CMS Releases 2024 Final Rule for Inpatient and Long-Term Care Hospitals’ Payment Systems, and Proposed Rules for Outpatient and Ambulatory Surgical Center Services’ Payment Systems, and Physician Fees

August 7, 2023
30 minutes

On August 1, 2023, the Centers for Medicare & Medicaid Services (CMS) released the final rule for the federal fiscal year (FFY) 2024 inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) payment system, which is scheduled to be published in the Federal Register on August 28, 2023. In April 2023, just after the publication of the IPPS proposed rule, we circulated an alert summarizing certain aspects of CMS’s proposals. Below is a quick summary of what CMS determined regarding each of the following topics in the final rule: A. market basket and other base rate updates; B. “health equity” policies; C. wage index, geographic reclassification, and other changes impacting rural hospitals; D. medical education programs; E. disproportionate share hospital payments; F. “quality of care” – ownership disclosures for additional providers as well as hospital performance and data reporting; G. low-volume hospitals’ payment adjustment; and H. the Medicare interoperability program. As discussed below, CMS decided to finalize a majority of its proposals in this final rule, including its limitation on counting section 1115 waiver days in the Medicare disproportionate share hospital (DSH) calculation.

A couple of weeks earlier, on July 13, 2023, CMS published in the Federal Register its annual proposed rule for the calendar year (CY) 2024 outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) payment system as well as the physician fee schedule (PFS). This Alert also details key changes proposed by CMS in the OPPS/ASC proposed rule on the following topics: A. Increased and New Potential OPPS Payments; B. Payment for 340B Drugs; C. New Public Reporting Requirements for Hospitals’ List of Charges and Other Data; D. Policies for Rural Emergency Hospitals; and E. Changes to the Medicare Code Editor. It also details the Value-Based Changes in the PFS proposed rule.

Comments on these two proposed rules are due to CMS by September 11, 2023. We recommend that you consider submitting comments on any provision potentially affecting your organization. Please feel free to reach out to one of the authors or to your Ropes & Gray advisor with any questions about these proposals.



  1. Market Basket Update. Based on more recent data, CMS finalized a net increase of 3.1% to the FFY 2024 IPPS payment rates, which is more than the 2.8% increase proposed but still less than the 3.8% increase for FFY 2023. The FFY 2024 3.1% increase is the result of a 3.3% increase to the market basket percentage estimate, offset by a 0.2% decrease due to the productivity adjustment. CMS also finalized rates for the LTCH payment system that would decrease the FFY 2024 payment rates by 0.2% compared to FFY 2023. In their comments on the proposed rule, hospital groups criticized these increases as inadequate and have urged CMS to suspend the productivity adjustment due to recent declines in hospital productivity.
  2. 2022 Data Used to Calculate MS-DRGs Despite COVID-19. CMS decided to use FFY 2022 claims data for Medicare rate-setting. Despite having made additional adjustments in recent rulemakings on top of its standard updates to the Medicare rates based on prior year claims data to reflect the impact of COVID-19 hospitalizations, CMS did not modify its usual rate-setting methodology. This is because, in CMS’s view, the FFY 2022 data adequately account for COVID-19 hospitalizations, and CMS “believe[s] there remains uncertainty regarding the impact that COVID-19 will have on LTCHs in FFY 2024 relative to FFY 2022.”


