasing programs by 2025. Specifically, CMS is looking for stakeholder feedback on 1) clarifying the definition of digital quality measures; 2) using the Fast Healthcare Interoperability Resources (FHIR) standard for electronic clinical quality measures (eCQMs) that are currently in the various quality programs; 3) standardizing data required for quality measures for collection via FHIR-based Application Programming Interfaces (APIs); 4) leveraging technological opportunities to facilitate digital quality measurement; 5) better supporting data aggregation; and 6) developing a common portfolio of measures for potential alignment across CMS-regulated programs, federal programs and agencies, and the private sector.

PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program: CMS proposes removing the oncology care plan for pain (NQF #0383) and adopting COVID-19 vaccination coverage among healthcare personnel.

Hospital Inpatient Quality Reporting (IQR) Program: CMS proposes to add five, delete five and seek comment on three measures. Additionally, starting with the CY 2023 reporting period/FY 2025 payments, CMS is proposing to require hospitals to use the 2015 Edition Cures Update version of certified electronic health record technology (CEHRT) that supports reporting requirements for all available eCQMs.

 

Measure

Change

Effective Date

Maternal morbidity structural

Proposed addition

Abbreviate CY 2021 reporting period impacting FY 2023 payments

COVID-19 vaccination coverage among healthcare personnel

Proposed addition

October-December 2021 reporting period impacting FY 2023 payments

Hybrid hospital-wide all-cause risk-standardized mortality

Proposed addition

Voluntary reporting FY 2023; mandatory reporting FY 2024, affecting FY 2026 payments

Hospital harm-severe hypoglycemia (NQF #3503e)

Proposed addition

CY 2023 reporting period impacting FY 2025 payments

Hospital harm-severe hyperglycemia (NQF #3533e)

Proposed addition

CY 2023 reporting period impacting FY 2025 payments

Death among surgical inpatients with serious treatable complications (NQF #0351)

Proposed deletion

FY 2023 payments

Exclusive breast milk feeding (NQF #0480)

Proposed deletion

FY 2026 payments

Admit decision time to ED departure time for admitted patients (NQF #0497)

Proposed deletion

CY 2024 reporting period/
FY 2026 payments

Anticoagulation therapy for atrial fibrillation/flutter (#0436)

Proposed deletion

CY 2024 reporting period/
FY 2026 payments

Discharged on statin medication (NQF #0439)

Proposed deletion

CY 2024 reporting period/
FY 2026 payments

COVID-19 mortality measure

Requesting comment

 

Patient-reported outcome measures (PROM) following elective total hip and/or knee arthroplasty

Requesting comment

 

Stratify hospital-wide all-cause unplanned readmissions measure and add a separate structural measure to assess hospital leadership engagement in health equity data

Requesting comment

 

Hospital Value-Based Purchasing (HVBP) Program: CMS proposes to suppress or remove the following measures:

 

Measure

 

FY

Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS)

Suppress

2022

Medicare Spending Per Beneficiary

Suppress

2022

Five CDC Healthcare-Associated Infection measures

Suppress

2022

Pneumonia 30-day mortality rate measures

Suppress

2023

Patient safety and adverse events composite measure

Remove

2023

In addition, CMS proposes to update baseline periods for certain measures and make technical updates to account for the public health emergency. CMS proposes to not calculate a total performance score for FY 2022 and instead award to all hospitals the amount that is typically withheld. CMS also proposes to calculate and publicly report measure rates for all measures where feasible and appropriately caveated.

Medicare and Medicaid Promoting Interoperability Programs: CMS proposes to continue the minimum reporting period of any continuous 90 days for CY 2023 before increasing the minimum reporting period to any continuous 180 days starting in CY 2024. The agency also proposes to increase the minimum required score from 50 points to 60 points (out of 100). CMS proposes several measure changes, including requiring a "yes" or applicable exclusion for all four Public Health and Clinical Data Exchange measures, increasing the Prescription Drug Monitoring Program measure from 5 to 10 bonus points (retaining it as optional), and adding a new bidirectional Health Information Exchange measure as an optional alternative to the two existing measures. CMS proposes to tweak attestation requirements, including removing attestation statements 2 and 3 from the preventing information blocking attestation, while adding a new attestation to having completed an annual assessment of all nine Safety Assurance Factors for EHR Resilience (SAFER) guides. Finally, the agency proposes to add two and remove four eCQMs starting with CYs 2023 and 2024, respectively, in alignment with proposals for the Hospital IQR Program.

