Payment Reimbursement and Managed Care

Proposed FY 2022 IPPS Rule: Hospital finance and revenue cycle teams, clinicians and payers are assessing the rule impacts and preparing their responses

May 11, 2021 10:55 pm
  • The details of the Proposed FY 2022 IPPS Rule were released on April 27, which means health systems, payers and providers are currently busy assessing the impacts and determining how to react before the June 28  comment deadline.
  • Review of the Proposed FY 2022 IPPS Rule website, and providers’ governmental finance and policy experts downloading and analyzing the supporting tables and impact files will help hospital leadership, government relations and supporting hospital staff digest and react to the details of the proposed rule.
  • Analysis needs to be done now on what the details mean for your individual hospital reimbursement. What impacts are lurking in the details or are not clearly defined? What is the best reaction and engagement opportunity for you to get your feedback heard by CMS and policy leaders?

While the details of the FY 2022 IPPS Rule continued to be analyzed by the healthcare industry over the next six weeks, it is important for all healthcare providers to perform their own due diligence. HFMA staff is currently busy reviewing both the detailed language within the rule and the areas of the rule that have been left vague. Policy vagueness can sometimes have a more adverse impact than detailed initiatives.

Some of the key changes currently being reviewed by the HFMA team for comment are:


  • CMS proposes a 2.8% payment increase to hospitals that successfully participate in the Hospital Inpatient Quality Reporting program and are meaningful EHR users. The agency states that hospital payments will increase by an estimated $2.5 billion with the inclusion of disproportionate share and Medicare uncompensated care payments.
  • Medicare payments based on uncompensated care costs are estimated to decrease 7.99% in FY2022.

MS-DRG Policy

  • CMS has proposed to scrap the overhaul of MS-DRG rate-setting that was proposed in the 2021 IPPS final rule. The rule required hospitals to report the median payer-specific negotiated payment rate by MS-DRG for all contracted Medicare Advantage (MA) payers on the Medicare cost reports for reporting periods on or after January 1, 2021. The agency’s plan to utilize the reported data to separate MS-DRG rates from hospitals’ cost-to-charge ratio and make a move to a new market-based MS-DRG rate setting policy by FY 2024 appears to be abandoned at this time.

Organ Acquisition Costs

  • CMS is proposing to only pay reasonable costs when solid organs are transplanted into Medicare beneficiaries, saving an estimated $230 million in FY 2022, $1.74 billion over five years, and $4.15 billion over 10 years. This estimate includes kidney acquisition costs shifting from MA plans to fee-for-service as of  January 1, 2021.

New Technology Add-on Payments

  • Due to CMS’ proposal to use FY 2019 utilization data only to set payment rates, rather than using two years of data, CMS is proposing a one-year extension of New Technology Add-on Payments (NTAP) for 14 technologies that would otherwise have passed the two- to three-year NTAP eligibility period.
  • CMS proposes to also extend the COVID-19 Treatments Add-on Payment (NCTAP) for eligible discharges through the end of the fiscal year.

Direct Graduate Medical Education (DGME) and Indirect Medical Education (IME)

  • The Consolidated Appropriations Act (CAA), 2021 contained three provisions that will increase DGME and IME spending. The first one authorizes the Secretary to increase full time equivalent (FTE) resident caps by 1,000 FTEs over five years. The second one provides cap exemptions to rural hospitals that participate in “rural training track” residencies that train residents to practice in rural areas. The third allows a hospital that trained a small number of residents for a short duration prior to December 27, 2020 to reset its DGME per resident amount and FTE cap. CMS provides 10-year cost estimates for each of these provisions that range from $30 million in FY2022 to $530 million by FY 2031.

Labor Areas and Hospital Wage Index

  • Given the unprecedented nature of the ongoing COVID-19 PHE, CMS seeks comment on whether to continue to limit the decrease in a hospital’s wage index resulting from use of OMB Bulletin 18-04 in FY 2022. An extended transition could potentially take the form of continuing the FY 2021 wage index for those hospitals experiencing a continuing reduction in the wage index in FY 2022 from the adoption of OMB Bulletin 18-04. CMS further seeks comment on making this transition budget-neutral, as is its usual practice.

Occupational Mix Survey Data

  • CMS compared the impact on the wage index of using the 2019 occupational mix survey instead of the 2016 occupational mix survey. These results indicate that the wage indexes of 49.3% of core-based statistical areas (CBSAs) overall will decrease due to application of the 2019 occupational mix survey data compared to the 2016 occupational mix survey data. Further, a larger percentage of urban areas (50.5%) than rural areas (40.4%) will benefit from the use of the 2019 occupational mix survey data as compared to the 2016 occupational mix survey data.

Full summary available

HFMA members can find a full summary of the Fiscal Year 2022 Medicare Hospital Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System Proposed Rule located here. Please reach out to Shawn Stack at HFMA with any questions, concerns, or comments you would like to share.


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