  1. Requested Information on the Challenges Facing Safety-Net Hospitals. In the final rule, CMS stated that it is still reviewing the comments that it received in response to its request for information about safety-net hospitals. In the proposed rule, CMS sought feedback on “the challenges faced by safety-net hospitals, and potential approaches to help safety-net hospitals meet those challenges.” For example, CMS sought comments on how safety-net hospitals should be identified or defined and classifying the different types of safety-net hospitals. CMS also sought comments on two proposed approaches to identifying safety-net hospitals and the use of the “area deprivation index” developed by the National Institutes of Health.
  2. Changes to the Severity Level Designation for Codes Describing Homelessness. CMS finalized its proposal to change the severity level designation for social determinants of health (SDOH) diagnosis codes describing homelessness from non-complication or comorbidity to complication or comorbidity for FFY 2024. The agency defines the SDOH as the conditions in the environment in which people are born, live, learn, work, play, worship, and age that affect a wide range of health issues, functioning, and quality-of-life outcomes and risks. CMS is recognizing homelessness as an indicator of increased resource utilization in the acute inpatient hospital setting.
  3. Hospital VBP Program. In the final rule, CMS estimated that the total amount available for value-based incentive payments for FFY 2024 is approximately $1.7 billion. The agency also revised the Hospital Value-Based Purchasing (VBP) program scoring methodology to award Health Equity Adjustment bonus points for dual-eligible status patients that will be calculated as the product of a measure performance scaler and underserved multiplier. CMS also updated its tool that measures hospitals’ efficiency by comparing how much Medicare pays at a given hospital for an inpatient stay to hospitals nationally, the so-called Medicare Spending per Beneficiary Hospital measure, beginning with the FFY 2028 program year and changes to the Hospital-Level Risk-Standardized Complication Rate beginning with the FFY 2030 program year. CMS further adopted a standard operating procedure for sepsis care, the so-called Severe Sepsis and Septic Shock: Management Bundle measure, for the Hospital VBP program. Finally, the agency adopted two changes to the survey process for the Hospital Consumer Assessment of Healthcare Providers and Systems effective for discharges in January 2025, namely (1) that the survey be offered via “web-mail” permanently after an initial experimental period, and (2) that the official CMS Spanish translation of the survey be administered to any patient who expresses a desire for a Spanish version.


  1. Calculating the Rural Wage Index. CMS adopted its proposed changes to how it treats, for wage index purposes, hospitals that are reclassified as rural under 42 C.F.R. § 412.103 based on its interpretation of 42 U.S.C. § 1395ww(d)(8). In particular, CMS finalized its proposal that hospitals reclassified from urban to rural under section 412.103 would be treated “the same as geographically rural hospitals for the wage index calculation” for FFY 2024 and thus included in the rural wage index. CMS also finalized its proposal to exclude from the rural wage index the calculation of so-called “dual reclass” hospitals, i.e., hospitals with simultaneous section 412.103 urban-to-rural and Medicare Geographic Classification Review Board reclassifications.
  2. Continuing Low-Wage Index Policy. CMS finalized its proposal to continue its low-wage index policy that increases the Medicare wage index calculation for hospitals in the lowest quartile and offsets that adjustment by reducing the wage index for all other hospitals. Under this policy, CMS increases the wage index for hospitals below the 25th percentile wage index by one half of the difference between the otherwise applicable final wage index for that hospital and the 25th percentile wage index for the year across all hospitals. CMS again recognized that the policy is “the subject of pending litigation,” and that the D.C. District Court in Bridgeport Hospital v. Becerra “found that the Secretary did not have the authority” under the Medicare statute “to adopt the low wage index hospital policy for [F]FY 2020.” But the agency stated that it has “appealed the court’s decision” and planned to continue the policy for FFY 2024.
  3. Effective Date of Rural Reclassification for Hospitals Qualifying for SCH Status Based on Merger. CMS finalized its proposal to change the effective date of rural reclassification for certain hospitals that qualify for rural reclassification under 42 C.F.R. § 412.103(a)(3) by meeting the criteria for sole community hospital (SCH) status (other than location in a rural area). For such hospitals whose eligibility for sole community hospital status depends on a hospital merger, the effective date of a rural reclassification under section 412.103(a)(3) will be the effective date of the approved merger for applications that the Medicare contractor receives on or after October 1, 2023. If the Medicare contractor does not receive a completed application within 90 days of CMS’s written notification to the hospital of the merger, the SCH reclassification will be effective as of the date that the contractor receives the completed application pursuant to section 412.92(b)(2)(i).
  4. REH Enrollment Requirements. CMS finalized its proposal to codify requirements for eligible facilities to submit certain information when applying for enrollment as a Rural Emergency Hospital (REH). Congress established this new type of provider in the Consolidated Appropriations Act of 2021, and in the CY 2023 OPPS final rule (published November 23, 2022), CMS adopted the enrollment methods for a provider to become an REH. In this final rule, CMS also codified its January 26, 2023, instructions for enrollment as an REH. CMS further, as proposed, added a requirement for a facility applying for enrollment as an REH to submit an action plan containing (1) a plan for initiating REH services; (2) a transition plan identifying the services that the provider will retain, modify, add, and discontinue as an REH; (3) a description of other outpatient medical and health services that it intends to furnish on an outpatient basis as an REH; and (4) information regarding how the provider intends to use the additional facility payment it will receive as an REH.