Hospital Readmissions Reduction Program: For FY 2023, CMS proposes to suppress the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following pneumonia hospitalization measure (NQF #0506). Further, it proposes excluding COVID-19-diagnosed patients from measure denominators for the five conditions/procedure-specific readmission measures. CMS also requests public comments on closing the gap in health equity through future stratification of results for readmission measures by race and ethnicity, and expanding standardized data collection to additional social factors.

Hospital-Acquired Condition (HAC) Reduction Program: CMS made no changes to the existing measures in the HAC Reduction Program in CY 2020. In terms of methodology, CMS proposes to suppress the third and fourth quarters of CY 2020 for both the CMS Patient Safety and Adverse Events Composite (CMS PSI 90) and the CDC National Healthcare Safety Network (NHSN) healthcare-associated infections (HAI) measure. This would impact performance calculations for 2022 and 2023 performance years and means that CMS would propose calculating measure rates for that program year but then "suppress" the use of those rates to generate Total HAC Scores. CMS proposed to update regulation to reflect that the current public reporting site, Hospital Compare, has been renamed Care Compare.

Medicare Shared Savings Program (MSSP): CMS proposes to make changes to policies for the MSSP to allow eligible Accountable Care Organizations (ACOs) participating in the BASIC track's glide path option to elect to forgo automatic advancement along with the glide path's increasing levels of risk and potential reward for the performance year 2022. However, those organizations would automatically move up the risk-sharing glide path to where they would otherwise be in 2023.

Restoring the Imputed Wage Floor: CMS proposes to implement the imputed floor wage index provision of the American Rescue Plan (ARP) Act of 2021 for hospitals in all-urban states, specifically by reinstating the imputed floor wage index policy for all-urban states effective for discharges beginning FY 2022 with no expiration date. Effective Oct. 1, 2021, the ARP restores the wage index "rural floor" protection for the all-urban states of New Jersey, Delaware and Rhode Island. In the Proposed Rule, however, CMS interprets the ARP change to make it also applicable to, and beneficial for, hospitals in Connecticut, Puerto Rico and the District of Columbia.

Low Wage Index Hospital Policy: CMS proposes to maintain a policy that supports hospitals in low-wage index areas. Medicare payments to hospitals are adjusted by a wage index intended to account for geographic differences across labor markets. CMS updates the wage index each year based on hospital cost report data and other inputs and policies. In FY 2020, CMS finalized a policy that boosts the wage index for hospitals with a wage index value below the 25th percentile. Affected hospitals had their wage index value increased by half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value across all hospitals. CMS achieved budget neutrality for this change by adjusting the standardized amount applied across all IPPS hospitals. CMS maintained this policy in FY 2021 and proposes to continue this policy in FY 2022 as well.

Urban-to-Rural Reclassification: CMS proposes steps that would make it harder for hospitals to withdraw from urban-to-rural reclassification. Medicare regulations allow hospitals geographically located in urban areas to be redesignated to rural areas of their state for Medicare payment purposes. In recent years, litigation has broadened the availability and appeal of redesignation. As a result, CMS has seen an increase in the number of hospitals seeking urban-to-rural reclassification. Accordingly, CMS has taken steps to minimize these maneuvers and their impact, and the agency now proposes two notable rule changes to the same effect. CMS proposes that requests to cancel rural reclassifications may not be made earlier than one year after the reclassification effective date. For example, a hospital that was approved to receive a rural reclassification effective Oct. 1, 2021, could not request to cancel that reclassification until Oct. 1, 2022

CMS also proposes to eliminate the current Rule that a request to cancel must be made 120 days before the end of the hospital's fiscal year. Such cancelation will be effective beginning with the hospital's next fiscal year. CMS proposes to require instead that a hospital approved for rural reclassification (and which does not receive an additional reclassification) would have its data included in calculating the rural wage index for at least one federal fiscal year before the rural reclassification status could be canceled. Specifically, CMS proposes to make cancellation requests effective for the federal fiscal year that begins in the calendar year after the calendar year in which the cancelation request is submitted.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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