On August 1, 2023, CMS issued its annual Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) Final Rule for FY 2024 (the Final Rule). In the Final Rule, CMS, among other things, updates the IPPS and LTCH payment rates, overhauls its methodology for calculating the rural wage index, reverses its policy denying capital Disproportionate Share Hospital (DSH) payments to reclassified rural hospitals, and adds various health equity impacts, including reclassifying homelessness as a complication or comorbidity. The Final Rule ends the New COVID-19 Treatments Add-on Payments and makes several changes to the Hospital Value-Based Purchasing (VBP) Program. This article provides an overview of the key provisions in the Final Rule. The Final Rule is scheduled to be published in the Federal Register on August 28, 2023.

IPPS and LTCH PPS Payment Provisions

CMS increased the operating payment rates for acute care hospitals by 3.1% (down from 4.2% in FY 2023). This reflects a projected FY 2024 IPPS hospital market basket update of 3.3%, reduced by a 0.2 percentage point productivity adjustment. This update reflects the most recent data available, and as a result, is 0.5 percentage point higher than the proposed update for FY 2024.

Overall, CMS will increase hospital payments by $2.2 billion compared to FY 2023, which also includes a $957 million decrease in DSH payments and a $364 million decrease in new medical technology payments. The decrease in DSH payments is a result of CMS’s Office of the Actuary’s estimate that the rate of uninsured will decline from 9.2% in FY 2023 to 8.3% in FY 2024. The decrease in new medical technology payments is a result of the expiration of new technology add-on payments for several technologies.

Hospitals may be subject to payment adjustments under the IPPS, including:

• Payment reductions for excess readmissions under the Hospital Readmissions Reduction Program;
• A payment reduction of 1% for the worst-performing quartile of hospitals under the Hospital Acquired Condition Reduction Program; and
• Upward and downward adjustments under the Hospital VBP Program.

For FY 2024, CMS expects the LTCH standard payment rate to increase by 3.3% and the LTCH PPS payments to increase by approximately 0.2%, or $6 million. This is due to a projected 2.9% decrease in high-cost outlier payments. In response to public comment, CMS modified the methodology used to determine this high-cost outlier threshold and finalized a threshold markedly lower than in the proposed rule.

Continuation of Low-Wage Hospital Policy

To mitigate growing wage index disparities between high and low wage hospitals, CMS implemented a policy in the FY 2020 IPPS and LTCH PPS Rule to increase wage index values for certain hospitals with low-wage index values in the lower 25th percentile, doing so in a budget-neutral manner through an adjustment applied to the standardized amounts for all hospitals.

CMS stated that it only has one year of relevant data (from FY 2020) to evaluate potential impacts of this data, and as a result, in the Final Rule, CMS continues these policies through FY 2024 while it obtains and reviews additional data to evaluate its potential impacts. The 25th percentile for FY 2024 will be 0.8667.

This policy is the subject of pending litigation before the D.C. Circuit in Bridgeport Hospital v. Becerra and the Ninth Circuit in Kaweah Delta Health Care District v. Becerra. The lower courts in both cases ruled that CMS does not have authority to adopt the low-wage hospital policy.

Rural Emergency Hospitals and Graduate Medical Education

Under Section 125 of the Consolidated Appropriations Act, 2021, certain rural hospitals may apply for a new hospital designation as a rural emergency hospital (REH).

CMS made changes to graduate medical education (GME) payments for training in REHs, allowing REHs to be considered non-provider settings for GME payment purposes similar to critical access hospitals (CAHs). Specifically, effective for portions of cost reporting periods beginning on or after October 1, 2023, an REH may decide to be a non-provider site and can either (1) include the full-time equivalent (FTE) residents training at the hospital in its GME and indirect graduate medical education (IME) FTE counts for Medicare payment purposes, or (2) incur direct GME costs and receive payment based on reasonable costs for those training costs.

Health Equity Impacts

CMS has added fifteen new health equity hospital categorizations for the FY 2024 IPPS payment impacts. It will track and analyze the percentages of discharges for beneficiaries who are American Indian or Alaska Native, Asian or Pacific Islander, Black, Hispanic, multiracial, White, dual enrolled, low-income subsidy enrolled, homeless, with a behavioral health diagnosis, who come from rural areas, with end-stage renal disease coverage, with a disability, and who live in an area with an Area Deprivation Index greater than or equal to 85. As part of the CMS Framework for Health Equity 2022-2032, CMS will expand the collection, reporting, and analysis of standardized health equity data.