  1. Graduate Medical Education Payments. CMS finalized a new paragraph (d) at 42 C.F.R. § 419.92 addressing payments for REHs. This paragraph states that, effective for portions of cost-reporting periods beginning on or after October 1, 2023, an REH may decide to be a non-provider site and can either include the full-time equivalent (FTE) residents training at the hospital in its direct and indirect graduate medical education (GME and IME, respectively) FTE counts for Medicare payment purposes or incur GME costs and be paid based on reasonable costs for those training costs. CMS also clarified the instructions on Form CMS-2552-10 Worksheet E, Part A, for hospitals participating in regular or rural track Medicare GME affiliation agreements under 42 C.F.R. § 413.79(f), explaining which lines on that form hospitals use to calculate their current year’s FTE caps, allowable FTE counts, and numerators of the resident-to-bed ratios.
  2. Revising Medicare Part C Nursing and Allied Health Payments. In 2023, Congress passed a statutory provision to remove retroactively the $60 million annual cap on additional nursing and allied health (NAHE) payments for CYs 2010 through 2019 (Part C NAHE payments). See Consolidated Appropriations Act of 2023, Pub. L. No. 117-328, § 4143. CMS finalized a data table for calculating those Part C NAHE payments for CYs 2010 through 2019 that eliminates the cap and uses the most recent CY 2022 available data. CMS will recalculate the pool amounts pursuant to 42 U.S.C. § 1395ww(l)(2) for those CYs, ranging from a low of almost $63 million for CY 2010 and a high of approximately $140 million for CY 2019, consistent with the methodology in the agency’s March 16, 2023, Transmittal 11904. CMS further finalized its proposal that amounts previously recouped will be returned to hospitals, and recoupments that would have occurred if not for the enactment of the statute will not occur. Instead, CMS will issue a new transmittal reflecting this finalized methodology. CMS also calculated the CY 2022 payment rates based on 2020 cost reporting data located in the Healthcare Cost Report Information System (HCRIS). The agency will reduce Part C GME payments by 3.27% for 2022, as the statute directs CMS to reduce these GME payments to fund the NAHE Part C payment pool.


  1. Changed Policy on Section 1115 Waiver Days in Medicaid Fraction. CMS finalized its proposal to limit inclusion of section 1115 waiver days in the DSH Medicaid fraction. Under the final rule, hospitals may include section 1115 waiver days in the Medicaid fraction only for “patients who receive from the demonstration (1) health insurance that covers inpatient hospital services or (2) premium assistance that covers 100 percent of the premium cost to the patient, which the patient uses to buy health insurance that covers inpatient hospital services, provided in either case that the patient is not also entitled to Medicare Part A.” CMS explicitly excludes from the numerator of the Medicaid fraction of the DSH calculation the days of all patients whose care is provided through uncompensated care pool payments, like those in Florida and Texas, as well as patients whose section 1115 premium assistance covers less than 100% of their premium costs. In response to public comments, CMS acknowledges that its new premium assistance policy would increase the burden on providers in one state (Massachusetts) because it has the only known section 1115 waiver that does not provide 100% premium assistance to all patients.
  2. Continued Reduction in Uncompensated Care Payments. The general process for deriving estimates and making calculations was finalized, but there were several changes in the actual figures from the proposed to final rule:
    • CMS decreased Factor 1 from $10.461 billion in the FFY 2023 final rule to $10.015 billion in the FY 2024 final rule. With this decrease, the final Factor 1 is over $450 million less than the final Factor 1 for FY 2022.
    • For Factor 2, CMS used the same data from the CMS actuary to estimate that the ratio of the nationwide uninsured fell from 14% to an average of 9.3% and 9.2% in 2023 and 2024 respectively (down from 9.6% in FY 2022). CMS finalized the uninsured rate at 9.2% in Factor 2.
    • As a result, the overall pool of DSH uncompensated care funds decreased from $6.712 billion to $5.938 billion between the proposed and final rules, a decrease of nearly $1.2 billion.
    • CMS finalized the same methodology used in the FFY 2023 IPPS final rule to calculate Factor 3 for FFY 2024 by using data from the most recent three years of audited cost reports from FFYs 2018, 2019, and 2020 based on, as proposed, the March 2023 HCRIS update.


