5 ways COVID-19 shows up in CMS’ proposed hospital pay rule

After more than two years of living with the COVID-19 pandemic and with cases on the rise again, the virus continues to dictate hospital payment proposals for fiscal 2023.

Here’s a look at how at how four ideas in the proposed Medicare Hospital Inpatient Prospective Payment System rule were shaped by the COVID-19 pandemic, and one that hospital trade groups think ought to be:

1. CMS proposed returning to its typical practice of using the most recent available data to set hospital rates. CMS used 2019 data for 2022 rates when 2020 data was significantly impacted by the virus, believing that cases would decrease in 2022 to the point where pre-COVID-19 data would be more useful for rate-setting. But COVID-19 still hasn’t gone away, and CMS said using 2021 claims and 2020 cost data with some modifications seems appropriate since Medicare patients will likely continue to be hospitalized with COVID-19 in 2023.

“The virus that causes COVID-19 has continued to significantly impact hospitalizations for the time period subsequent to the development of the FY 2022 IPPS/LTCH PPS final rule… Even if a variant causes less severe disease in general, an increase in the overall number of cases could cause an increase in hospitalizations,” the rule said.

2. CMS suggested discounting or revising several value-based purchasing measures that would be significantly affected by COVID-19. All six measures in the Hospital-Acquired Condition Reduction Program for fiscal 2023 could be discounted. CMS also wants to halt five hospital-acquired infection measures in the Hospital Value-Based Purchasing Program, as well as a consumer assessment of providers and systems measure. The measure tracking 30-day readmission rate following pneumonia has already been paused for 2023, but CMS proposed excluding COVID-19 patients from the denominator of the rate in future years, among other technical changes.

The American Hospital Association applauded this proposal in a statement Monday.

“We thank CMS for recognizing that the COVID-19 pandemic continues to affect hospital performance in its quality measurement and value programs,” said Stacey Hughes, AHA’s executive vice president.

3. Medicare and Medicaid conditions of participation for hospitals and critical-access hospitals may be changed to require continued reporting of COVID-19 and seasonal flu through April 2024. CMS also proposed creating new reporting requirements on illness and pathogens for a future declared pandemic. CMS may require reporting on total COVID-19 and flu infections and deaths, available supplies in the facility, ventilator use, bed capacity and more. CMS doesn’t expect hospitals to have to report anything they haven’t already been reporting throughout the COVID-19 emergency. The agency asked for feedback on the burden additional reporting could create.

4. CMS requested input on whether it should adjust hospital inpatient and outpatient payment to account for the costs of domestically produced and approved N95 masks. Supply shortages earlier in the pandemic caused prices for N95s to skyrocket from 25 to 40 cents to more than $5 and sometimes more than $10 per mask. Prices have stabilized back down around 70 cents per mask, but costs can still build up for hospitals, according to CMS. The agency could incorporate these costs with biweekly interim payments to hospitals to be reconciled in the future, or develop a claims-based approach with an add-on that could be applied to each relevant Medicare IPPS charge.

Group purchasing organization Premier said it appreciates CMS’ consideration of incentives to purchase domestic N95s.

“Premier has long advocated that the creation of a resilient and sustainable domestic manufacturing base for critical medical supplies requires incentives to offset higher acquisition costs,” senior vice president of public affairs Blair Childs said in a statement.

5. Still, providers say the financial stress of the pandemic far outweighs CMS’ 3.2% proposed payment increase. Hospitals claim this rate doesn’t cover rising labor costs, which have increased significantly during the COVID-19 public health emergency. They also worry about an $800 million cut to disproportionate share hospital payments.

DSH cuts “would undermine vital support for essential hospitals as they recover from the financial stress of the COVID-19 public health emergency, which continues,” America’s Essential Hospitals CEO Dr. Bruce Siegel said in a statement.

AHA also called the update “simply unacceptable” and said COVID-19 continues to hamper providers’ abilities to care for patients.