CMS Assigns Homelessness Social Determinants of Health Diagnoses Codes a Severity Designation of “Complication or Comorbidity”

CMS has finalized a change to the severity designation of three ICD-10-CM diagnosis codes describing homelessness: unspecified (Z59.00), sheltered (Z59.01), and unsheltered (Z59.02). These codes were previously assigned a “non-complication or comorbidity” (NonCC), but after a review of the impact on hospital resources used in the treatment of unhoused individuals, CMS has changed the severity designation of these codes to “complication or comorbidity” (CC), based on the higher than average resource costs for cases with these diagnosis codes compared to similar cases without these codes.

As social determinants of health (SDOH) diagnoses codes are increasingly added to billed claims, CMS will continue to analyze the effects of SDOH on severity of illness, complexity of services, and consumption of resources.

New COVID-19 Treatments Add-On Payments End October 1, 2023

In response to the COVID-19 Public Health Emergency (PHE), CMS established an add-on payment for new COVID-19 treatments. In the FY 2022 IPPS/LTCH PPS final rule, CMS extended this add-on payment through the end of the fiscal year in which the PHE ends.

As the PHE ended on May 11, 2023, inpatient discharges involving eligible COVID-19 treatments will be eligible for the add-on payment through September 30, 2023, i.e. the end of FY 2023. The New COVID-19 Treatments Add-On Payment will expire at the end of FY 2023, and no add-on payments will be made for discharges on or after October 1, 2023.

Changes to New Technology Add-On Payment Policies

CMS finalized changes to the New Technology Add-on Payment (NTAP) program and application process:

1. For technologies that are not already FDA market authorized, NTAP applicants must have a complete and active FDA market authorization request pending at the time of the NTAP application submission. Such applicants must provide documentation of FDA acceptance or filing with their NTAP application.
2. For applications beginning FY 2025, in order to be eligible for consideration for the new NTAP, an applicant must have received FDA approval or clearance by May 1, rather than July 1, of the year prior to the beginning of the fiscal year for which the application is being considered.

Changes to Rural Wage Index Calculation Methodology

Under Section 1886(d)(E) of the Social Security Act, implemented in regulations at 42 C.F.R § 412.103, a hospital in an urban area may be reclassified as a rural hospital if it meets certain conditions. Previously, hospitals reclassified as rural pursuant to this regulation were not treated the same as geographically rural hospitals for purposes of calculating the wage index. The impact of this meant that the “rural floor”—the rule providing that the area wage index for urban hospitals may not be less than the area wage index applicable to rural hospitals in a given state—did not take into account hospitals reclassified as rural pursuant to 42 C.F.R. § 412.103.

Beginning with FY 2024, CMS will now treat hospitals reclassified as rural the same as geographically rural hospitals for purposes of calculating the wage index. The data of all 42 C.F.R. § 412.103 reclassified hospitals will be included in the calculation of the wage index for the rural area of the state and the calculation of the rural floor for urban hospitals in the state.

CMS, however, will continue to exclude from the rural wage index “dual reclass” hospitals, i.e. hospitals with simultaneous 42 C.F.R. § 412.103 and Medicare Geographic Classification Review Board reclassifications, in accordance with the hold harmless provision at Section 1886(d)(8)(C)(ii) of the Act.

Treatment of Section 1115 Demonstration Days for Purposes of DSH Payments

Hospitals that serve a disproportionate number of low-income patients are entitled to additional Medicare payments under the IPPS. The most common method by which a hospital may qualify for a DSH payment is based in pertinent part on the level of the hospital’s disproportionate patient percentage (DPP). A hospital’s DPP is the sum of two fractions: the “Medicare fraction” and the “Medicaid fraction.” As relevant here, the Medicaid fraction is computed by dividing the number of inpatient days furnished to patients who, for such days, were eligible for Medicaid but were not entitled to benefits under Medicare Part A, by the hospital’s total number of inpatient days for the same period.

Section 1115 of the Act gives HHS the authority to approve experimental, pilot, or demonstration projects that are found by the Secretary to be likely to assist in promoting the objectives of the Medicaid program. States use Section 1115 demonstrations (also called “waivers”) to provide “medical assistance” to groups that statutorily are not eligible for Medicaid benefits.