  1. Disclosures of Ownership on Medicare Enrollment Forms for Providers Other than SNFs. CMS had proposed that for purposes of disclosing provider ownership interests, the definitions of “private equity company” and “real estate investment trust” that it had proposed in a recent skilled nursing facility (SNF) rulemaking would also apply to all providers and suppliers completing the Form CMS-855A enrollment application. However, CMS did not finalize this proposal but stated that it planned to address the proposal in a later final rule.
  2. HAC Reduction Program: Suppression of Measures and Data Collection. CMS finalized its proposal to add a validation reconsideration process to the Hospital-Acquired Condition (HAC) Reduction Program, giving hospitals the opportunity to request reconsideration of their final validation scores starting with the FFY 2025 program year. CMS will send a notification letter to hospitals that fail the HAC Reduction Program validation requirement instructing them that, to obtain reconsideration, they must submit a reconsideration request form with the basis for reconsideration and all documentation and evidence supporting their request within 30 days from the date stated on the letter. After reviewing the comments submitted in response to its potential adoption of new electronic clinical quality measures (eCQMs) for inclusion in the HAC Reduction Program, CMS stated that it will consider the commenters’ input and that any future proposal to implement a new measure would be announced through notice-and-comment rulemaking.
  3. New and Modified Measures for Hospital IQR Program. CMS finalized its proposed adoption of three new measures for the Hospital Inpatient Quality Reporting (IQR) Program to “assess clinical processes, patient safety and adverse events, patient experiences with care, care coordination, and clinical outcomes, as well as cost of care.” The measures include (1) Hospital Harm-Acute Kidney Injury, (2) Hospital Harm-Pressure Injury, and (3) Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computer Tomography in Adults. CMS also finalized its proposal to modify three measures within the Hospital IQR Program measure. In addition to the measure discussed in the section below, CMS expanded the cohorts of the Hybrid Hospital-Wide All-Cause Risk Standardized Mortality measure and Hybrid Hospital-Wide All-Cause Readmission measure, beginning with the FFY 2027 payment determination, from only Medicare fee-for-service (FFS) patients to cohorts that include both FFS and Medicare Advantage patients 65 to 94 years old. CMS further finalized its proposal to remove the following three measures from the Hospital IQR Program measure set: (1) the Hospital-Level Risk-Standardized Complication Rate Following Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty); (2) Medicare Spending Per Beneficiary; and (3) Elective Delivery Prior to 39 Completed Weeks Gestation. CMS will remove the first two measures from the Hospital IQR Program measure beginning with the FFY 2030 and FFY 2028 payment determinations, respectively, and both measures will be adopted in the Hospital VBP Program for those same payment determinations. CMS stated that removal of these two measures is intended to prevent duplicative reporting and simplify administration. CMS also removed the third measure because, as proposed, performance is so high and unvarying that meaningful distinctions and improvements in performance can no longer be made.
  4. Modifying COVID-19 Vaccination Coverage among HCP Measure. CMS finalized its proposal to modify the COVID-19 Vaccination Coverage among Health Care Personnel (HCP) measure to replace the term “complete vaccination course” with the term “up to date” in the HCP vaccination definition. Whether an HCP is “up to date” will be determined by reference to the definition of “up to date” used by the Centers for Disease Control and Prevention as of the first day of the applicable reporting quarter. The measure will be calculated as the cumulative number of HCP eligible to work in the facility for at least one day during the reporting period, excluding persons with contraindications to COVID-19 vaccination, who are considered up to date with recommended COVID-19 vaccines, divided by the total number of such eligible HCP. This modification takes effect beginning with the Q4 CY 2023 reporting period/FFY 2025 payment determination for the Hospital IQR Program and the FFY 2025 program year for the LTCH QRP and the PPS-Exempt Cancer Hospital Quality Reporting Program. Public reporting of the modified version of the COVID-19 Vaccination Coverage among HCP measure begins with the October 2024 Care Compare refresh or as soon as technically feasible thereafter.


