FFY 2024 IPPS Proposed Rule – Safety Net Hospitals

On April 10, the Centers for Medicare & Medicaid Services (CMS) published the FFY 2024 IPPS Proposed Rule (effective for discharges on or after October 1, 2023).” Toyon is pleased to provide our summary of:  Topic 5 – FFY 2024 IPPS Proposed Rule – Safety Net Hospitals

Request for Information on Safety-Net Hospitals 
CMS is requesting providers respond to 17 questions concerning challenges faced by safety-net hospitals and potential approaches to help safety-net hospitals meet those challenges. CMS highlights the importance of identifying safety-net hospitals for policy purposes. Notably, CMS cites recent MedPAC recommendations to Congress5 to establish a hospital Medicare Safety-Net Index (MSNI) that measures the following three variables: 
  • Medicare Low-Income Subsidy (LIS) Enrollment Ratio – Medicare dually eligible discharges (full or partial Medicaid benefits) + Part D LIS6 recipients. This population is then compared to the total number of Medicare inpatient discharges for the LIS ratio. 
  • Ratio of Uncompensated Care Costs to Total Operating Revenue. 
  • Medicare Share of Total Inpatient Days. 
For FFY 2024, MedPAC recommends Congress should: 
  • Begin a transition to redistribute empirical DSH and UC DSH payments through the MSNI. 
  • Add $2 billion to the MSNI pool. 
  • Scale fee-for-service MSNI payments in proportion to each hospital’s MSNI and distribute the funds through a percentage add-on to payments under the inpatient and outpatient prospective payment systems. 
  • Pay commensurate MSNI amounts for services furnished to Medicare Advantage (MA) enrollees directly to hospitals and exclude them from MA benchmarks. 
MedPAC’s report simulates a linear redistribution of DSH and UC DSH payments qualifying hospitals with a MSNI in the 10th percentile and above. MedPAC also considers using the 5th percentile as a qualifying threshold. 
As a potential alternative, CMS also provides an “Area-level Index Approach,” based on recommendations from the Assistant Secretary for Planning and Evaluation (ASPE). The ASPE states the Area Deprivation Index (ADI) or the Social Deprivation Index (SDI) are “the best available choices when selecting an index for addressing health related social needs or social determinants of health.”  
Toyon’s Take 
Although MedPAC recommends CMS transition DSH (and UC DSH) payments in FFY 2024, it is very unlikely CMS will apply any changes for this upcoming federal year. Any significant changes to DSH methodologies and reimbursement would need to first go through a proper rule-making process. Toyon will continue to monitor this MedPAC recommendation and provide updates as more information is available. 
For more information, please contact Fred Fisher at fred.fisher@toyonassociates.com
6 Limited assets and an income below 150 percent of the Federal poverty level 
Comments are due to CMS by Friday, June 9 via https://www.regulations.gov/ (see instructions under the “submit a comment” tab and reference file code “CMS-1785-P”). Toyon will share our comment letter in the coming weeks. 
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