Since 2000, CMS has included patient days for these Section 1115 expansion groups (also called “expansion populations” or “expansion waiver groups”) in the Medicaid fraction for the DPP calculation. In 2020, the United States Court of Appeals for the D.C. Circuit held that the Secretary must include patient days associated with individual who receive “medical assistance” in the form of direct-to-hospital payments from uncompensated care pools matched by the Secretary as part of a Section 1115 waiver. These patient days are commonly referred to as Section 1115 UCC waiver days. Bethesda Health v. Azar, 980 F.3d 121 (D.C. Cir. 2020). CMS, however, continues to maintain that it is permitted to exercise its discretion to define which expansion groups are eligible for consideration in the Medicaid fraction. CMS previously proposed excluding Section 1115 UCC waiver days from the Medicaid fraction in the FY 2022 and FY 2023 IPPS proposed rules, but ultimately did not move forward with finalizing those proposals due to negative comments it received.

For FY 2024, however, CMS has decided to limit the universe of Section 1115 demonstration beneficiaries that may be included in the Medicaid fraction for purposes of the Medicare DSH calculation. Pursuant to the Final Rule, only the days of those patients who receive from the Section 1115 demonstration (1) health insurance that covers inpatient hospital services or (2) premium assistance that covers 100% of the premium cost to the patient, which the patient uses to buy health insurance that covers inpatient hospital services will be counted in the numerator of the Medicaid fraction.

The new rule effectively excludes patient days for which hospitals received funds from an uncompensated or undercompensated care pool authorized through Section 1115 demonstrations—i.e. Section 1115 UCC waiver days. This new regulation is effective for discharges occurring on or after October 1, 2023.

Stark Law Exemptions from Prohibition on Expansion of Facility Capacity

The Physician Self-Referral Law (also known as the Stark Law) prohibits a physician or immediate family member who has a financial relationship with a healthcare entity from making patient referrals to the entity for certain designated health services (DHS) covered by Medicare. Section 1877(d)(2) of the Social Security Act, the rural provider exception, establishes that an ownership or investment interest in an entity does not constitute a financial relationship where the entity is a “rural provider,” furnishing substantially all of the DHS it furnishes (at least 75%) to residents of a rural area. Section 1877(d)(3) of the Social Security Act, the whole hospital exception, allows for a physician to have an ownership or investment interest in a hospital to which the physician refers DHS, when the physician is authorized to perform services at the hospital and the ownership or investment interest is in the hospital itself.

Section 6001(a)(3) of the Affordable Care Act amended the rural provider and whole hospital exceptions to prohibit hospitals with physician ownership or investment from increasing the number of operating rooms, procedure rooms, and beds beyond that for which the hospital was licensed on March 23, 2010.

CMS has clarified the process for requesting an exception from the prohibition on the expansion of facility capacity. To be eligible to request an expansion exception, a hospital must first meet the criteria as an applicable hospital or a high Medicaid facility. CMS will not consider an expansion exception request from a hospital for which CMS had previously approved an expansion exception that would allow the hospital’s facility capacity to reach 200 percent of its baseline facility capacity if the full expansion is utilized. A hospital may only request an exception up to once every two years.

When deciding whether to approve or deny an expansion request, CMS will consider four factors:

1. The specialty of the hospital or the services furnished by or to be furnished by the hospital if CMS approves the request;
2. Program integrity or quality of care concerns related to the hospital;
3. Whether the hospital has a need for additional operating rooms, procedure rooms, or beds; and
4. Whether there is a need for additional operating rooms, procedure rooms, or beds in the county in which the main campus of the hospital is located, in any county in which the hospital provides inpatient or outpatient hospital services as of the date the hospital submits the expansion exception request, or in any county in which the hospital plans to provide inpatient or outpatient hospital services.

CMS may also consider any other factors it deems relevant to its decision to approve or deny an expansion exception request.

CMS made technical and clarifying changes to the information that must be submitted for an expansion exception request. These changes include: (1) providing an email address as well as a hard copy mailing address for the contact person for the hospital; (2) providing the names of any counties in which the hospital provides inpatient or outpatient hospital services, in addition to the name of the county in which the main campus of the requesting hospital is located; (3) providing a statement and, if available, supporting documentation regarding the hospital’s compliance with the requirement that it does not discriminate against beneficiaries of Federal health care programs and does not permit physicians practicing at the hospital to discriminate against such beneficiaries; and (4) providing information regarding whether and how the hospital has used any expansion facility capacity approved in a prior request.

CMS eliminated the option to mail hard copy requests and the requirement to mail an original hard copy of the signed certification statement. CMS is requiring electronic submission of requests following the instructions posted on the CMS website.

