News: FY 2022 IPPS final rule released

CDI Strategies - Volume 15, Issue 31

CMS has released the fiscal year (FY) 2022 Inpatient Prospective Payment System (IPPS) final rule, finalizing its efforts to cushion the ongoing impact of the COVID-19 pandemic on hospital revenue and resources. Along with payment rate updates, the final rule also repealed the MS-DRG relative weight methodology and hospital cost-reporting requirement finalized in the 2021 IPPS final rule.

The ACDIS Regulatory Committee submitted comments on the proposed rule, some of which are reflected in the final rule.

Payment updates

CMS finalized a 2.7% payment increase to hospitals that successfully participate in the Hospital Inpatient Quality Reporting program and are meaningful EHR users, JustCoding reported. Including disproportionate share hospital and Medicare uncompensated care payments, the agency estimates IPPS hospital payments will increase by $2.3 billion.

The 2022 IPPS final rule adds a Maternal Morbidity measure to the hospital quality reporting program that requires hospitals to report whether they participate in statewide or national efforts to improve perinatal health.

Although CMS typically uses hospital utilization data from the previous FY when setting payment rates for the upcoming FY, the agency believes that wouldn’t be appropriate in this case. The COVID-19 pandemic drastically changed inpatient hospital utilization in FY 2020, according to the final rule.

The COVID-19 vaccination rates in the Medicare population, coupled with the effectiveness of the vaccines, led CMS to believe that there will be significantly lower risk of COVID-19 infection and fewer hospitalizations for COVID-19 in FY 2022 than occurred in FY 2020. Because of this, CMS used the FY 2019 data from prior to the COVID-19 public health emergency to approximate the expected FY 2022 inpatient hospital utilization.

Market-based MS-DRG policy, hospital cost reporting

CMS finalized a dramatic overhaul of MS-DRG rate-setting in the 2021 IPPS final rule which was set to take effect in FY 2024, but the 2022 final rule has entirely reversed those policies. Instead, CMS plans to continue using the existing cost-based MS-DRG relative weight methodology, JustCoding reported.

Additionally, the 2021 IPPS final rule required hospitals to report the median payer-specific negotiated payment rate by MS-DRG for all contracted Medicare Advantage payers for cost reporting periods ending on or after January 1, 2021. The FY 2022 IPPS final rule repealed this requirement. According to the final rule, had hospitals been required to comply with this requirement, it would have resulted in approximately 64,000 hours of administrative burden.


For FY 2022, in connection with CMS’ decision to use FY 2019 data for FY 2022 rate setting, CMS is finalizing a one-year extension of new technology add-on payments for 13 technologies for which the new technology add-on payment would otherwise be discontinued beginning FY 2022.

CMS is extending the New COVID-19 Treatments Add-on Payment (NCTAP) for eligible COVID-19 products through the end of the fiscal year in which the public health emergency (PHE) ends.

CMS did not adopt the proposal to discontinue the NCTAP for discharges on or after October 1, 2021, for a product that is approved for NTAP beginning FY 2022. Instead, hospitals will be eligible to receive both NCTAP and the traditional new technology add-on payment for qualifying patient stays through the end of the FY in which the PHE ends, with the new technology add-on payment reducing the amount of the NCTAP.

Additionally, the final rule has added authorization of additional payments for diagnostics and therapies to treat COVID-19 during the time of the current PHE. CMS is also adopting a measure that requires hospitals and long-term healthcare centers to report COVID-19 vaccination rates of workers in their facilities.

ACDIS Regulatory Committee proposals

Earlier this year, the ACDIS Regulatory Committee made recommendations on the FY 2022 proposed rule, some of which were adopted.

The committee proposed the reclassification of code B33.24, Viral myocarditis, into MDC 05, DRG 314-16, which has been reflected in the 2022 IPPS final rule. Also adopted was the Regulatory Committee’s suggestion for a CC exclusion rule to include congestive heart failure (I11.0, I13.2).

There are some new limited codes in the 2022 IPPS final rule for social determinants of health. The ACDIS Regulatory Committee had supported these codes, but in a more limited, controlled fashion than the original proposed rule. The addition of added social determinants of health codes appears to be consistent with the committee’s vision.

The 2022 proposed rule noted a new adoption date of April 1 for new and revised motions from the final rule. While the Regulatory Committee supported this with caution, it will in fact be enacted by CMS.

Editor’s note: This article was originally published by JustCoding. For more information or to read the FY 2022 IPPS rule in its entirety, visit the CMS website. The finalized FY 2022 IPPS rule updates will be covered in the upcoming webinar 2022 IPPS Final Rule: Compliant Revenue Strategies.