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IPPS 2022 Final Rule Summary [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by Josh Weissenborn, BESLER’s Reimbursement Services Manager to give us highlights from this year’s IPPS Final Rule.

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Highlights of this episode include:

  • Updates where providers are experiencing the greatest impact
  • Median payer-specific negotiated charge by MS-DRG for Medicare Advantage payers
  • Medicare Bad Debt changes
  • Updates to Organ Acquisition
  • Updates on Medical Education

Mike Passanante: Hi, it’s Mike Passanante, and welcome back to the award-winning Hospital Finance Podcast. As we do every year, Besler releases a summary of the IPPS Final Rule. And to give us some highlights of this year’s rule, I’m joined by Josh Weissenborn, who is a manager in our reimbursement services team here at BESLER. Josh, welcome to the show.

Josh Weissenborn: Thanks, Mike

Mike: So, Josh, the past couple of years we’ve seen many changes to reimbursement. CMS has recently published the federal fiscal year 2022 in Patient Perspective Payment System, the final rule, as we mentioned. Was this year’s final rule just as impactful as in previous years?

Josh: Absolutely. So before I start, I just want to mention that CMS has not addressed every area discussing the 2022 IPPS Proposed Rule. Due to the magnitude of comments, policies in areas such as organ acquisition, digital 1115 waiver days, and IME/GME brought forth in the proposed rule will be addressed in future legislation. So for these areas, I’ll be discussing changes outlining the proposed rule in the directions that we think that CMS will go. Keep in mind that our speculation could differ from CMS’s future legislation. So in this podcast, I’ll focus on the most significant updates where we see providers experiencing the greatest impact, some positive, and of course, some negative. The areas that I’ll touch on today include a repeal of the requirements to report the median payer-specific negotiated charge by MS-DRG for Medicare Advantage payers. A new requirement for states which will impact bad debts, propose updates to organ acquisition, as well as propose updates to medical education.

Mike: All right. So let’s dive right in. The new requirement for hospitals to report the median payer-specific negotiated charge by MS-DRG for Medicare Advantage payers was not well received. Can you tell me a little bit about CMS’s decision to repeal this requirement and what this means for providers?

Josh: Yeah. So CMS has been looking for ways to rely less and less on hospitals’ chargemasters and setting future market-based MS-DRG relative rates. In the FY 2021 IPPS Final Rule effective for [inaudible] periods and in honor after January 1st, 2021, CMS implemented the requirement for hospitals reimbursed under MS-DRGs to report the median payer-specific negotiated charge by DRG for Medicare Advantage payers. Which was to be reported on the newly-created worksheet S-12 on the Medicare cost report. This information would have been used to set the MS-DRG rates beginning in FY 2024.

The requirement received a large number of critical comments and not all Medicare Advantage contracts use MS-DRGs. Which really played a key role in CMS’s decisions to repeal these requirements. So as a result, CMS would continue to use their current cost-based methodology for fiscal year 2024 and beyond. This will help reduce the additional administrative burden for providers for the time being. However, CMS is looking for alternative methods. So really, be ready for these additional changes down the road. Our speculation is that CMS is gearing towards reporting requirements to ensure that DRG payments are in line with the other payers. In addition, by moving the price and transparency reporting requirements to the cost report, there could greater penalties for non-compliance, which would include rejection of cost reports and then subscript withholding of a provider’s enduring payments.

Mike: Josh, it’s my understanding that Medicare bad debts will be undergoing a change as it relates to the state’s reporting requirements. What can you tell us about those changes?

Josh: Yeah. So as discussed by CMS in the final rule, so this really impacts statement key programs as reporting requirements as it relates to claims which share the costs with Medicare program, or what we in reimbursement refer to as dual-eligible or crossover bad debts. So for dates of service beginning January 1st, 2023, states are required to enroll all qualified providers and have systems in place to process, adjudicate and issue our A3 claims. So that means that states must have a necessary process using systems in place by the state. And it’s actually what CMS is doing here is holding states accountable for the timely accurate processing and dual-eligible claims so that the states pay their share.

And what this means for providers is that in order to claim each crossover bad debt reported on the Medicare cost report, that provider would really need to have that remittent revised from the states. So we would expect a greater number of claims being paid by state Medicaid programs as a result to this change, and, therefore, reducing the Medicare share, and the deductibles in  co-insurance reported on the Medicare cost report. In addition, CMS states that this policy change will reduce the amount of bad debt appeals and, therefore, reduce the administrative cost both for the providers and the CMS.