Consistent with last year, CMS will extend the temporary changes to the low-volume hospital definition (15 road miles from another subsection (d) hospital and with less than 3,800 discharges during the fiscal year) and payment adjustment methodology (determined using a continuous linear sliding scale ranging from 25% for low-volume hospitals with 500 or fewer discharges to 0% for low-volume hospitals with more than 3,800 discharges) under section 4101 of the Consolidated Appropriations Act of 2023 for FFY 2024. The agency will also make conforming changes to the regulation text at 42 C.F.R. § 412.101. Also consistent with last year, hospitals must submit written requests for low-volume hospital status to their Medicare contractor by September 1, 2023 and include sufficient documentation to establish that they meet the applicable mileage and discharge criteria.


CMS finalized its proposed relatively minor changes to the Promoting Interoperability (PI) Program. CMS adopted a 180-day reporting period in CY 2025, which is an increase from the 90 day period used in CY 2023 and consistent with the 180-day electronic health record (EHR) reporting period in CY 2024. CMS also changed the payment adjustment year for new PI Program participating hospitals (PI Participating Hospitals) beginning with the reporting period in CY 2025 to two years after the calendar year in which the reporting period occurs. Beginning with the reporting period in CY 2024, CMS will require PI Participating Hospitals to attest that they have conducted the annual Safety Assurance Factors for EHR Resilience (SAFER) Guides self-assessments. Finally, beginning with the reporting period in CY 2025, CMS adopted three new eCQMs that PI Participating Hospitals can choose to report for their required self-selected eCQMs—the Hospital Harm – Pressure Injury eCQM; the Hospital Harm – Acute Kidney Injury eCQM; and the Excessive Radiation Dose or Inadequate Image Quality for Diagnostic Computed Tomography (CT) in Adults (Hospital Level – Inpatient) eCQM—for both the Medicare Promoting Interoperability Program and the Hospital IQR Program.



