CMS on Monday issued a proposed rule announcing the annual payment updates to the Inpatient Prospective Payment System (IPPS) and long-term care hospital (LTCH) prospective payment system for fiscal year (FY) 2023, as well as other health equity and maternal health initiatives. CMS will accept comments on the proposed rule through June 17.

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Proposed changes to IPPS

Under the proposed rule, acute care hospitals using EHRs and participating in the Hospital Inpatient Quality Reporting (IQR) Program would see a 3.2% increase in FY 2023 payment rates. This change is based on a market basket update of 3.1% reduced by a 0.4 percentage point productivity adjustment and a 0.5 percentage point increase required by statue.

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Overall, CMS estimates hospital payments would increase by $1.6 billion in FY 2023. In addition, the agency said Medicare disproportionate share hospital payments and Medicare uncompensated care payments would decrease by approximately $800 million.

Hospitals may also be subject to other payment adjustments in the IPPS, such as:

• Reduced payments for excess readmissions in the Hospital Readmissions Reduction Program
• A 1% payment reduction for the worst-performing quartile in the Hospital-Acquired Condition Reduction Program
• Adjustments either up or down based on the Hospital Value-Based Purchasing Program

Additional payments for Medicare Dependent Hospitals and the temporary change in payments for low-volume hospitals would also expire in FY 2023. Although these payments have been previously extended by legislation, CMS said payments to these hospitals would decrease by $600 million if they expire.

CMS is also considering adding a payment adjustment for hospitals that source their N95 respirators from domestic manufacturers. 

Proposed health equity, maternal health policies

CMS also proposed several new policies aimed at addressing health equity and maternal health.

Starting in FY 2023, CMS proposed three health equity-focused measures to be added to the Hospital IQR Program. The first measure would assess a hospital's commitment to health equity through activities in five domains: strategic planning, data collection, data analysis, quality improvement, and leadership engagement.

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The other two proposed health equity measures focus on identifying and screening for patient-level health-related social needs, including food insecurity, housing instability, transportation needs, and more. According to CMS, identifying and screening for these needs would help hospitals "serve patients holistically by addressing and monitoring what are often key contributors to poor physical and mental health outcomes."

In addition to these health equity measures, CMS proposed a new "birthing-friendly" designation for hospitals. It would be the first hospital quality designation specifically focusing on maternal health.

According to CMS, the designation would initially be based on the Hospital IQR Program's maternal morbidity measure, which requires hospitals to confirm whether they participate in a state or national perinatal quality improvement collaborative program and have enacted safety practices or bundles for birth complications. Other measures could be added in the future.

The proposed rule would also add two additional quality measures to the Hospital IQR Program with the goal of improving maternal health. One measure would focus on low-risk Cesarean deliveries, and the other would focus on severe obstetric complications.

"Building a healthier America starts with ensuring everyone in our nation has access to high-quality, affordable health care," said HHS Secretary Xavier Becerra. "The new Medicare policies we are proposing today will help advance health equity in our health systems and dramatically improve maternal care for new parents and their newborns."

Proposed changes to LTCH payment rates

Under CMS' proposed rule, payments to LTCH would increase by 0.8%, or $25 million, in FY 2023. This payment rate update is based on an approximately 0.7% increase from the annual standard federal rate update of 2.7% for FY 2023, as well as a projected decrease in high-cost outlier payments. (Goldman, Modern Healthcare, 4/18; Morse, Healthcare Finance News, 4/18; Paavola, Becker's Hospital CFO Report, 4/18; CMS IPPS and LTCH Proposed Rule fact sheet, 4/18; CMS Maternal Health policies fact sheet, 4/18; CMS press release, 4/18)