Knowledge Base Article

CMS issued a display copy of the FY 2024 IPPS Final Rule on Monday, August 1, 2023. This article contains a high-level look at the final operating payment rate changes, Rural Emergency Hospitals change, social determinants of health codes severity designation changes, when the New COVID-19 Treatment Add-On Payments are set to end, and updates to the Affordable Care Act Quality Programs.

Proposed Payment Rate Changes

The proposed increase 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 meaningful electronic health record (EHR) use was 2.8%. This finalized increase is 3.1%.

The increase in operating and capital payment rates will generally increase hospital payments in FY 2024 by $2.2 billion.

Rural Emergency Hospitals (REHs) and Graduate Medical Education (GME)

REH’s became a new provider type effective January 1, 2023. You can read more about them in a related MLN Fact Sheet. CMS finalized their proposal to allow REH’s serve as training sites for Medicare GME payment purposes to “help support graduate medical training in rural areas.”

Severity Level Designation Change for Z Codes Describing Homelessness

The U.S. Department of Health and Human Services (HHS) defines Social Determinants of Health (SDOH) as "the conditions in the environments where people are born, live, learn, work, play, worship, and age that affect a wide range of health, functioning, and quality-of-life outcomes and risks." Effective February 18, 2018, the AHA Coding Clinic published advice allowing the reporting of SDOH codes Z55-Z65, based on information documented by all clinicians involved in the care of the patient.

For FY 2024, CMS finalized their proposal to change the severity level designation for diagnosis codes Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered homelessness), and Z59.02 (Unsheltered homelessness) from NonCC to CC for FY 2024.

COVID-19 Treatment Add-On Payment (NCTAP) to End September 30, 2023

In response to the Public Health Emergency (PHE), CMS established NCTAP for eligible discharges during the PHE. In the FY 2022 final rule, CMS finalized the extension of NCTAP through the end of the FY in which the PHE ends. With the PHE ending on May 11, 2023, discharges involving eligible products would continue to be eligible for the NCTAP through September 30, 2023 (that is, through the end of FY 2023).”

Affordable Care Act Quality Programs

Hospital Readmission Reduction Program (HRRP)

CMS did not propose or finalize any changes to this value-based purchasing program that reduces payments to hospitals with excess readmissions.

Hospital-Acquired Condition (HAC) Reduction Program

This program creates an incentive for hospitals to reduce the incidence of hospital-acquired conditions by reducing payment by 1% for applicable hospitals ranking in the worst-performing quartile on select measures. For FY 2023, due to the ongoing COVID-19 PHE, no hospital was subject to the 1-percent payment reduction. You can read more about this program in a related FY 2023 CMS Fact Sheet.

For FY 2024, CMS finalized the proposal to establish a validation reconsideration process for hospitals who fail data validation beginning with the FY 2025 program year, affecting calendar year 2022 discharges. They also finalized modification of the validation targeting criteria to include hospitals granted extraordinary circumstances exceptions (ECEs) beginning with the FY 2027 program year, affecting calendar year 2024 discharges.

Hospital Value-Based Purchasing (VBP) Program

This is a budget-neutral program funded by reducing hospitals’ base operating DRG payments each fiscal year by 2% and redistributing the entire amount back to the hospitals as value-based incentive payments. Like the HAC Reduction Program, CMS finalized hospitals’ keeping the 2% payment due to the ongoing COVID-19 PHE. For FY 2024, CMS finalized several changes to this program for FY 2024, for example, CMS:

• Adopted the Severe Sepsis and Septic Shock: Management Bundle measure in the Safety Domain beginning with the FY 2026 program year.
• Adopted a modified version of the Medicare Spending Per Beneficiary (MSPB) Hospital measure beginning with the FY 2028 program year, and
• Adopted a modified version of the Hospital-level Risk-Standardized Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) measure beginning with the FY 2030 program year.

Resources

August 1, 2023 CMS Fact Sheet: FY 2024 Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) Final Rule – CMS-1785-F and CMS-1788-F Fact Sheet: https://www.cms.gov/newsroom/fact-sheets/fy-2024-hospital-inpatient-prospective-payment-system-ipps-and-long-term-care-hospital-prospective-0