  1. Conversion Factor Update. For CY 2024, CMS is proposing an overall increase factor of 2.8% to the OPPS conversion factor. This 2.8% increase is the result of a 3.0% increase to the market basket percentage, which is based on the most recent estimate of the inpatient market basket calculation offset by a 0.2% decrease to the multifactor productivity adjustment. Given this update, CMS estimates that total payments to OPPS providers (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case mix) for CY 2024 would be approximately $88.6 billion, $6.0 billion more than estimated CY 2023 OPPS payments.
  2. Use of CY 2022 Claims Data and ASC Payment System Ratesetting. CMS proposes to use CY 2022 claims data, which, in most cases, include cost report data from periods beginning in CY 2019, to set payment system rates for CY 2024. Consistent with its pre COVID 19 standard practice of using claims data from two CYs prior, CMS proposes to use CY 2022 claims data. This is consistent with CMS’s approach in CY 2023 of using CY 2021 claims data. For CY 2022, CMS used CY 2019 claims data because CMS did not believe that the CY 2020 data were the best approximation of excepted outpatient hospital services due to the impacts of the COVID-19 pandemic on outpatient services. But here, as in CY 2023, CMS asserts that the effects of COVID-19 are “less pronounced” and has decided to use CY 2022 claims data.
  3. New Payment for Establishing and Maintaining Access to Essential Medicines. The Administration’s January 2021 Executive Order 14001 and July 2022 publication National Strategy for a Resilient Public Health Supply Chain emphasized the importance of strengthening medical supply chains and preventing persistent and increasing shortages of medical supplies. In response, in the OPPS rule, CMS seeks comments on a separate payment under the IPPS that would reimburse hospitals for establishing and maintaining access to a buffer stock of so-called “essential medicines.” These medicines are critical for acute care of conditions, including of respiratory conditions, and have no comparable alternative. The proposed payment could take effect as early as cost reporting periods beginning on or after January 1, 2024. CMS states that the separate payment would not be budget-neutral and that it may consider an adjustment under the OPPS for future years. Hospitals that adopt procurement strategies to maintain a three-month buffer stock of one or more essential medicines, such as through contracts with distributors or wholesalers, could receive this payment, which recognizes the additional costs associated with increasing stock. CMS, in turn, proposes corresponding changes to the regulations and seeks comments on these proposals, including how effective this payment policy would be in improving supply chain resiliency and whether a three-month buffer supply is an appropriate duration. In addition, CMS states that it may consider expanding the policy in the future to include critical medical devices once FDA’s Critical Medical Device List becomes available.
  4. Payment for Intensive Cardiac Rehabilitation Services, Group Therapy, and Dental Services as well as Other Policy Changes. CMS proposes that, effective January 1, 2024, intensive cardiac rehabilitation services will be excluded from the 40% relativity adjuster policy so that payments at the non-excepted rate (i.e., payments for services provided in an off-campus site) will be 100% of the OPPS rate for cardiac rehabilitation services, the same rate as services provided in a physician’s office. CMS also proposes a new, untimed healthcare common procedural coding system C-code for group therapy; to delay in-person visit requirements for mental health services furnished remotely until January 1, 2025; and to continue to pay for outpatient therapy services, diabetes self-management training, and medical nutrition therapy provided via telehealth through CY 2024. In addition, CMS proposes to assign 229 additional dental codes to clinical Ambulatory Payment Classifications for CY 2024 to promote greater consistency in Medicare payment for different sites of service and to help ensure patient access to outpatient dental services. During CY 2024, CMS also proposes to package payments for dental services when they are performed with another covered dental or medical service to promote clinical resource efficiencies. Finally, CMS proposes that supervision of pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac rehabilitation services can be provided by not only a physician but also a physician assistant, nurse practitioner, or clinical nurse specialist, including services through audio-video real-time communications technology through December 31, 2024.


In light of the Supreme Court’s June 15, 2022, decision in American Hospital Association v. Becerra striking down a CMS rule providing payment for average sales price (ASP) minus 22.5% as a violation of the Medicare Act, CMS proposes to continue the policy from CY 2023 to pay 340B hospitals the statutory default payment rate for separately payable drugs and biologicals, generally ASP plus 6%. Our prior alert evaluating this decision can be located here. CMS also proposes no longer to require both 340B modifiers of JG and TB and instead, effective January 1, 2025, to permit 340B hospitals to report only the TB modifier. Relatedly, CMS recently issued a separate proposed rule that it says would remedy the 340B-acquired drug payment policy for CYs 2018 through 2022. See 88 Fed. Reg. 44,078 (July 11, 2023). In that rule, CMS proposes one-time lump sum payments to affected 340B covered entities calculated as the difference between what they were paid for 340B drugs during the relevant time period and what they would have been paid had the 340B payment policy not applied. CMS also proposes in that separate rule to offset prospectively (beginning in CY 2025 and estimated to take about 16 years) $7.8 billion to maintain budget neutrality. Comments on the July 11 proposed rule are due on September 5, 2023.


