Medicare Proposed Rule 2024 Highlights

The Centers for Medicare and Medicaid Services (CMS) released its annual Inpatient Prospective Payment System (IPPS) and Long-term Care Hospital Prospective Payment System (LTCH PPS) proposed rule for fiscal year 2024 on April 10, 2023.  

The IPPS and LTCH are payment systems that set a fixed amount of money for inpatient stay and long-term care respectively and are based on the patient’s diagnosis and other factors.  

The proposed rule for fiscal year 2024 includes several changes including: 

Net 2.8% Increase in IPPS Rates 

The proposed rule would increase IPPS rates by a net of 2.8% in FY 2024. This 2.8% payment update reflects a hospital market basket increase of 3.0%, less 0.2 percentage points for productivity. The hospital market basket is a measure of the cost of hospital inputs, such as labor, supplies, and equipment. The productivity adjustment is a factor that is used to account for the fact that hospitals are becoming more efficient over time. CMS says that hospitals will see an increase of about $3.3 billion in 2024.  

Disproportionate share hospital payments 

CMS projects Medicare disproportionate share hospital payments Medicare uncompensated care payments will decrease by a combined $115 million.  

Long-term care hospitals  

CMS projects a decrease of 2.5 percent ($59 million) in standard payments to long-term care hospitals in fiscal year 2024.  

Physician-owned hospitals  

In order for a hospital to be reimbursed by Medicare for services referred by a physician who owns or invests in the hospital, the hospital must fulfill all of the requirements of either the whole hospital exception or rural provider exception. To use these exceptions, the hospital may not expand the number of beds or operating and procedure rooms that they have been licensed for unless CMS grants them permission.  

The proposed rule for FY 2024 IPPS/LTCH PPS would make changes to the regulations regarding hospital expansions including:  

• Limiting expansion request to eligible hospitals that will provide data and information in their request as CMS sees fit  
• Reinstate program integrity restrictions on the frequency of expansion requests, maximum aggregate expansion of a hospital, and location of expansion facility capacity for hospitals that meet the criteria for “high Medicaid facilities”  

SDOH Codes 

The proposed rule will increase the severity of the three ICD-10 codes for homelessness (including unspecified, sheltered, or unsheltered). The severity of the code will move from non-complication or -comorbidity (NonCC) to complication or comorbidity (CC). Their decision is based on data that shows higher costs associated with these codes compared to similar cases without these codes.  

Health Equity Impacts 

CMS plans to add 15 new hospital categorizations that consider health equity factors for the FY 2024 IPPS payment impacts to align with their health equity goals outlined in the CMS Framework for Health Equity 2022-2032.  

The CMS Framework for Health Equity 2022-2032 also aims to enhance the collection, reporting, and analysis of standardized health equity data as a priority. As new data becomes available, CMS intends to incorporate it into their analyses on a continuous basis. 

Rural emergency hospitals  

The proposed rule changes Graduate Medical Education (GME) to include training in a new Medicare provider type, Rural Emergency Hospitals (REHs). The rule aims to remedy the growing closures of rural hospitals by establishing them as REHs and allowing them GME. 

New Covid-19 treatment add-on payments  

CMS created the New COVID-19 Treatments Add-on Payment (NCTAP) during the COVID-19 Public Health Emergency (PHE). If the PHE ends in May as planned, the NCTAP will expire at the end of the current fiscal year in September.   

Safety-Net Hospital Request for Information 

Safety-net hospitals serve the uninsured, underinsured, and people that face barriers to care.  

CMS is asking for information and public input concerning the challenges that face safety-net hospitals and their patients. CMS is also asking for potential approaches to remedy these challenges.  

The proposed rule for the Hospital Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System for Fiscal Year 2024 includes several updates and changes that could impact healthcare providers and Medicare beneficiaries. Healthcare providers and stakeholders are encouraged to review the proposed rule, which will be published on May 1, 2023, and provide comments to CMS before the June 9, 2023 deadline.