Medicare Final Rule for FY 2022: Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) Rates 

Release Date: August 02, 2021
Federal Register Publication Date: August 13, 2021
Effective Date: October 1, 2021

IPPS Final Rule:                              

*Based on general acute care hospitals paid under IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users.

IPPS pays hospital for Medicare beneficiary services using a national base payment rate, adjusted for a number of factors like patient’s condition and cost of hospital labor in the geographic area. Some takeaways from the final rule:

• An increase in operating payments for acute care hospitals paid under IPPS that meet Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users. Increase in operating payments and other changes will increase hospital payments in FY2022 by $3.7 billion
  • Revise the national labor-related and nonlabor-related shares that was based on 2018 IPPS market basket. 
  • Payment reduction for excess readmissions under Hospital Readmissions Reduction Program
• Repeals the requirement to report median payer-negotiated rates for Medicare Advantage plans
• LTCH PPS payments for discharges are expected to increase by .9 percent due to annual Standard Federal Rate update for FY2022.
• LTCH PPS payments for discharges paid the site neutral payment rate are expected to increase by 3.0 percent.
• CMS approved 19 technologies that applied for new technology add-on payments. The 42 technologies are eligible to receive add-on payments. New technology add-on payments will be approximately $1.5 billion. 
• CMS estimates to distribute $7.2 billion in uncompensated care payments for FY2022 which is a decrease of $1.1 billion from FY2021. The data on uncompensated care costs from Worksheet S-10 of hospitals FY2018 cost reports will be used to distribute the funds. 
• Cost-based MS-DRG relative weight methodology to will continue to set Medicare payment rates for inpatient stays for FY2024 and subsequent fiscal years. 
• CMS will require state Medicaid provider enrollment systems to allow valid enrollments from all Medicare providers to process cost sharing claims for services furnished to dual eligible individuals. 
• A five-year extension for each of the Rural Community Hospital Demonstration and FCHIP Demonstration. 
• New measures are being implemented for Hospital IQR Program. Hospitals that do not submit quality data or fail to meet all Hospital IQR Program requirements are subject to a one-fourth reduction in their annual payment updated under the IPPS. 
• CMS is finalizing changes to existing EHR certification requirements. Beginning of CY2023 reporting period/FY2025 payment determination, hospitals are to use EHR technology that has been updated with 2015 Edition Cures Update and the technology supports the reporting requirements for all available eCQMs.

Sources: CMS Year 2022 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) Rates Final Rule.