CMS Considers Use of COVID-19 Claims for FY 2023 Rate Setting

CMS is proposing to use two sets of weights to calculate future rate setting for organizations: one including COVID-19 claims and one excluding COVID-19 claims.

CMS released the fiscal year (FY) 2023 inpatient prospective payment system proposed rule with proposals for new calculations for FY 2023 rate setting.  

Although CMS is proposing to use FY 2021 data for FY 2023 Medicare Severity Diagnosis-Related Groups (MS-DRG) rate setting, the agency wants a modified methodology to account for the historical and potential future impact of COVID-19.

The agency expects a decline in the number of Medicare beneficiaries hospitalized with COVID-19 but believes it’s reasonable to expect that some beneficiaries will continue to be hospitalized due to COVID-19.

With these considerations in mind, CMS is proposing a unique method for calculating MS-DRG weights. CMS is proposing to use two sets of weights to calculate MS-DRGs, one including COVID-19 claims and one excluding COVID-19 claims. Then, CMS is proposing to average the two sets of weights and using that to determine the FY 2023 relative weights.

CMS is also proposing to use charge inflation factors and cost-charge-ratio adjustment factors to modify FY 2021 data used to determine the FY 2023 outlier fixed-loss amount. The agency believes this would create a more reasonable approximation of actual cost increases as it does not expect that the charge inflation that occurred during the public health emergency will continue.

Alternatively, CMS is seeking feedback on the use of FY 2021 without any of the proposed modifications.

Revenue cycle leaders should review the proposed rule, paying particular attention to sections and proposals that affect their organization. Consider submitting comments to CMS to explain why a particular proposal will be beneficial or detrimental and to offer feedback where the agency is explicitly soliciting comments.

For more information on the proposed rule, see the Federal Register. Comments are due to CMS no later than June 17.