If you’re interested in Medicare fee-for-service payment rates and policies for inpatient hospitals and long-term care hospitals (LTCHs), you’ll want to look at the Centers for Medicare & Medicaid Services (CMS) final rule for the federal fiscal year (FY) 2024 inpatient prospective payment system (IPPS) and LTCH prospective payment system (PPS). This final rule was published on Aug. 1, 2023, and it updates payment rates and policies for these facilities.
In addition to updating payment rates, this final rule includes policies to promote health equity and patient safety. For example, CMS is incentivizing those who care for high proportions of underserved individuals, as defined by dual eligibility status. The final rule also addresses the treatment of Section 1115 demonstration days in the calculation of Medicare disproportionate share hospital (DSH) payments. If you’re interested in learning more about these updates, keep reading.
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- CMS published a final rule for the federal fiscal year (FY) 2024 inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) prospective payment system (PPS) on Aug. 1, 2023.
- The final rule updates Medicare fee-for-service payment rates and policies for inpatient hospitals and LTCHs for FY 2024 and includes policies to promote health equity and patient safety.
- The final rule also addresses the treatment of Section 1115 demonstration days in the calculation of Medicare disproportionate share hospital (DSH) payments.
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CMS Finalizes Medicare Inpatient Payment Rule for FY 2024
The Centers for Medicare & Medicaid Services (CMS) has released the final rule for the Fiscal Year (FY) 2024 Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS). This important rule finalizes Medicare payment rates and policies for inpatient hospitals and long-term care hospitals for FY 2024.
Key Payment Rate Updates
The standardized payment amount for hospitals participating in quality reporting will increase by 3.1% in FY 2024 compared to FY 2023, to $6,497.77. CMS will distribute around $5.9 billion in uncompensated care payments to eligible disproportionate share hospitals, a decrease of $950 million from FY 2023. The rule also clarifies that Section 1115 Medicaid demonstration days can be included in Medicare disproportionate share hospital (DSH) payment calculations.
Wage Index and Disparity Changes
CMS is continuing efforts to reduce wage index disparities affecting low-wage index hospitals for another year. The rule also finalized a proposal to consider hospitals reclassified as rural under Section 412.103 as geographically rural for wage index purposes starting in FY 2024.
Rural Emergency Hospital Payments
Rural emergency hospitals will now be treated similarly to critical access hospitals for determining graduate medical education (GME) payments.
New Technology Add-On Payments
Revisions were made to the criteria that applicants must meet to apply for new technology add-on payments (NTAP).
Impacts on Hospital Payments
Acute care hospitals will see a net estimated increase of $2.2 billion in FY 2024 payments, driven by a $2.6 billion increase in operating and capital payments plus changes to DSH and uncompensated care. The total update percentage is 3.1%.
The LTCH standard payment rate will increase by 3.3%, and LTCH PPS payments are estimated to rise by 0.2% or $6 million.
The rule finalizes changes governing expansion opportunities for grandfathered physician-owned hospitals.
Diagnosis-Related Group (MS-DRG) Changes
Updates were made to MS-DRGs subject to post-acute care transfer and special payment policies, including reassignment, creation, and deletion of certain MS-DRGs.
In summary, this final rule implements impactful changes to Medicare’s inpatient payment structure and policies for FY 2024. It aims to increase payments to many providers while addressing disparities and incentivizing high-quality care. Healthcare organizations should closely review the provisions to understand the effects.
IPPS Rule 2024 Frequently Asked Questions
The IPPS final rule for FY 2024 includes several changes that will affect healthcare providers. One of the key changes is an increase in Medicare inpatient prospective payment system rates by a net 3.1% compared to FY 2023. The rule also updates the wage index and adjusts the MS-DRG relative weights. Additionally, it includes changes to the hospital readmissions reduction program and the hospital-acquired conditions reduction program.
The IPPS payment system is a critical component of Medicare’s reimbursement system for inpatient hospital services. It affects healthcare providers by determining the payment rates for inpatient hospital services, which can impact the financial viability of hospitals and their ability to provide high-quality care to patients. The IPPS payment system also incentivizes hospitals to improve quality and reduce costs through various programs and initiatives.
The IPPS Pricer is a software tool that calculates Medicare payment rates for inpatient hospital services based on the MS-DRG system. The Pricer considers various factors, such as the patient’s diagnosis, procedures performed, and hospital location. The Pricer implies that it helps ensure that Medicare payments are accurate and appropriate based on the services provided to patients.
The IPPS rule for 2024 includes several provisions related to social determinants of health, which are factors that impact health outcomes but are not directly related to medical care. These provisions aim to address health disparities and improve health outcomes for vulnerable populations. For example, the rule includes changes to the hospital readmissions reduction program that consider a hospital’s performance on certain measures related to social determinants of health.
The fiscal year dates for the IPPS rule in 2024 are from October 1, 2023, to September 30, 2024. During this time, hospitals will be subject to the payment rates and policies outlined in the IPPS final rule for FY 2024.
The IPPS payment methodology can impact patient care and outcomes in several ways. For example, the payment rates and incentives in the IPPS system can incentivize hospitals to improve quality and reduce costs, which can lead to better patient outcomes. However, the payment methodology can also create financial pressures that may impact hospitals’ ability to provide high-quality care to patients. Policymakers need to balance these competing priorities to ensure that patients receive the best possible care.
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