Hospital Payments Increase 2.8% Under CMS Proposed Rule


The Centers for Medicare and Medicaid Services has updated the Medicare fee-for-service payment rates and policies for inpatient hospitals and long-term care hospitals for 2022.

Before taking into account Medicare disproportionate share hospital payments and Medicare uncompensated care payments, the proposed increase in operating payment rates, increases in capital payments, increases in payments for new medical technologies, increases in payments due to implementation of the imputed floor and other proposed changes will increase hospital payments in FY 2022 by $3.4 billion, or 2.8%.

But there is much in the proposed rule beyond payment updates.

The proposed rule would require hospitals to report vaccination rates among healthcare staff. CMS is proposing the adoption of the COVID-19 Vaccination Coverage among Healthcare Personnel Measure to require hospitals to report COVID-19 vaccinations of workers in their facilities.

One of the biggest proposals is the repeal of the mandate that hospitals disclose their privately negotiated rates with payers.

American Hospital Association executive vice president Tom Nickels said, “Based on our initial review, we are very pleased CMS is proposing to repeal the requirement that hospitals and health systems disclose privately negotiated contract terms with payers on the Medicare cost report. We have long said that privately negotiated rates take into account any number of unique circumstances between a private payer and a hospital, and their disclosure will not further CMS’s goal of paying market rates that reflect the cost of delivering care.”

CMS is proposing to repeal the requirement that a hospital report on the Medicare cost report the median payer-specific negotiated charge that the hospital has negotiated with all of its Medicare Advantage payers, by MS-DRG, for cost reporting periods ending on or after January 1, 2021. CMS said it estimates this will reduce administrative burden on hospitals by approximately 64,000 hours.

The proposed annual rule is now open for public comment and is expected to be finalized and in effect by October 1.


The increase proposed in the Hospital Inpatient Prospective Payment System rate for acute care hospitals is an estimated 2.8%. To get this increase, hospitals must successfully participate in the Hospital Inpatient Quality Reporting Program and be meaningful electronic health record users.

This rate reflects the projected hospital market basket update of 2.5% reduced by a 0.2 percentage point productivity adjustment, and increased by a 0.5 percentage point adjustment required by legislation.

Hospitals may be subject to other payment adjustments including:

Payment reductions for excess readmissions under the Hospital Readmissions Reduction Program.

A payment reduction of 1% for the worst-performing quartile under the Hospital-Acquired Condition Reduction Program.

Upward and downward adjustments under the Hospital Value-Based Purchasing Program.

CMS projects Medicare DSH payments and Medicare uncompensated care payments to decrease in FY 2022 compared to FY 2021 by approximately $0.9 billion. Overall, CMS estimates hospital payments will increase by $2.5 billion.

“We are also proposing to repeal the market-based MS-DRG relative weight methodology that was adopted effective for FY 2024, and to continue using the existing cost-based MS-DRG relative weight methodology to set Medicare payment rates for inpatient stays for FY 2024 and subsequent fiscal years,” the proposal stated.

CMS also proposes to extend New Technology Add-on Payments for 14 technologies that otherwise would be discontinued in 2022.

CMS proposes to extend new COVID-19 treatments add-on payment for eligible products through the end of the fiscal year in which the public health emergency ends.

CMS estimates total Medicare spending on acute-care inpatient hospital services will increase by about $2.5 billion in fiscal year 2022.


The proposed policies in the rule builds on key priorities to close healthcare equity gaps and to support greater access to life-saving diagnostics and therapies during the public health emergency and beyond, CMS said.

CMS is seeking stakeholder feedback on ways to attain health equity for all patients through policy solution.

This includes enhancing hospital-specific reports that stratify measure results by Medicare/Medicaid dual eligibility and other social risk factors, ways to improve demographic data collection, and the potential creation of a hospital equity score to synthesize results across multiple measures and social risk factors.

Consistent with President Biden’s Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, CMS will address persistent inequities in health outcomes in the U.S. through improving data collection to better measure and analyze disparities across programs and policies.

