On July 27, 2022, CMS issued final rules for FY 2023 in its yearly update to Medicare payment policies and rates under the Inpatient Rehabilitation Facilities (IRFs) prospective payment system (PPS) and the Inpatient Psychiatric Facilities (IPF) PPS. CMS also issued an update to hospice payment rates for FY 2023.

The following discussion highlights some of the proposed changes in each final rule, effective October 1, 2022.

IPF PPS

The FY 2023 update to Medicare payment policies and rates under the IPF PPS will result in an estimated $90 million, or 2.5%, increase in payments to IPFs relative to payments to IPFs in FY 2022, and a 3.8% increase in IPF PPS payment rates. The update reflects an estimated 4.1% market basket update, less a 0.3 percentage point productivity adjustment, resulting in a final IPF payment rate update of 3.8%. The 2.5% increase in payments is greater than the 1.5% increase that CMS had proposed on March 31, 2022 as previously reported here. The rule also updates the outlier threshold amount from $16,040 to $24,630 to maintain estimated outlier payments at 2.0% of total estimated payments aggregate IPF PPS payments.

The final rule establishes a permanent mitigation policy that applies a 5% cap on decreases in the IPF PPS wage index for FY 2023 and subsequent years in order to smooth the impact of year-to-year changes in IPF payments related to significant decreases to the IPF wage index that may affect providers in any given year. Under this policy, an IPF’s wage index will not be less than 95% of its final wage index calculated in the prior FY.

CMS did not propose or finalize any changes to the IPF Quality Reporting Program.
The CMS fact sheet on the IPF final rule is available here. The final rule is available here.

IRF PPS

The FY 2023 update to Medicare payment policies and rates under the IRF PPS will result in an estimated $275 million, or 3.2%, increase in payments to IRFs relative to payments in FY 2022. CMS is increasing the IRF PPS payment rates by 3.9% based on an estimated 4.2% IRF market basket update, less a 0.3 percentage point productivity adjustment. The 3.2% increase in payments is greater than the 2.0% increase that CMS had proposed on March 31, 2022 as previously reported here. The rule also updates the outlier threshold amount from $9,491 to $12,526 to account for an increase in IRF PPS payments and estimated costs and to maintain estimated outlier payments at approximately 3.0% of total estimated payments aggregate IRF PPS payments for FY 2023.

The final rule establishes a permanent cap policy in order to increase the predictability of IRF PPS payments to providers and mitigate instability and significant decreases to the IRF wage index that may impact providers in any given year. This policy applies a 5% cap on any decrease in an IRF’s PPS wage index for FY 2023 and subsequent years.

CMS is codifying the existing IRF PPS teaching policy with respect to how CMS adjusts the federal prospective payment on a facility basis by a factor to account for indirect teaching costs and the policy allowing an IRF to receive a temporary adjustment to its full-time equivalent (FTE) cap to reflect residents added to its teaching program due to the closure of another IRF or of an IRF’s medical residency training program.

The final rule also updates the IRF Quality Reporting Program (IRFQRP) and finalizes a rule to require quality data reporting on all IRF patients, regardless of payer, beginning with the FY 2026 IRFQRP. As a result, providers will need to start collecting the IRF Patient Assessment Instrument on all patients receiving care in an IRF, regardless of payer, beginning on October 1, 2024.

CMS also summarizes public comments it received on the inclusion of the National Healthcare Safety Network Healthcare-Associated Clostridioides difficile Infection Outcome Measure in the IRFQRP, and public comments on the RFI for Overarching Principles for Measuring Equity and Healthcare Quality Disparities Across CMS Quality Programs.

The CMS fact sheet on the IRF PPS final rule is available here. The Final Rule is available here.

FY 2023 Hospice Payment Rate Update Final Rule

The FY 2023 update will result in an estimated $825 million, or 3.8%, increase in payments to hospices relative to payments in FY 2022. This update reflects an estimated 4.1% market basket percentage increase, less 0.3 percentage point productivity adjustment. The rule also increases the statutory aggregate cap amount by 3.8% to $32,486.92, which is the limit of overall payments per patient that are made to a hospice annually. The amount of increases in payments and the statutory aggregate cap in the final rule are greater than in the proposed rule issued by CMS on March 31, 2022 as previously reported here.

The final rule establishes a permanent mitigation policy that applies a 5% cap on any decrease to a geographic area’s wage index, so that a geographic area’s wage index would not be less than 95% of its wage index calculated in the prior FY.

With respect to the Hospice Quality Reporting Program, the final rule provides an update on the development of the Hospice Outcomes and Patient Evaluation tool and an updated on the testing conducted for the Consumer Assessment of Healthcare Providers and Systems Survey.

The CMS fact sheet on the hospice final rule is available here. The final rule is available here.