Mike: So switch gears and talk about organ acquisition. While there are only 300 or so certified organ transplant centers, it’s a big issue for these providers who are going to have a significant impact on Medicare settlement. A big part of organ acquisition reimbursement is the Medicare usable organ count. And as I understand it, CMS proposed changes to this definition in the federal Fiscal Year 2022 Proposed Rule. And all of the final regulations are not yet published. Can you discuss these changes and where you see the final regulations going?

Josh: Yeah, absolutely. So this is probably one of the most significant changes that was in the 2022 Proposed Rule, and one which will have a detrimental impact, particularly to Organ Procurement Organizations, and what I refer to as OPOs. Under current rules and regulations, the definition of Medicare useable organs includes organs sent through other transplant hospitals and OPOs regardless of the beneficiary’s payer, as well as organs transferred to a US military renal transplant center, with a reciprocal sharing agreement in effect prior to March 3rd, 1988. So now the definition the 2022 Proposed Rule will change this to exclude organs sent to another transplant hospital or OPO which are not transplanted into a Medicare beneficiary, as well as all organs transferred to a military renal transplant center, regardless if they had the reciprocal sharing agreements.

So what this means for providers is that to have your reduction and Medicare utilization and ultimately, Medicare share the acquisition cost that will be reimbursed on the Medicare cost report. Furthermore, transplant hospitals and OPOs will really need to work closely together and collaborate in order to track the pair and the intended transplant recipient. So only report those organs where the intended recipient is a Medicare beneficiary.

While it’s impossible to know exactly how CMS will proceed, we do strongly believe that changes are coming in the very near future as Medicare continues to correct areas where they are historically paid more than their share. But whether or not providers agree, CMS is only responsible for paying their share of the cost, which is really what this change is designed to do. Unfortunately, unless there is some sort of agreement placed with the Department of Health and Human Services who has the authority to bare some diverting through non-Medicare cost, there will be negative reimbursement ramifications, particularly for the OPOs.

Mike: Josh, have there been any other changes to organ acquisition covered in the 2022 Proposed Rule?

Josh: Yeah. So another change I did want to discuss proposed by CMS relates to donor community hospitals. And these are hospitals who excise organs and then provide to other transplant hospitals or OPOs. So currently, donor community hospitals will build the transfer hospital– I’m sorry, transplant hospital or OPO, customary charges or negotiated rates. Effective for cost report periods beginning on or after October 1st, 2021, CMS is proposing to change this so that the hospital must reduce the charges bill to reasonable cost using the most recently available hospital-specific cost:charge ratio.

So CMS’s rationale here is to correct instances of noted abuse where donor community hospitals are grossly overcharging OPOs and transplant hospitals. However, not only will this be detrimental to all the donor community hospitals who can now only bill up to reasonable cost. Will have a impact that the transplant hospitals or the OPOs should report the amounts into the donor community hospital’s organ acquisition cost in their Medicare cost report, which now will be lower.

Another change I do want to just quickly mention is the consolidation of the organ acquisition regulations. So currently, they’re housed in your several sections of the kind of federal regulations. But as a result of this proposed rule, it will all be housed in 42 CFR 413 part L. So this really should make it easier to be able to find the regulations as they’re all in one place now.

Mike: Okay. Let’s talk about medical education, which is always a big topic of discussion. What are the changes this year?

Josh: Yeah. So, again, this is another area where CMS is not maybe a final determination. So I’ll be discussing this in the context of the proposed rule. So as a result of the Consolidated Appropriations Act of 2021, the one I’ll refer to as the CAA going forward, there are three provisions that were included in the proposed rule as a result of the CAA sections 126, 127, and 131. And this will mostly benefit rural providers and those urban providers who are part of a rural training track. In addition, there’s an opportunity for providers at the lower zero for resident and for FTE cap to be able to reset these amounts.

Mike: Let’s start with the potential increases to FTE slots under section 126 of the CAA. What are the changes proposed by CMS there?

Josh: Yeah. So what this section does, so it adds its whole of 1,000 new Medicare-funded GME positions available to qualifying hospitals over a five-year period. So this is essentially 200 positions that will be imported per year. And this will start on July 1st, 2023. So there are four statutorily specified categories that we prioritize in which 10% or greater will be distributed to each of the categories.