In this proposed rule, CMS is soliciting feedback on opportunities to leverage diverse sets of data (race, Medicare/Medicaid dual eligible status, disability status, LGBTQ+, socioeconomic status, etc.) and new methodological approaches to advance equity through the quality measurement and value-based purchasing programs.


CMS proposes to enhance the medical workforce in rural and underserved communities to support COVID-19 recovery and beyond.

Major provisions in the proposed rule would fund medical residency positions in hospitals in rural and underserved communities to address workforce shortages.

CMS is proposing to distribute 1,000 additional physician-residency slots to qualifying hospitals, phasing in 200 slots per year over five years.

CMS estimates that the additional funding for these additional residency slots, once fully phased in, will total approximately $0.3 billion each year to fund medical residency positions in hospitals to address the workforce shortages.

“Hospitals are often the backbone of rural communities – but the COVID-19 pandemic has hit rural hospitals hard, and too many are struggling to stay afloat,” said HHS Secretary Xavier Becerra. “This rule will give hospitals more relief and additional tools to care for COVID-19 patients, and it will also bolster the healthcare workforce in rural and underserved communities.”

This proposed rule includes proposals to implement provisions of the Consolidated Appropriations Act of 2021 relating to payments to hospitals for direct graduate medical education and for indirect medical education costs.

In the proposed rule, CMS will continue policies finalized in the FY 2020 IPPS/LTCH PPS final rule to address wage-index disparities affecting low-wage-index hospitals. Additionally, this proposed rule includes a proposal to implement the imputed floor wage-index provision of the American Rescue Plan Act of 2021.


Additionally, CMS is proposing to modify the Promoting Interoperability program requirements for eligible hospitals and critical access hospitals to expand reporting within the Public Health and Clinical Data Exchange Objective.

The proposal would require hospitals to report on all four of the following measures: Syndromic Surveillance Reporting, Immunization Registry Reporting, Electronic Case Reporting and Electronic Reportable Laboratory Result Reporting.

Requiring hospitals to report these four measures would help to prepare public health agencies to respond to future health threats and a long-term COVID-19 recovery by strengthening public health functions, including early warning surveillance, case surveillance and vaccine uptake, that will increase the information available to help hospitals better serve their patients, CMS said.


Blair Childs, SVP for public affairs for Premier said: “Premier is encouraged that the Centers for Medicare & Medicaid Services (CMS) is proposing mitigation policies that recognize hospitals’ continued need to adapt their care processes to respond to the pandemic.

“The policies CMS is proposing to mitigate the impact of COVID-19 on quality measures will help prevent a hospital’s quality score from telling a false story and being unfairly penalized. We are also pleased that CMS is providing an option for Medicare Shared Savings Program ACOs to opt out of advancing to the next level of risk for PY 2022.

“Given the data uncertainty and the need to focus on COVID-19 care, it’s appropriate CMS is allowing ACOs to pause their progression to risk for one year.”

American Hospital Association executive vice president Tom Nickels said, “In addition, we applaud CMS for proposing to extend the add-on payment for new COVID-19 treatments through the year in which the current public health emergency ends. This will help hospitals and health systems continue to treat COVID-19 patients and save lives.

“We are also pleased CMS is proposing to implement the 1,000 new Medicare-funded medical residency positions that were added by Congress last year, and we look forward to reviewing this proposal in more detail. The AHA has long advocated for increasing the number of Medicare-funded residency slots to help ease current physician shortages and bolster the foundation of our healthcare system.”

Beth Feldpush, senior vice president of policy and advocacy, America’s Essential Hospitals said, “America’s Essential Hospitals is pleased to see policies to improve healthcare equity and to withdraw burdensome data collection requirements as part of the proposed fiscal year 2022 Medicare Inpatient Prospective Payment System.

“The Centers for Medicare & Medicaid Services has made the right decision to end the collection of Medicare Advantage median charge data on cost reports. We believe this policy exceeded the agency’s statutory authority.”

Shockwave Medical, which makes products for the treatment of severely calcified cardiovascular disease, said it was pleased about the recommendations that coronary IVL cases be eligible for incremental payment via a New Technology Add-On Payment from CMS when performed in the hospital inpatient setting.


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