Hospital Inpatient Quality Reporting Program

CMS previously implemented the Hospital Inpatient Quality Reporting (IQR) Program to measure the quality of hospital inpatient services. In the Final Rule, CMS added three new electronic clinical quality measures (eCQMs) that hospitals can select to meet the eCQM reporting requirements for a given year for both the Hospital IQR and Medicare Promoting Interoperability Programs:

• Beginning with the CY 2025 reporting period/FY 2027 payment determination, CMS adopted the Hospital Harm — Pressure Injury eCQM, which assesses the proportion of inpatient hospitalizations for patients 18 years and older who suffer the harm of developing a new stage 2, stage 3, stage 4, or unstageable pressure injury.
• Beginning with the CY 2025 reporting period/FY 2027 payment determination, CMS adopted the Hospital Harm — Acute Kidney Injury eCQM, assessing the proportion of inpatient hospitalizations for patients 18 years and older who have an acute kidney injury (stage 2 or greater) that occurred during the encounter.
• Beginning with the CY 2025 reporting period/FY 2027 payment determination, CMS adopted the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level — Inpatient) eCQM, providing a standardized method for monitoring the performance of diagnostic CT to discourage unnecessarily high radiation doses while preserving image quality.

CMS also modified three measures currently in the Hospital IQR Program:

• Beginning with the FY 2027 payment determination, CMS expanded the Hybrid Hospital-Wide All-Cause Risk Standardized Mortality measure to include MA patients.
• Beginning with the FY 2027 payment determination, CMS likewise expended the Hybrid Hospital-Wide All-Cause Readmission measure to include MA admissions.
• Beginning with the FY 2025 payment determination, CMS revised the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure to replace the term “complete vaccination course” with the term “up to date.” The prior version of this measure reported on the primary vaccination series only, while the updated version of the measure reports the cumulative number of HCP who are up to date with recommended COVID-19 vaccinations to align CMS programs with the Centers for Disease Control and Prevention’s (CDC’s) definition of “up to date” vaccination, keeping the measure relevant if future vaccination guidance evolves.

Finally, CMS removed three measures from the Hospital IQR Program:

• Beginning with the April 1, 2025, through March 31, 2028, reporting period/FY 2030 payment determination, CMS removed the Hospital-level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty measure. This is removed in conjunction with the adoption of the recent updates to this measure in the Hospital VBP Program.
• Beginning with the CY 2026 reporting period/FY 2028 payment determination, CMS removed the Medicare Spending Per Beneficiary (MSPB) Hospital measure. This is removed in conjunction with the adoption of the recent updates to this measure in the Hospital VBP Program.
• Beginning with the CY 2024 reporting period/FY 2026 payment determination, CMS removed the Elective Delivery Prior to 39 Completed Weeks Gestation: Percentage of Babies Electively Delivered Prior to 39 Completed Weeks Gestation measure. CMS removed this measure because measure performance has been topped out for the last six performance periods.

Medicare Promoting Interoperability Program

CMS finalized the following changes to the Medicare Promoting Interoperability Program for eligible hospitals and CAHs:

• Beginning with the Electronic Health Record (EHR) reporting period in CY 2024, CMS modified the requirements for the Safety Assurance Factors for EHR Resilience (SAFER) Guides measure to require eligible hospitals and CAHs to attest “yes” to having conducted an annual self-assessment of all nine SAFER Guides at any point during the calendar year in which the EHR reporting period occurs.
• CMS amended the definition of “EHR reporting period for a payment adjustment year” for participating eligible hospitals and CAHs to define the EHR reporting period in CY 2025 as a minimum of any continuous 180-day period within CY 2025.
• Beginning with the EHR reporting period in CY 2025, CMS amended the definition of “EHR reporting period for a payment adjustment year” such that eligible hospitals that have not successfully demonstrated meaningful EHR use in a prior year will not be required to attest to meaningful use by October 1st of the year prior to the payment adjustment year.
• CMS modified the response options related to unique patients or actions for objectives and measures for the Medicare Promoting Interoperability Program for which there is no numerator and denominator, and for which unique patients or actions are not counted. The response option for these objectives and measures would read “N/A (measure is Yes/No).”
• Beginning with the CY 2025 reporting period, CMS adopted new eCQMs eligible hospitals and CAHs can select as one of their three self-selected eCQMs: (1) Hospital Harm — Pressure Injury eCQM; (2) Hospital Harm — Acute Kidney Injury eCQM; and (3) Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level — Inpatient) eCQM.

