On April 27, the Centers for Medicare & Medicaid Services (CMS) released the Proposed 2022 Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital rule.

CMS will accept comments on the proposed changes up to 5:00pm ET on June 28, 2021.

Quick Look: The proposed rule increases payments to acute care hospitals, adopts wage index policy changes, provides details on distributing 1,000 new Graduate Medical Education (GME) residency slots, and proposes various changes to the Promoting Interoperability Program and quality programs. In addition, CMS proposes to delete a requirement that hospitals report median negotiated rates with Medicare Advantage plans.

Watch for CLA’s full Regulatory Advisor for more details. In the interim, here is a sampling of key policies.

Payments

Due to the pandemic, CMS proposes using Fiscal Year (FY) 2019 data for setting rates and weights but seeks comments on whether to consider using FY 2020 data. CMS proposes a 2.5% annual update, but when combined with a 0.2% productivity reduction and a statutorily required increase of 0.5%, the result is a 2.8% increase in 2022. Overall, CMS estimates hospitals payments will increase $2.5 billion due to the rule.

For the Medicare Disproportionate Share Hospital (DSH) payments, CMS calculates the three factors as:

• Factor 1: DSH pool of $10,573,368,841.28, which is equal to 75 percent of the total amount of estimated Medicare DSH payments for FY 2021
• Factor 2: 0.7214 (72.14%). The uncompensated care amount would be $10.573 billion multiplied by 0.7214, or $7.628 billion. CMS indicates this is roughly $662 million below the 2021 uncompensated care amount of $8.290 billion and equates to a decrease of 7.99%.
• Factor 3: use of one-year S-10 data (FY 2018)

CMS proposes to repeal the policy it put in place under last year’s rule that requires a hospital report on its Medicare cost report the median payer-specific negotiated charge that the hospital has negotiated with its Medicare Advantage payers by MS-DRG. CMS had planned on using this information to establish a new market-based MS-DRG relative weight methodology effective for FY 2024. However, CMS also repeals that methodology and will continue using the existing cost-based methodology for calculating the MS-DRG relative weights for FY 2024 and subsequent fiscal years.

Wage Index

CMS proposes several changes to wage index policies. First, as required under the American Rescue Plan Act of 2021 (Pub. L. 117–2), CMS is re-establishing the minimum area wage index for hospitals in all-urban states (i.e.: the imputed rural floor) beginning with discharges occurring on or after October 1, 2021. CMS indicates that based on available data, the change would apply to New Jersey, Rhode Island, Delaware, Connecticut, and Washington, D.C.

Second, CMS will continue assisting hospitals with a wage index below the 25^th percentile. For Fiscal Year (FY) 2022 under this policy, the 25^th percentile wage index value is 0.8418. CMS seeks comments on whether, due to the pandemic, it should adjust how it handles the negative impact of this change on high wage index hospitals.

Finally, CMS proposes to change several policies related to urban to rural reclassifications due to activities it believes distort those policies. CMS proposes that requests to cancel rural reclassifications must be submitted at least one year after the effective date of the reclassification. In addition, CMS proposes to eliminate the current rule that cancelations must be requested 120 days prior to the end of the fiscal year and is effective beginning with the next fiscal year. Instead, it would use a policy that ensures a hospital approved for rural reclassification would have its data included in the calculation of the rural wage index for at least one Federal fiscal year before the rural reclassification status could be canceled.

Graduate Medical Education (GME)

There are many changes in the proposed rule that relate to GME. These policies stem from statutory changes enacted under the Consolidated Appropriations Act of 2021 (CAA 2021).

The CAA 2021 included 1,000 new residency slots. CMS is statutorily prohibited from distributing more than 200 slots per year. As such, CMS proposes to make 200 residency positions available for FY 2023 and each subsequent year. Applications for new slots are due by January 31 of the preceding fiscal year.

While the CAA 2021 caps the number of slots a hospital can receive at 25, CMS proposes to limit slots to no more than 1.0 FTE each year per hospital. Hospitals may only submit one application a year. The statute also requires a demonstrated likelihood the slots will be used by a hospital and then requires CMS distribute not less than 10% of slots to each of four priority categories:

• Category 1 – rural hospitals
• Category 2 – hospitals training residents above their cap,
• Category 3 – hospitals in states with new medical schools,
• Category 4 – hospitals serving underserved areas

With respect to Rural Training Track (RTT) programs, the CAA 2021 included statutory language to address several problematic policies. Those relate to cap adjustments for urban and rural hospitals, removing a requirement that the RTT must be separately accredited as long as the program in its entirety is accredited by the Accreditation Council for Graduate Medical Education and allowing an exemption from the three-year rolling average.

Finally, the CAA 2021 enacted policies to allow hospitals to reset low or zero per resident amounts (PRA) and full-time equivalent (FTE) resident caps due to hosting or rotating small numbers of residents for short periods and inadvertently setting those caps. CMS provides its approach to implementing those policies.

Promoting Interoperability, Quality Programs

CMS proposes a variety of changes to the Promoting Interoperability Program. CMS proposes continuing the 90-day reporting period for FY 2022 and FY 2023 but would move to a 180-day continuous reporting period for FY 2024. For Calendar Year (CY) 2022 and subsequent years, the minimum scoring threshold is increased from 50 points to 60 points. There are also changes to various measures and measure reporting that should be reviewed. A few of those are:

• For CY 2022, CMS would modify the “Provide Patients Electronic Access to Their Health Information” measure to require eligible hospitals and CAHs to ensure that patient health information remains available to access indefinitely and by an application of the patient’s choice that is configured to the hospital’s CEHRT. This would include all patient health information from encounters on or after January 1, 2016.
• Add a new Health Information Exchange (HIE) Bi-Directional Exchange measure as a yes/no attestation, beginning in CY 2022 to the HIE objective as an optional alternative to the two existing measures.
• Beginning with the EHR reporting period in CY 2022, CMS proposes to require an eligible hospital or CAH to report under the Public Health and Clinical Data Exchange objective on the following: Syndromic Surveillance Reporting, Immunization Registry Reporting, Electronic Case Reporting, and Electronic Reportable Laboratory Result Reporting. Some exemptions exist.

Due to the COVID-19 pandemic, CMS proposes a measure suppression policy for several of its other programs: Hospital Readmissions Reduction Program (HRRP), Hospital-Acquired Condition (HAC) Reduction Program, Hospital Value-Based Purchasing, Skilled Nursing Facility Value-Based Purchasing Program, and End-Stage Renal Disease Quality Incentive Program. The policy will use various factors to assess whether to suppress measures or not, which CMS proposes doing for multiple programs. Further, CMS makes a variety of measure additions and deletions that should be reviewed.

How We Can Help

Have questions about the proposed 2022 IPPS rule? Reach out to learn more about our regulatory, financial, audit and related services so you understand how these payment and policy changes may impact your organization. Watch for the release of our full Regulator Advisor in the future by signing up to receive CLA publications.