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2024 IPPS Final Rule: Special Rules for Special Hospitals

August 23, 2023

There is a scene in the movie Tora, Tora, Tora where a group of sailors on a Japanese aircraft carrier excitedly gather around one of their celebrated pilots. When asked by one of the flight crew, “how did you rate another promotion,” the cocky pilot wryly remarked, “special people deserve special treatment,” which brought roars of laughter from his admirers.

Sometimes, special people, special situations and special institutions do require special consideration. The normal rules don’t always apply. This is the case for specially designated hospitals in the United States. Due to their unique status, special rules apply to them that don’t apply to the standard acute care hospitals. It is the purpose of this alert to address those provisions found in the recently released 2024 Inpatient Prospective Payment System (IPPS) final rule that are particularly applicable to hospitals of special designation. Below, are a few highlights arising from the rule, which originate, in part, from a fact sheet on the final rule released by CMS.

Low-Wage Index Hospitals

The Centers for Medicare and Medicaid Services (CMS) will continue its temporary policies that were finalized in the FY 2020 IPPS final rule to address wage index disparities affecting low-wage index hospitals, which includes many rural hospitals. The rule explains that CMS only has one year of relevant data (from FY 2020) that could be used to evaluate any potential impacts of this policy. Since CMS does not have sufficient data from the time period this policy has been in effect, it was determined to continue the policy while the agency obtains and reviews additional data.

Rural Emergency Hospitals

As you will recall, rural emergency hospitals (REHs) exist as a new CMS hospital classification. The REH designation was established by the Consolidated Appropriations Act (CAA) of 2021 to address the growing concern over closures of rural hospitals. The 2024 final rule includes changes to graduate medical education (GME) payments for training relative to REHs. These changes help support graduate medical training in rural areas by allowing these rural hospitals to serve as training sites for Medicare GME payment purposes after they become REHs.

Rural Wage Index Calculation

CMS has taken into consideration recent public comments that have urged it to change its wage index policies involving the treatment of hospitals that have reclassified from urban to rural under section 1886(d)(8)(E) of the Social Security Act (implemented in the regulations at §412.103). The rule finalizes the proposal to interpret section 1886(d)(8)(E) of the Social Security Act as treating rural reclassified hospitals the same as geographically rural hospitals for purposes of calculating the wage index. Specifically, CMS will include hospitals with §412.103 reclassification along with geographically rural hospitals in rural wage index calculations beginning with FY 2024. Under Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105–33), the area wage index applicable for any hospital that is located in an urban area of a state may not be less than the area wage index applicable to hospitals located in rural areas in that state. This provision is referred to as the rural floor. CMS will include the data of all §412.103 reclassified hospitals in the calculation of the wage index for the rural area of the state and the calculation of the rural floor for urban hospitals in the state.

Disproportionate Share Hospitals

As you’ll recall from last week’s alert the 2024 IPPS final rule contained a 3.1 percent payment increase for hospitals that meet quality and reporting requirements for FY 2024, up from the 2.8 increase that had been recommended in the proposed rule. This represents an increase in inpatient hospital payments of $2.2 billion compared to FY 2023. However, Disproportionate Share Hospital (DSH) payments will actually decrease by $957 million, according to the final rule, and CMS is projecting payments for new medical technologies will also decrease by $364 million.

The cut to DSH payments is based, in part, on an Office of the Actuary estimate that 8.5 percent of individuals will be uninsured in calendar year (CY) 2024, compared to 7.7 percent in CY 2023. According to some, this estimate is somewhat problematic. For example, in a statement released by the American Hospital Association (AHA) on August 1, the cuts were described as “inexplicable” in light of recent plunges in Medicaid enrollment.

Physician-Owned Hospitals

For a hospital to submit claims and receive Medicare payment for services referred by a physician owner or investor (or a physician whose family member is an owner or investor), the hospital must satisfy all of the requirements of either the whole hospital exception or the rural provider exception to the physician self-referral law, commonly referred to as the “Stark Law.”

To use the rural provider exception or the whole hospital exception, a hospital may not increase the aggregate number of operating rooms, procedure rooms, and beds above that for which the hospital was licensed on March 23, 2010 (or, in the case of a hospital that did not have a provider agreement in effect as of that date, but did have a provider agreement in effect on December 31, 2010, the effective date of such agreement), unless CMS has granted an exception to the prohibition on expansion. A hospital may request an exception to the prohibition on expansion of facility capacity using the process established in the 2012 Hospital Outpatient Prospective Payment System (OPPS) final rule.

The final rule accomplishes the following:

  • Revises the regulations to clarify that CMS will only consider expansion exception requests from eligible hospitals, clarifying the data and information that must be included in an expansion exception request, identifying factors that CMS will consider when making a decision on an expansion exception request, and revising certain aspects of the process for requesting an expansion exception. 
  • Reinstates, with respect to hospitals that meet the criteria for “high Medicaid facilities,” program integrity restrictions on the frequency of expansion exception requests, maximum aggregate expansion of a hospital, and location of expansion facility capacity that were removed in the CY 2021 OPPS final rule. 

Cancer Hospitals

The PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program is a quality reporting program for the eleven cancer hospitals that are statutorily exempt from the IPPS. CMS collects and publishes data from PCHs on applicable quality measures. The final rule sets forth the following:

  • Beginning public display of the Surgical Treatment Complications for Localized Prostate Cancer measure beginning with data from the FY 2025 program year.
  • Adoption of four new measures for the PCHQR Program:
  • Facility Commitment to Health Equity beginning with the FY 2026 program year. 
  • Screening for Social Drivers of Health beginning with voluntary reporting for the FY 2026 program year and mandatory reporting for the FY 2027 program year.
  • Screen Positive Rate for Social Drivers of Health beginning with voluntary reporting for the FY 2026 program year and mandatory reporting for the FY 2027 program year.
  • Documentation of Goals of Care Discussions Among Cancer Patients beginning with the FY 2026 program year.
  • Modification of the COVID-19 Vaccination Coverage among HCP measure, in alignment with the Hospital IQR Program and LTCH QRP.
  • Modification of the data submission and reporting requirements for the HCAHPS survey measure beginning with the FY 2027 program year.

Next week, we will conclude our review of the final rule by focusing on the hospital quality program.

To read more on the 2024 IPPS Final Rule, read one of our earlier alerts here.

With best wishes,

Chris Martin
Senior Vice President—BPO

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