CMS' final inpatient payment rule for 2021: 7 things to know

CMS released its annual Inpatient Prospective Payment System final rule Sept. 2, which raises Medicare payment rates for acute care hospitals. 

The rule, which affects approximately 3,200 acute care hospitals, applies to discharges occurring on or after Oct. 1, 2020. 

Here are seven takeaways from the 2,160-page final rule

1. Payment rate update. Acute care hospitals that report quality data and are meaningful users of EHRs will receive a net 2.9 percent increase in Medicare rates in fiscal year 2021, compared to fiscal 2020. CMS projects the rate increase, together with other changes to inpatient payment policies, will boost total IPPS payments by about $3.5 billion.

2. Disclosure of negotiated rates. Under the final rule, hospitals must report to CMS the median rate negotiated with Medicare Advantage organizations for inpatient services. CMS will begin collecting this data in 2021 and will use it in a new market-based methodology to set inpatient hospital payments beginning in 2024.

The American Hospital Association said it is disappointed that the policy was included in the final rule. 

"The AHA remains deeply disappointed that CMS continues to require hospitals and health systems to disclose privately negotiated contract terms with payers," said Ashley Thompson, senior vice president of public policy analysis and development at the AHA. "By continuing to focus on negotiated rates rather than expanding access to a patient’s out-of-pocket costs, the Administration fails to meet the goal it set for itself — assisting consumers in becoming more prudent purchasers of health care. We once again urge the agency to focus on what is really important to patients — ready access to their out-of-pocket costs."

3. Add-on payments. CMS approved add-on payments for 24 new technologies and expanded the new technology add-on payments for certain antimicrobials approved under the FDA's Limited Population Pathway for Antibacterial and Antifungal Drugs. "The LPAD pathway encourages the development of safe and effective drug products that address unmet needs of patients with serious bacterial and fungal infections," CMS said. 

To allow eligible antimicrobial products to begin receiving the add-on payment sooner, CMS finalized a policy to provide for conditional approval for antimicrobial products that meet criteria for the add-on payment but did not receive FDA approval in time for consideration in the final rule. 

4. New DRG. The final rule creates a new Medicare Severity-Diagnosis Related Group for CAR T-cell therapies. "The new payment group helps to predictably compensate hospitals paid under the IPPS for their costs in delivering necessary care to Medicare beneficiaries and provide payment flexibility for the future as new CAR T-cell therapies become available," CMS said. 

5. Disproportionate Share Hospital payments. CMS will distribute roughly $8.3 billion in DSH payments in fiscal 2021, a decrease of about $60 million from fiscal 2020. CMS will use a single year of data on uncompensated care costs to distribute DSH funds.  

6. Graduate medical education policy. The final rule expands the definition of who is considered a displaced resident when teaching hospitals and residency programs close. The policies will allow funding to be transferred for certain residents who are not physically at the hospital training when it closes. The policies are meant to provide more flexibility for residents to transfer while a hospital or residency program is winding down operations, CMS said. 

7. Inpatient Quality Reporting Program. CMS finalized several changes to the Inpatient Quality Reporting Program. Starting in the 2021 reporting period, CMS will gradually increase the number of quarters of electronic clinical quality measure data until it reaches a full year of data for the 2023 reporting period. Under the final rule, electronic clinical quality measure data will be publicly available in fall 2022, beginning with data reported for 2021. 

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