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AEH Wants CMS to Define Hospital Category for FY 2023 IPPS Rule

Analysis  |  By Jay Asser  
   June 22, 2022

The association responded to annual updates to the inpatient prospective payment system (IPPS).

America's Essential Hospitals (AEH) is calling on CMS to define hospitals that disproportionately serve marginalized patients and implement policies to protect them as part of its comments on the FY 2023 IPPS proposed rule.

As CMS finalizes Medicare inpatient payment policies, AEH wants the governing body to consider how payment cuts will affect the stability of essential hospitals in their effort to promote health equity.

The proposed rule will result in reimbursement cuts in the form of Medicare disproportionate share hospital (DSH) payment reductions, which AEH says will "devastate hospitals facing an uncertain financial future."

By working to define the category of hospitals that disproportionately serve marginalized patients, CMS will ensure essential hospitals are not unfairly disadvantaged and continue to have sufficient resources, especially for future outbreaks of COVID-19.

Once this group of hospitals is defined, AEH are urging CMS to identify new policies that will fund these hospitals, as well as identify current policies that disproportionately harm them, such as ensuring stable Medicare DSH funding.

AEH also wants CMS to adjust its methodology for calculating the annual payment update for FY 2023 to ensure it provides an update that considers inflation and workforce costs on hospitals. CMS' proposal has a net annual payment update of 3.1% caused by a 3.2% market basket update, plus a 0.5% adjustment mandated by legislation, and minus 0.4% productivity adjustment.

Rather, AEH requests a market basket update of at least 5% and the waiving of the productivity adjustment, which can be justified by looking at alternative sources of cost data, such as Medicare cost reports, for a better representation of hospital cost increases.

When it comes to DSH payments, AEH recommends CMS maintain stability for essential hospitals, accurately capture the full range of uncompensated costs hospitals sustain when caring for disadvantaged patients, and ensure transparency in its Medicare DSH methodology.

Other AEH recommendations for CMS include:

  • Implementing policies that reduce administrative burden on hospitals in the Medicare Promoting Interoperability Program
  • Continue to refine the hospital Inpatient Quality Reporting Program measure set
  • Promote the standardized reporting of social risk factors
  • Provide clear, interpretive guidance on data reporting before the end of the COVID-19 public health emergency

"In working to identify and support essential hospitals, CMS would advance its commitment to health equity, protect the interests of the Medicare program, and preserve access to care for the most disadvantaged Medicare beneficiaries," AEH writes. "We urge CMS to follow these recommendations, and we look forward to working with the agency to advance our shared goals."

Jay Asser is an associate editor for HealthLeaders.


Defining the category of hospitals that disproportionately serve marginalized patients will ensure hospitals are not unfairly disadvantaged and maintain resources.

AEH encourages a market basket update of at least 5% and the waiving of the productivity adjustment.

DSH payments should reflect uncompensated costs hospitals face when caring for disadvantaged patients and have transparent methodology.

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