  1. New Requirements for Hospitals’ Public List of Charges. Pursuant to the CY 2020 hospital price transparency final rule implementing section 2718(e) of the Public Health Service Act, CMS adopted requirements for hospitals to make public their standard changes as a comprehensive machine-readable file (MRF) and in a consumer-friendly format. In this rule, CMS proposes to define several terms, such as “CMS template” and “machine-readable file”; to revise the standard charge information and data elements that hospitals must include in their MRFs; to require hospitals to use a template developed by CMS; and to improve the accessibility of hospital MRFs. In addition, CMS proposes to change its enforcement process by updating its methods to assess hospital compliance. Among other changes, CMS seeks to revise the regulation on monitoring and enforcement at 42 C.F.R. § 180.70 to indicate that CMS may conduct comprehensive compliance reviews of hospitals’ standard charges information posted on their websites and to require hospital officials to certify the accuracy and completeness of the standard charges information posted in their MRF. If finalized, CMS’s proposals would mostly become effective and enforced on January 1, 2024. CMS further seeks comments on several questions, including what health pricing information elements consumers find most valuable before receiving care and how third parties are using MRF data to develop consumer-friendly pricing tools.
  2. Hospital OQR Program. CMS proposes numerous changes to the Hospital Outpatient Quality Reporting (OQR) Program. First, CMS proposes to remove the “left without being seen” measure beginning CY 2024 due to limited evidence that this measure is effective. Second, CMS proposes to modify three previously adopted measures beginning in the CY 2024 reporting period/CY 2026 payment determination: (a) adding the term “up to date” to the COVID 19 vaccination coverage among health care personnel measure; (b) limiting the allowable survey instruments that a hospital outpatient department may use to assess changes in patient’s visual function for the purposes of the cataracts visual function measure; and (c) modifying, based on recent changes to clinical guidelines, the appropriate follow-up interval for normal colonoscopy in average risk patients measure to begin colorectal cancer screening at age 45, not age 50. Third, CMS proposes to report publicly data regarding the median time for discharged emergency department (ED) patients overall and patients transferred from the ED. Fourth, CMS proposes to continue to apply the reduction of the outpatient department fee schedule increase factor for hospitals that do not meet the Hospital OQR Program requirements for CY 2024. Finally, CMS seeks comment on potential measurement topics for the Hospital OQR Program, including behavioral health and telehealth.


CMS makes several proposals relating to the REHs, including the Rural Emergency Hospital Quality Reporting (REHQR) Program. CMS seeks comments on its proposal to codify in the regulation the Program’s statutory authority under section 125 of the Consolidated Appropriations Act of 2021. CMS also proposes to adopt four quality reporting measures: (1) abdomen computed tomography – use of contrast material; (2) median time from ED arrival to departure for discharged patients; (3) facility seven-day risk-standardized hospital visit rate after outpatient colonoscopy; and (4) risk-standardized hospital visits within seven days after hospital outpatient surgery. According to CMS, many hospitals eligible to convert to REH status have reported sufficient data for these measures. Median time from ED arrival to departure would be based on chart-abstracted quarterly data, whereas the other measures would be based on claims and enrollment data submitted every one to three years (the third measure has a three-year reporting period beginning with patient encounters from January 1, 2024, through December 31, 2026). CMS also seeks comment on its proposals (1) to maintain all REHQR measures until it proposes and finalizes their removal, (2) to allow the agency to remove any measures immediately outside of rulemaking, and (3) to codify in the regulation eight factors to assess whether to remove a measure. Per the proposed rule, CMS would publish online the data that REHs submit for the REHQR Program after providing them an opportunity to review and correct them. CMS would also grant, to requesting REHs and at the agency’s discretion, quality data deadline extensions or waivers to REHs experiencing extraordinary circumstances beyond their control. In addition, CMS proposes that Indian Health Services (“IHS”) and tribal hospitals that convert to REHs be paid for hospital outpatient services under the same all-inclusive rate (AIR) rather than under OPPS that would apply had those services been performed by an IHS or tribal hospital that was not an REH.


