On April 10, 2023, CMS issued its annual Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System Proposed Rule for Fiscal Year (FY) 2024. Among numerous proposals, CMS calls for a 2.8 percent increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting program and are meaningful electronic health record users. A final rule is expected by August 1, 2023.
Proposed Rule
CMS proposes an increase of 2.8 percent (compared to a 4.3 percent increase in FY 2023) in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) program and are meaningful electronic health record (EHR) users. This reflects a projected FY 2024 hospital market basket increase of 3 percent, reduced by a 0.2 percentage point productivity adjustment. CMS proposed increasing the LTCH payment rate by approximately 2.9 percent. However, CMS projected that LTCH payments will decreased by 0.9 percent ($24 million) due to an expected decrease in high-cost outlier payments.
Based on public comments and court rulings, CMS proposed considering hospitals reclassified as rural under the same as geographically rural hospitals for wage index calculations beginning FY 2024. CMS estimates that this would result in a total of 596 hospitals receiving the rural floor in FY 2024. The rule also stated that the area wage index for any hospital in an urban area may not be less than the area wage index for rural hospitals.
For the Medicare DSH payment adjustment, CMS projects that the amount available to distribute as payments for uncompensated care for FY 2024 would decrease by approximately $161 million. The supplemental payment is not budget-neutral, and CMS estimates the impact for FY 2024 to be approximately $90.3 million, which would be an approximately $6 million decrease from estimates of supplemental payments in FY 2023. CMS proposes to continue its supplemental payment for Indian health services and tribal hospitals, as well as Puerto Rico hospitals. CMS finalized this policy in FY 2023 to mitigate the discontinued use of low-income insured days as an alternative for uncompensated care costs.
Additionally, the Consolidated Appropriations Act, 2021, established rural emergency hospitals (REHs) as a new Medicare provider type to address concerns over increasing closures of rural hospitals. REHs are facilities that convert from either a critical access hospital (CAH) or a rural hospital with 50 or fewer beds that do not provide acute-care inpatient services. CMS proposes to allow REHs to be designated as graduate medical education training sites. This proposal aims to address workforce shortages in rural communities by allowing medical residents to train in these settings.
Finally, the Proposed rule contains a request for information from CMS regarding safety-net hospitals. Specifically, CMS is seeking public input on challenges faced by safety-net hospitals and their patients. In addition, CMS asks for potential approaches to help safety-net hospitals meet those challenges, including whether an alternative approach exists to the Safety-Net Index (SNI). SNI is a potential measure of the degree to which a hospital functions as a safety-net hospital. Safety-net hospitals serve vulnerable populations that often face barriers to accessing healthcare.