PPS-Exempt Cancer Hospital Quality Reporting Program

CMS finalized the following changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) program for the eleven cancer hospitals that are statutorily exempt from the IPPS:

• CMS will begin public display of the Surgical Treatment Complications for Localized Prostate Cancer measure beginning with data from the FY 2025 program year.
• CMS has adopted the following new measures for the PCHQR Program:
  • Facility Commitment to Health Equity beginning with the FY 2026 program year.
  • Screening for Social Drivers of Health beginning with voluntary reporting for the FY 2026 program year and mandatory reporting for the FY 2027 program year.
  • Screen Positive Rate for Social Drivers of Health beginning with voluntary reporting for the FY 2026 program year and mandatory reporting for the FY 2027 program year.
  • Documentation of Goals of Care Discussions Among Cancer Patients beginning with the FY 2026 program year.
• CMS has modified the COVID-19 Vaccination Coverage among HCP measure, in alignment with the Hospital IQR Program and LTCH QRP.
• CMS has modified the data submission and reporting requirements for the HCAHPS survey measure beginning with the FY 2027 program year.

Hospitals Readmissions Reduction Program

CMS did not implement any changes to the Hospital Readmissions Reduction Program. All previously finalized policies under this program will continue to apply in FY 2024.

Reconsideration of Validation Results Under Hospital Acquired Condition Reduction Program

Section 1886(p) of the Act establishes the Hospital Acquired Condition (HAC) Reduction Program under which payments to applicable hospitals are adjusted to provide an incentive to reduce hospital-acquired conditions. Specifically, the HAC Reduction Program reduces Medicare fee-for-service payment by 1% for the lowest-performing quartile of hospitals on the measures of hospital-acquired conditions.

Beginning with the FY 2025 program year (affecting calendar year 2022 discharges), CMS will allow hospitals that fail validation to request reconsideration of their validation results before use in HAC Reduction Program scoring calculations. Only hospitals that fail to meet the passing threshold for the end-of-year confidence interval calculation will receive an opportunity to request reconsideration of their validation results.

CMS will notify a hospital that failed the HAC Reduction Program validation requirement via certified mail. A hospital requesting validation reconsideration must submit a reconsideration request form within 30 days.

A hospital’s request for validation reconsideration must include, among other things, a basis for requesting reconsideration, as well as all documentation and evidence that supports the hospital’s request for reconsideration.

CMS will limit the scope of the HAC Reduction Program data validation reconsideration reviews to information already submitted by the hospital during the initial validation process, and will not abstract medical records that were not submitted during the initial validation process. CMS will expand the scope of review only if it is determined during the review that the hospital correctly and timely submitted the requested medical records.

Beginning in FY 2027, affecting CY 2024 discharges, CMS modified the criteria for data validation to include hospitals that received an Extraordinary Circumstances Exception (ECE). CMS modified the validation targeting criteria to include any hospital with a estimated reliability upper bound of the two-tailed confidence interval that is less than 75 percent and received an ECE for one or more quarters beginning with the FY 2027 program year, affecting validation of calendar year 2024 discharges.

Changes to the Hospital VBP Program

The Hospital VBP Program reduces base operating DRG payments each fiscal year by 2% and redistributes that amount back to the hospitals as value-based incentive payments. The total amount available for value-based incentive payments for FY 2024 is approximately $1.7 billion.

The FY 2024 Final Rule will implement several changes to the VBP Program. The Final Rule adopts the Severe Sepsis and Septic Shock: Management Bundle measure in the Safety Domain beginning in FY 2026. To qualify for the value-based payment, hospitals must demonstrate provision of certain patient interventions within 3 or 6 hours, respectively, when patients present with certain symptoms of severe sepsis or septic shock. This is the same Severe Sepsis and Septic Shock: Management Bundle measure already in place for the Hospital IQR Program.

The Final Rule also revises the Hospital VBP Program scoring methodology to add a new adjustment that rewards hospitals based on their performance and the proportion of their patients who are dually eligible for Medicare and Medicaid. CMS will add Health Equity Adjustment (HEA) bonus points to a hospital’s Total Performance Score (TPS) that will be calculated using a methodology that incorporates a hospital’s performance across all four domains for the program year and its proportion of patients with dual Medicaid and Medicare eligibility. The number of HEA bonus points will be capped at 10 points. CMS will increase the TPS maximum from 100 to 110. Beginning with FY 2026 Program Year, the TPS score range will be 0 to 110.

