Changes to Payment Rates under IPPS

CMS finalized an increase of 3.1% to the IPPS payment rates. This reflects a projected FY 2024 IPPS hospital market basket update of 3.3%, reduced by a 0.2% productivity adjustment. The update reflects the most recently available forecasts of the price proxies underlying the market basket, including projected increases in compensation. Hospitals may be subject to the following IPPS payment adjustments: payment reductions for excess readmissions; payment reduction (1%) for the worst-performing quartile; and upward and downward adjustments under the Hospital Value-Based Purchasing (VBP) Program.

Graduate Medical Education (GME)

For cost reporting periods beginning on or after October 1, 2023, a hospital may include full-time equivalent (FTE) residents training at a rural emergency hospital (REH) in its FTE counts as long as the hospital incurs the costs of the resident training. Alternatively, a REH can choose to operate as a non-provider training site where another hospital incurs the costs for the training and counts the resident FTEs on the other hospital’s cost report. These changes were enacted to support medical education training programs in rural areas.

Uncompensated Care / Disproportionate Share (DSH)

With respect to the DSH calculation, CMS finalized how Section 1115 waiver patients are included in the DSH calculation. These patients include only those who receive rfrom the demonstration either (1) health insurance that covers inpatient hospital services or (2) premium assistance that covers 100% of the premium cost to the patient for inpatient hospital services, provided that the patient is not also entitled to Medicare Part A for each case. Moreover, CMS excluded from the DSH calculation the days of patients for whom hospitals are paid from waiver-authorized uncompensated or undercompensated care pools. This change could have a meaningful impact on hospitals in states that use Section 1115 demonstration funds for uncompensated care pools, including California, Florida, Massachusetts, and Texas, among others.

For the uncompensated care program, CMS will distribute approximately $5.94 billion in uncompensated care payment (UCP) to eligible DSH hospitals for FY 2024, which is a decrease of about $940 million from the prior year. 

Hospital Quality Reporting 

For FY 2024, CMS adopted three new measures, removed three existing measures, and modified three current measures for the Hospital Inpatient Quality Reporting (IQR) Program, including several electronic clinical quality measures (eCQMs). First, CMS is adding the following three eCQMs: (1) Hospital Harm – Pressure Injury; (2) Hospital Harm – Acute Kidney Injury; and (3) Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level – Inpatient). Second, CMS is removing the following three measures: (1) Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty; (2) Medicare Spending Per Beneficiary (MSPB) Hospital; and (3) Elective Delivery Prior to 39 Completed Weeks Gestation: Percentage of Babies Electively Delivered Prior to 39 Completed Weeks Gestation. Third, CMS is modifying the following three measures: (1) Hybrid Hospital-Wide All-Cause Risk Standardized Mortality to include Medicare Advantage (MA) admissions; (2) Hybrid Hospital-Wide All-Cause Readmission to include MA admissions; and (3) COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) to include the cumulative number of HCP who are up to date with recommended COVID-19 vaccinations in accordance with the Centers for Disease Control and Prevention guidance. Hospitals that fail to submit quality data or to meet all Hospital IQR Program requirements are subject to a one-fourth reduction in their Annual Payment Update under the IPPS. The new measures have reporting periods beginning in CY 2025 and payment determination impacts in FY 2027.

Hospital-Acquired Conditions (HAC) Reduction Program

CMS made several changes to the HAC Reduction Program, including the establishment of a validation reconsideration process for hospitals that failed to meet data validation requirements. This process begins with the FY 2025 program year, affecting CY 2022 discharges and the modification of the targeting criteria for data validation to include hospitals that received an Extraordinary Circumstances Exception during the data periods validated beginning with the FY 2027 program year, affecting CY 2024 discharges.

Hospital Readmissions Reduction Program

CMS did not propose or finalize any changes to the Hospital Readmissions Reduction Program. All previously finalized policies under this program will continue to apply.