A $3.3B Payment Increase or $115M Cut in 2024? Where Will Your Organization Land?

Health equity and payment updates take center stage in CMS' fiscal year 2024 IPPS proposed rule.

CMS recently issued its fiscal year (FY) 2024 inpatient prospective payment system (IPPS) proposed rule. While updating Medicare payments and policies for hospitals, the rule also would adopt hospital quality measures to promote safety and equity, as well as reduce preventable harm, according to CMS' press release.

Under the proposed rule, acute care hospitals that report quality data and are meaningful users of EHRs will see a net 2.8% increase in payments in FY 2024 (compared to 2023), an expected increase of $3.3 billion. However, disproportionate share hospitals could be facing a payment cut of $115 million.

Under this rule, hospitals may be subject to other payment adjustments under the IPPS, including:

• Payment reductions for excess readmissions under the Hospital Readmissions Reduction Program
• Payment reduction of 1% for the worst-performing quartile under the Hospital Acquired Condition Reduction Program
• Upward and downward adjustments under the Hospital Value-Based Purchasing Program

CMS is also proposing health equity adjustments under the Hospital Value-Based Purchasing Program, which adjusts IPPS payments to acute care hospitals depending on their quality performance in the inpatient hospital setting. As part of its goal to measure policy impact more explicitly on health equity, CMS has proposed adding 15 new health equity hospital categorizations for payment impacts.

Hospitals may also see higher payments under a proposal to recognize homelessness as an indicator of increased resource utilization in the acute inpatient hospital setting. CMS proposed changing the severity designation of three ICD-10-CM diagnosis codes that describe homelessness from “non-complication or comorbidity” to “complication or comorbidity” to address the higher average resource costs of cases with these codes.

CMS has also proposed to allow rural emergency hospitals to be designated as graduate medical education training sites. This would enable more medical residents to train in rural settings amid worsening clinician shortages, especially in rural communities, CMS said.

Revenue cycle leaders should review the proposed rule and analyze the proposals’ potential impact on reimbursement and workflows. Changes could have a cross-functional impact, so it’s always important leaders ensure that all revenue cycle departments are aware of the proposed changes.