Blog, Reimbursement, The Hospital Finance Podcast®

FY 2024 IPPS Final Rule Summary Webinar [PODCAST]

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In this episode, we’re pleased to welcome back Bob McDowell, BESLER’s Senior Reimbursement Consultant, to give us a glimpse into BESLER’s upcoming webinar, FY 2024 IPPS Final Rule Summary, that he’s presenting on September 13, 2023, at 1 PM ET.

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Highlights of this episode include:

  • Final Rule Overview
  • Rural Emergency Hospitals
  • The Changes to DSH Payment Methodology
  • Wage Index New Policy

Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome back Bob McDowell, one of BESLER’s senior reimbursement consultants. In this episode, Bob will give us a glimpse into BESLER’s upcoming webinar, FY 2024 IPPS Final Rule Summary, that we’re hosting on Wednesday, September 13, 2023, at 1 PM Eastern Time. Welcome back, and thanks for joining us today, Bob.

Bob McDowell: Well, thank you, Kelly. And it’s a pleasure to be with you this afternoon.

Kelly: All right, well, let’s go ahead and jump in. CMS typically updates the hospital payment rates in the Final Rule. Can you give us a quick overview as to what’s going to happen in the upcoming year?

Bob: Absolutely. This year, we’re at federal fiscal year 2024. There are favorable increases in the hospital federal rates for both short-term and long-term acute care facilities. For short-term acute care facilities, also known as inpatient PPS, or IPPS hospitals, there is a net increase to the federal rate of 3.1%. This increase comes from the annual market basket increase of 3.3%, and is reduced by a productivity adjustment of 0.2%. This is an adjustment to the hospital-based federal reimbursement rate, which may be subject to other favorable and unfavorable adjustments from additional CMS programs, such as Hospital Readmissions Reduction Program, Hospital-Acquired Condition Reduction Program, and Hospital Value-Based Purchasing Program. The increase to the federal rate for IPPS hospitals will result in an estimated $2.2 billion in additional payments for federal fiscal year 2024. This $2.2 billion in additional hospital revenues is net of reductions in Medicare DSH and new technology add-on payments, and includes an increase in capital payments.

For long-term acute care hospitals, also known as LTACs, initially in the proposed rule they were expected to see an unfavorable reduction in their payments of 2.5% or $59 million. But in the final rule, CMS reduced the unfavorable rate reduction, and LTACs are expected to receive the favorable increase of 0.2%, or $6 million of additional payments. Now, I know that’s not a whole lot, but it’s better than a $59 million cut in payments.

Kelly: Thank you for that quick overview. In the calendar year 2023 Outpatient Final Rule, CMS established payments for a new provider type, rural emergency hospitals. Does CMS make any additional provisions for these new facilities in the Inpatient Final Rule?

Bob: Yes, they actually did. Although a rural emergency hospital as an outpatient-only facility. In the IPPO’s final rule, CMS designated rural emergency hospitals eligible to receive additional payments for graduate medical education. Graduate medical education is, for the most part, an enhancement to inpatient or Part A facility reimbursement. And it has traditionally been addressed in the IPPS rules, which is where CMS has chosen to address this enhancement for rural emergency hospitals. Overall, reimbursement for graduate medical education to a rural emergency hospital will be handled with a similar methodology as critical access hospitals use, in that they can choose one of two different paths. A rural emergency hospital can choose to train residents as a non-provider setting, where the FTE counts for those residents for IME, or indirect medical education, and DGME, or direct graduate medical education, would be reported on the cost report of the hosting hospital, and not on the cost report for the rural emergency hospital. Or the rural emergency hospital can choose to incur the cost of training their residents in its facility, in which case they will be reimbursed on a reasonable cost basis.

Kelly: Thank you for that explanation. Staying with the topic of payment enhancements or add-on payments, we’ve been hearing that there may be some changes to disproportionate share hospital payment methodology. Can you bring us up-to-date with anything that may have been finalized in the Rule?

Bob: Yes. There are three items I would like to discuss here. Two of them were finalized and one was not. But it’s something that I believe that we need to watch for. The first change that was finalized is the opening up of capital DSH payments to hospitals with 100 or more beds located in an urban CVSA. We have reclassified as rural under Section 412.103. Currently, only urban hospitals with 100 or more beds are eligible for capital DSH reimbursement. And since CMS has viewed an urban hospital which has elected a Section 412.103 reclassification to a rural setting as being a rural hospital, they have not traditionally been eligible for capital DSH payments. Starting on October 1st of this year, an urban hospital that reclassified to rural under Section 412.103, and that has 100 or more beds, are now eligible to receive reimbursement for capital DSH as well.

The second change that was finalized was the treatment of Section 1115 Waiver Days, and the Medicaid proxy of the Medicare DSH formula. This issue has shifted around a bit through litigation and CMS change request. But for the 2024 IPPS Rule that finalized, that included in the Medicaid proxy are 1115 waiver days for those patients with benefits that cover inpatient hospital services, or benefits that cover 100% of the premium cost, which the patient uses to buy health insurance that covers inpatient hospital services. The main idea here is that the patient is covered for inpatient hospital services. The Medicaid proxy will not include any days paid from the 1115 demonstration-authorized uncompensated care or under-compensated care pools.

And lastly, a provision that was not finalized but one that should be watched, was in the federal fiscal year 2024 IPPS proposed rule. CMS asked for feedback through a request for information related to a provision introduced by MedPack entitled Safety Net Index. The safety net index would replace the current Medicaid proxy and the traditional Medicare DSH formula. But the proxy based on Medicare patients enrolled in Medicare Part D and receiving low-income subsidy, or LIS benefits, the LIS proxy is believed by some to be a better indicator of what a Medicare safety net hospital is. And it identifies a Medicare populace, instead of the Medicaid-eligible populace, whereby the Medicare program would be reimbursing the facilities for treating low-income Medicare beneficiaries. CMS should first decide what a safety net hospital looks like, or how it is to be defined, and then evaluate which method better identifies that type of facility. With the implementation of health equity qualifiers and quality reporting, we will hopefully see a better-defined picture of CMS’s vision related to this.

Kelly: Thank you. That was great information. The Wage Index is an imperative part of reimbursement for IPPS payments, as well as for OPPS payments. Were there any significant changes in philosophy or methodology for federal fiscal year 2024?

Bob: There was, and it appears that the new policy is somewhat in opposition with the capital DSH policy. And so, let’s take a look at what I mean by that. Unlike the new capital DSH policy where a reclassified facility is geographically recognized by where the hospital is physically located, for federal fiscal year 2024 hospitals that have a Section 412.103 reclassification from urban to rural, their wage data will now be included in the rural area’s wage data where they are reclassified to. Hospitals who have a dual classification through the MGCRB are exempt from this policy. And their wage data will continue to be included in the urban area that they are reclassified to, or re-unclassified to. It just depends on that facility’s situation.

Kelly: Well, thank you. That was great information. And we really appreciate you joining us today, Bob, for sharing this sneak peek into BESLER’s upcoming webinar, FY 2024 IPPS Final Rule Summary that you’re presenting live on September 13, 2023. And as a bonus, you can earn CPE. Thanks again, Bob.

Bob: Thank you, Kelly.

Kelly: And thank you all for joining us for this episode of the Hospital Finance Podcast. Until next time…

[music] This concludes today’s episode of the Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit The Hospital Finance Podcast is a production of BESLER | SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.


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