The Final Rule adopts three substantive measure updates to the Medicare Spending per Beneficiary (MSPB) beginning with the FY 2028 Program Year. Readmissions may trigger new episodes to account for episodes and costs that are currently not included in the measure but that could be within the hospital’s reasonable influence. A new indicator variable is in the risk adjustment model for whether there was an inpatient stay in the 30 days prior to episode start date. In addition, an updated MSPB amount calculation methodology changes one step in the measure calculation from the sum of observed costs divided by the sum of expected costs (ratio of sums) to the mean of observed costs divided by expected costs (mean of ratios).

The Final Rule updates the data collection and submission requirements for the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) beginning with the FY 2027 Program Year. The changes to the data collection and submission requirements, beginning with January 2025 discharges, are as follows:

• • CMS will add three new modes of survey administration (web-mail; web-phone, and web-mail-phone) in addition to the current mail only, telephone only, and mail-phone modes.
  • CMS will remove the requirement that only the patient may respond to the survey to allow a patient’s proxy to respond to the survey.
  • CMS will extend the data collection period for the HCAHPS Survey from 42 to 49 days.
  • CMS will require hospitals to collect information about the language that the patient speaks while in the hospital and will require the official CMS Spanish translation of the HCAHPS Survey to be administered to all patients who prefer Spanish.
  • CMS will remove two currently available options for administration of the HCAHPS Survey: active interactive voice response survey (IVR) and the multiple sites option, neither of which were ever widely used.

The Final Rule also finalizes substantive measure updates to the Hospital-level Risk-Standardized Complication Rate (RSCR) following elective primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (known as the THA/TKA Complication measure), beginning with the FY 2030 program year. The substantive updates are the inclusion of index admission diagnoses and in-hospital comorbidity data from Medicare Part A claims. Adopting these substantive measure updates will expand the measure outcome to include 26 additional mechanical complication ICD-10 codes. The additional ICD-10 codes capture the following diagnoses: fracture following insertion of orthopedic implant, joint prosthesis, or bone plate of the pelvis, femur, tibia or fibula, and periprosthetic fracture around internal prosthetic hip, hip joint, knee, knee joint, and other unspecified internal prosthetic joint. These substantive updates were previously adopted for use in the Hospital IQR Program in FY 2023.

Additionally, the Final Rule codifies at 42 C.F.R. § 412.164(c) eight measure removal factors as well as the policies for updating measure specifications and retaining measures. The Final Rule also codifies at 42 C.F.R. § 412.165(a)(1)(i) the minimum number of cases for the Hospital VBP Program measures.

LTCH Quality Reporting Program

The LTCH Quality Reporting Program (QRP) creates LTCH quality reporting requirements. LTCHs that do not meet the reporting requirements are subject to a two-percentage-point reduction in their Annual Increase Factor.

CMS finalized the following proposals:

• Beginning with the FY 2026 LTCH QRP, CMS added the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident level COVID-19 Vaccine) measure, which reports the percentage of stays in which patients in an LTCH are up to date with their COVID-19 vaccinations per the latest guidance of the CDC.
• Beginning with the FY 2025 LTCH QRP, CMS added the Functional Discharge (DC Function) measure, which assesses functional status by assessing the percentage of LTCH patients who meet or exceed an expected discharge function score and uses mobility and self-care items already collected on the assessment tool. In tandem, CMS removed the Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function (Application of Functional Assessment/Care Plan) measure.
• Beginning with the FY 2025 LTCH QRP, CMS removed the Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan that Addresses Function (Functional Assessment/Care Plan) measure.
• Beginning with the FY 2025 LTCH QRP, CMS finalized to update the COVID-19 Vaccination Coverage among HCP measure, in alignment with the Hospital IQR and PCHQR Programs.
• Beginning with the FY 2026 LTCH QRP, CMS increased the LTCH QRP Data Completion Thresholds for the LCDS Data Items, requiring LTCHs to report 100% of the required quality measure data and standardized patient assessment data collected using the LCDS on at least 85% of the assessments they submit. Failure to do so will result in a reduction of two percentage points to the applicable FY APU beginning with FY 2025.
• Beginning with the September 2024 Care Compare refresh or as soon as feasible, finalization of public reporting of the Transfer of Health Information to the Provider — PAC Measure (TOH-Provider) and the Transfer of Health Information to the Patient — PAC Measure (TOH-Patient) measures, which report the percentage of patient stays with a discharge assessment indicating that a current reconciled medication list was provided to the subsequent provider and/or to the patient/family/caregiver at discharge or transfer.

The Final Rule is available here, and a CMS fact sheet is available here.