So the categories here are, one, hospitals located in the rural areas that are treated as being located in a rural area for PM purposes. Two, hospitals training residents about the IME/GME caps. Three, hospitals in which states with new medical schools or additional locations and branches have existing medical schools, which includes 35 states. And you can find that list of states in the final rule. And, four, hospitals that serve areas designated as health professional strategy areas.

So there are a couple of invitations that you just want to quickly mention. So a provider can’t receive more than 25 additional FTE positions and increase this for individual providers who are further limited to one FTE each year. And then the second one is cap increases won’t be made unless the provider agrees to increase the total number of FTE residents it positions in the approved program by the number of order positions. So in the proposed rule, hospitals who will submit applications by January 31st, 2022, will be notified the following year on January 31st, 2023 of any awarded increases. In the application process, the provider must demonstrate that it doesn’t have sufficient room. And on its current cap, it must show or demonstrate a likelihood of either starting a new residency program, or expanding a residency program. In addition, a certification must be completed by the officer or administrator who signs the Medicare cost report.

Mike: Now, let’s talk about changes to oral training track programs under section 127 of the CAA. What has CMS proposed to change as a result?

Josh: Yeah. So effective for cost report periods on or after October 1st, 2022, CMS proposed to make changes to the rules around rural training track programs, especially as it relates to cap adjustments for urban hospitals. So CMS would allow prospective cap increases to the IME and GME caps and both the participating urban as well as the rural hospitals to expand the rural and qualifying the rural training track. So the requirement that the rural track must be separately accredited would also be removed so long as the program is accredited by the ECGME in its entirety regardless of the specialty. In addition, greater than 50% of the training time must be in a rural area. During the five-year cap growth window, these FTEs will not be included in the hospital’s three-year-old in average calculation until the cost report year at the six program year of each rural track.

Mike: Finally, that brings us to potential resets of the per resident amount and resident cap under section 131 of the CAA. What can you tell us about the proposed changes there?

Josh: Yes. So this will help providers to either have a low or a zero per resident amount, or what I’ll refer to as the PRA going forward, or their FTE cap. So CMS is allowing resets at the PRA or FTE cap here. And they break it up by two eligible categories. So there’s category A, in which a creditor must train at least one FTE, and category B, in which a provider must train at least three FTEs. The recalculation period will begin on December 27th, 2020, and would end five years later. So for both the PRA and the FTE cap, the reset won’t occur until it’s determined that the category A or category B threshold is met or exceeded.

There are a couple of specifics I want to mention. So I’ll start with the PRA reset. So the reset amount would be the lower of the following. It will be the lower of the hospital’s actual cost per resident in current connection with the GME programs based on the cost report and resident data from the hospital to replace at least cost reporting period. Or the updated weighted mean value of PRAs of all hospitals located in the same geographic wage area and the most recently settled cost reports. If there are fewer than three hospitals, all hospitals located in the same census regional will be used.

There is one circumstance which a provider may reset their PRA if they train less than one FTE. So if the provider is entered into a GME-affiliation agreement to rotate residents in the hospital, then they’re allowed to do the reset. However, if there is no affiliation agreement, then they must meet or exceed the category A threshold. And now, let’s talk about the reset FTE quickly. So the cap can only be reset when a category A or category B hospital begins training FTE residents in their new residency program. And the current regulations at 42 CFR 413.79(e)(1) would be followed here.

Mike: Josh, what is your take on these proposed changes, and how do you envision CMS proceeding?

Josh: Yeah. So because the proposed rules resulting from legislation are already enacted, it’s really safe to say that these providers– I’m sorry, that these provisions will be implemented by CMS. The overall impact is expected to be positive for eligible providers through potential increases in medical education payments. And we would expect this to encourage traditional training in rural areas where it’s difficult for these providers to track physicians and compete in the market.

Mike: Thanks, Josh. And if you’d like a more detailed review of the IPPS Final Rule, Josh just delivered a webinar which is recorded and available on our website. Just head up to, click on the insights button, and then the reimbursement tab and you’ll see a link to it. We invite you to go take a look at that and get some more information about the IPPS Final Rule. Josh, thanks so much for joining us today and providing your valuable insights around this year’s IPPS Final Rule.

Josh: Absolutely. Thanks for having me, Mike. Appreciate it.

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