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FY 2023 IPPS Final Rule: Payment Rate Change, Quality Programs and Social Determinants of Health

Published on 

Wednesday, August 17, 2022

 | Billing 
 | Coding 
 | Quality 

CMS issued a display copy of the FY 2023 IPPS Final Rule (CMS-1771-F-IFC) on Monday, August 1, 2022. This article contains a high-level look at the final operating payment rate, quality program payments, and Social Determinants of Health (SDOH).

Payment Rate Change

The proposed increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) use was 3.2%. CMS finalized an increase of 4.3%.

Overall, the increase in operating and capital IPPS payments rates will generally increase hospital payments in FY 2023 by $2.6 billion.

Quality Programs

Hospital Value Based Purchasing (VBP) Program

This is a budget-neutral program where 2% of all participating hospitals base operating MS-DRG payments are used for funding and then redistributed back as a value-based incentive payment.

For FY 2023, CMS will pause several measures limiting the number of measures available for accurate scoring. For this reason, CMS will not calculate a Total Performance Score (TPS) and instead, each hospital will receive a value-based incentive payment amount to match their 2% reduction in base-operating payment.

Hospital Acquired Condition (HAC) Reduction Program

This program reduces payment by 1% for all hospitals that rank in the worst performing quartile on select measures. For FY 2023, CMS is pausing measures that would have been used to calculate a Total HAC Score. Therefore, no hospital will be penalized under this program for FY 2023.

Hospital Readmissions Reduction Program (HRRP)

The HRRP program reduces payments to hospitals with excess readmissions for unplanned readmissions within 30 days of the index admission for the following conditions or procedures:

  • Acute myocardial infarction (AMI),
  • Chronic Obstructive Pulmonary Disease (COPD),
  • Pneumonia (PNA),
  • Coronary Artery Bypass Graft (CABG) surgery, and
  • Elective primary total hip arthroplasty and/or total knee arthroplasty (THA/TKA).

Beginning in FY 2023, all six conditions/procedure measures will be modified to include a risk adjustment for history of COVID-19 within 12 months prior to the index admission.

Social Determinants of Health

There are 96 diagnosis codes describing Social Determinants of Health (SDOH) in the subset of Z codes in categories Z55-Z65 (Persons with potential health hazards related to socioeconomic and psychosocial circumstances). Three of these codes are new and will be effective October 1, 2022:

  • Z59.82: Transportation insecurity,
  • Z59.86: Financial insecurity, and
  • Z59.87: Material hardship.

In the proposed rule, CMS requested comments on issues related to SDOHs noting that “if SDOH Z codes are not consistently reported in inpatient claims data, our methodology utilized to mathematically measure the impact on resource use, as described previously, may not adequately reflect what additional resources were expended by the hospital to address these SDOH circumstances in terms of requiring clinical evaluation, extended length of hospital stay, increased nursing care or monitoring or both, and comprehensive discharge planning.”

Specific to the question regarding codes in category Z59 (Homelessness), many commenters agreed that codes describing homelessness have been underreported and increasing the severity level of the codes from a non-complication or comorbidity (Non-CC) to a complication of comorbidity (CC) could result in increased documentation and reporting of this condition.

CMS notes that will take comments into consideration for future rulemaking.


FY 2023 IPPS Final Rule

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This material was compiled to share information.  MMP, Inc. is not offering legal advice. Every reasonable effort has been taken to ensure the information is accurate and useful.