CMS releases proposed Medicare inpatient rule

May 13, 2022

On April 18, the Centers for Medicare & Medicaid Services (CMS) issued its proposed FY 2023 Inpatient Prospective Payment System (IPPS) rule. WSHA is preparing a detailed summary of the proposed rule and hospital-specific impact analyses, which will be sent within the next few weeks to hospital chief financial officers and finance staff. CMS will accept comments on the proposed rule through June 17. WSHA plans to submit comments and share its draft with member hospitals in advance of the comment deadline.

The rule would increase Medicare inpatient prospective payment system rates by a net 3.2 percent for hospitals that meet EHR meaningful use criteria and submit quality measure data. Nationally, the 3.2 percent update will increase hospital payments by $1.6 billion. However, the increased payment would be offset by other cuts, including an $800 million decrease in disproportionate share hospital payments and an $800 million decrease in new medical technology payments. Other significant provisions include:

  • Use of recent data for rate setting – FY 2021 claims and FY 2020 cost reports —with several modifications to account for the COVID-19 pandemic. For FY 2022, CMS had used older data to avoid distortion due to pandemic-related changes to utilization.
  • Makes permanent a 5 percent limit to decreases to a hospital’s wage index from the prior fiscal year.
  • Use of multiple years of Worksheet S-10 cost report data to determine uncompensated care costs, specifically FY 2018 and FY 2019 data to distribute FY 2023 payments and a three-year average for FY 2024 and beyond.
  • Revision to the Medicaid fraction of the Medicare disproportionate share hospital calculation by only including patients who receive health insurance authorized by a section 1115 demonstration or paid by premium assistance authorized by a section 1115 demonstration where state expenditures are matched with federal Medicaid funds.
  • Extension of the COVID-19 hospital data reporting condition of participation requirement adopted in 2020 through April 30, 2024, unless the Health and Human Services Secretary establishes an earlier end date.
  • Establishment of new policies for future public health emergencies and infectious disease data reporting. In addition, CMS proposes changes to its quality reporting and value programs. For FY 2023, CMS again proposes to suppress most of the measures in its Hospital Value-based Purchasing Program, and all the measures in its Hospital-Acquired Condition Reduction Program. As a result, hospitals would not experience FY 2023 payment adjustments under either program. CMS also proposes changes and additional measures for the Inpatient Quality Reporting program. (Andrew Busz,


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