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CMS Releases FFY 2021 IPPS Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) has issued its federal fiscal year (FFY) 2021 inpatient prospective payment system (IPPS) proposed rule. In addition to annual payment and quality program updates, the proposed rule would require certain payer-negotiated rates to be reported on the cost report, make changes to Medicare disproportionate share (DSH) payments, and establish a new Medicare Severity-Diagnosis Related Group (MS-DRG) payment for Chimeric Antigen Receptor T-cell (CAR T) therapy.

CMS proposes a payment update of 3.1%. However, after accounting for additional policies in the proposed rule, CMS estimates an overall payment increase of 1.6%, or approximately $2.07 billion, compared to FFY 2020.

CMS also states that, due to the COVID-19 public health emergency, the agency has limited annual rule making required by statute to focus primarily on essential policies and proposals that reduce provider burden and may help providers in the COVID-19 response. Key highlights of the proposed rule include:

  • Market-Based MS-DRG Relative Weight Data Collection: CMS proposes to require hospitals to report on the Medicare cost report the median payer-specific negotiated rates for inpatient services, by MS-DRG, for Medicare Advantage organizations and third-party payers. This would be effective for cost reporting periods ending Jan. 1, 2021, or after. CMS seeks comment on using the median pricing data as the basis for a new method of setting the relative weights for DRGs, beginning with FFY 2024.
  • Medicare DSH Payments: For FFY 2021, CMS estimates it will distribute $7.82 billion in Medicare DSH payments, a decrease of approximately $530 million compared to FFY 2020. In addition, CMS proposes to use a single year of uncompensated care data from the 2017 Medicare cost report to determine the distribution of DSH uncompensated care payments for FFY 2021.
  • Area Wage Index: CMS proposes to continue its previously finalized area wage index policy by increasing the wage index for hospitals with a wage index value below the 25th percentile and applying a 0.25% decrease to the standardized payment amount for all hospitals to ensure budget neutrality.
  • CAR T-cell Therapy: CMS proposes a new MS-DRG for CAR-T cell therapy payments, which are no longer eligible for new technology payments.
  • Hospital Star Ratings: CMS was expected to propose an updated methodology to the hospital star ratings in the proposed rule. However, due to limited rulemaking during the COVID-19 public health emergency, the agency will consider changes in future rulemaking.
  • Quality Reporting Programs: CMS proposes limited changes to the hospital Inpatient Quality Reporting Program, Hospital-Acquired Conditions Program, Readmissions Reduction Program, and Value-Based Purchasing Program. CMS also proposes minor changes to the Promoting Interoperability Program.
  • Electronic Clinical Quality Measures (eCQMs): CMS proposes to gradually increase the number of quarters of electronic clinical quality measure data required until it reaches a full year for the calendar year (CY) 2023 performance period. Beginning with CY 2021, hospitals would be required to report on two quarters of data. CMS also proposes to begin publicly reporting eCQM measure results in late 2022, starting with data from CY 2021.​
A fact sheet on the proposed rule is available on CMS’ website. SDAHO will provide members with a brief summary and analysis of the proposed rule in the coming weeks.  Comments on the proposed rule are due July 10.


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