On Monday, the Centers for Medicare & Medicaid Services (CMS) issued the final rule for fiscal year (FY) 2022 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System (PPS). Notably, the final rule updates payment rates, extends and designates new technology add-on payments to a number of technologies, extends new COVID-19 treatments add-on payment, and repeals the market-based weight methodology.
General acute care hospitals paid under the IPPS that participate in the Hospital Inpatient Quality Reporting Program and are “meaningful” electronic health record users will increase operating payment rates for approximately 2.5 percent. This reflects the projected hospital market basket update of 2.7 percent reduced by a 0.7 percentage point productivity adjustment and increased by a 0.5 percentage point adjustment required by legislation. CMS projects that hospital payments in FY 2022 will increase by $3.7 billion (3.1%), and that DSH and Medicare uncompensated care payments will decrease in FY 2022 by approximately $1.4 billion.
CMS expects LTCH-PPS payments for FY 2022 to increase by approximately $42 million (1.1%). LTCH PPS payments for FY 2022 for discharges paid the standard LTCH payment rate are expected to increase by 0.9 percent. LTCH PPS payments for FY 2022 for discharges paid the site neutral payment rate are expected to increase by 3.0 percent. CMS estimates that discharges paid the site neutral payment rate will represent approximately 25 percent of all LTCH cases and 10 percent of all LTCH PPS payments in FY 2022.
CMS provides temporary additional payments for cases with high costs under NTAP policy. These payments are generally based on the most recently available Medicare claims and cost report data. However, due to the COVID-19 PHE, CMS is using FY 2019 data to approximate the expected FY 2022 inpatient hospital utilization. Due to the use of FY 2019 data for FY 2022 IPPS rate setting, CMS is finalizing a one-year extension of NTAP for 13 technologies whose NTAP would have been discontinued beginning FY 2022. Additionally, CMS is continuing NTAP for 10 technologies who remain in their newness period for FY 2022, this brings the total NTAP extensions to 23 technologies. CMS also approved 19 technologies that applied for NTAP for FY 2022. In total, 42 technologies are eligible to receive add-on payments for FY 2022. CMS estimates that FY 2022 Medicare spending on NTAP will be approximately $1.5 billion, nearly a 77% increase over the FY 2021 spending.
CMS is extending the NCTAP for eligible COVID-19 products through the end of the FY in which the PHE ends. This extension is an effort to mitigate potential financial disincentives for hospitals to provide new COVID-19 treatments. CMS is not finalizing the proposal to discontinue the NCTAP for discharges on or after October 1, 2021 for a product that is approved for NTAP beginning FY 2022. Hospitals will be eligible to receive both NCTAP and NTAP for qualifying patient stays, through the end of the fiscal year in which the PHE ends, with the NTAP reducing the amount of the NCTAP.
CMS is finalizing a proposal to repeal the requirement that a hospital report on the Medicare cost report the median payer-specific negotiated charge for cost reporting periods ending on or after January 1, 2021. The reporting requirement would have resulted in 64,000 hours of administrative burden. CMS will also repeal the market-based MS-DRG relative weight methodology that was adopted effective for FY 2024. They will continue using the existing cost-based MS-DRG relative weight methodology to set Medicare payment rates for inpatient stays for FY 2024 and subsequent fiscal years.