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New CMS Rule Increases Payments for Acute Care Hospitals and Advances Health Equity, Maternal Health

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The Centers for Medicare & Medicaid Services (CMS) issued a final rule for inpatient and long-term care hospitals to prioritize the advance of health equity and improve maternal health outcomes. As required by statute, the fiscal year (FY) 2023 Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) rule updates Medicare payments and policies for hospitals, drives high-quality, person-centered care, and promotes fiscal stewardship of the Medicare program. In addition, the rule finalizes new measures to encourage hospitals to build health equity into their core functions. These actions will improve care for people and communities who are disadvantaged or underserved by the health care system.

The rule includes three health equity-focused measures in hospital quality programs and establishes a “Birthing-Friendly” hospital designation. CMS will award this new designation to hospitals that participate in a statewide or national perinatal quality improvement collaborative program and have implemented the recommended quality interventions.

For acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record users, the final rule will result in an increase in operating payment rates of 4.3%. This reflects a FY 2023 projected hospital market basket update of 4.1%, reduced by a statutorily required productivity adjustment of a 0.3 percentage point and plus a 0.5 percentage point adjustment required by statute. This is the highest market basket update in the last 25 years and is primarily due to higher expected growth in compensation prices for hospital workers. Under the LTCH PPS, CMS expects payments in FY 2023 to increase by approximately 2.4% or $71 million.

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