CMS proposes to revise how it updates or changes the Medicare Code Editor (MCE), which is a software program that detects and reports errors in the coding of Medicare claims data. While CMS currently announces updates to the MCE through IPPS or OPPS rulemaking, CMS proposes to remove discussion of the MCE from the annual IPPS rulemakings, beginning with the FY 2025 rulemaking and to address future changes or updates to the MCE through instructions to Medicare contractors instead. CMS seeks to move away from notice-and-comment rulemaking even though the Supreme Court has confirmed that the requirements for notice and comment in Medicare are more onerous than under the Administrative Procedure Act. See Azar v. Allina Health Servs., 139 S. Ct. 1804, 1814 (2019). CMS also proposes continuing to issue instructions to contractors in connection with any April 1 or October 1 updates to the IPPS MCE. CMS seeks comment on these proposals. In addition, CMS explains that it continues to evaluate the purpose and function of the MCE and to seek input on whether there are concerns with the current edits in detecting errors or inaccuracies in the coded data.



  1. MSSP. The PFS proposed rule includes several key proposed updates to the Medicare Shared Savings Program (MSSP), the largest value-based payment model in the country, that aim, according to CMS, to advance the agency’s value-based care strategy for growth, alignment, and equity while responding to the concerns of accountable care organizations (ACOs). First, CMS proposes to allow MSSP ACOs the option to report quality measures under the Advanced Alternative Payment Model Performance Pathway (APP) on only their Medicare beneficiaries (rather than all patients regardless of payer) through Medicare clinical quality measures. In CMS’s view, this proposal ensures that ACOs have the option to report digitally on their Medicare patients, and that ACOs with specialty practices are not penalized for serving beneficiaries with no primary care relationship to the ACO. Second, CMS proposes to revise the calculation of the health equity adjustment to include beneficiaries with partial-year low-income subsidy/dual-eligible enrollment, recognizing more beneficiaries as underserved. According to CMS, their inclusion acknowledges that such beneficiaries with partial year (as compared to full year) enrollment “are also socioeconomically vulnerable and strengthens incentives for ACOs to serve these populations.” Third, CMS proposes to use historical data to establish the 40th percentile Merit-Based Incentive Payment System (MIPS) quality performance category score used for the quality performance standard. This proposal aims to address concerns that benchmarks are currently not publicly available prior to the start of a performance year, and that ACOs do not have a way of determining what quality score they would need to achieve to meet the quality performance standard. Fourth, beginning with the 2025 performance year, CMS proposes to modify the assignment methodology to better account for beneficiaries who receive primary care from nurse practitioners, physician assistants, and clinical nurse specialists over an expanded assignment window of 24 months. CMS indicates that this proposal would increase access by assigning additional Medicare fee-for-service beneficiaries to ACOs, especially among more underserved populations. Lastly, CMS proposes additional refinements to the financial benchmarking methodology for ACOs in agreement periods beginning on January 1, 2024, and in subsequent years to (1) apply a symmetrical cap to risk score growth in an ACO’s regional service area, similar to the cap applied on an ACO’s risk score growth; (2) apply the same CMS-Hierarchical Condition Categories risk adjustment methodology to both the benchmark and performance years; and (3) further mitigate the impact of the negative regional adjustment on the benchmark. CMS intends for these refinements to encourage participation by ACOs caring for medically complex, high-cost beneficiaries. Beyond the specific proposals, CMS also seeks comments on potential future developments of the MSSP, including incorporating a new track that would offer a higher level of risk and potential reward than currently available under the Enhanced track, refining the three-way blended benchmark update factor and the prior savings adjustment, and promoting ACO and community-based organization collaboration.
  2. QPP. Authorized by the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) (MACRA), the Quality Payment Program (QPP) is a payment incentive program through which the Medicare program rewards clinicians who provide high-value, high-quality services in a cost-efficient manner. The QPP includes two participation tracks for clinicians furnishing services under the Medicare program: (1) the MIPS and (2) the Advanced Alternative Payment Model (APM) track. Generally, under the QPP, eligible clinicians in MIPS have payments increased, maintained, or decreased based on relative performance in four categories: quality, cost, promoting interoperability, and improvement activities. The PFS proposed rule includes several proposed key updates to the QPP. First, CMS proposes to modify the MIPS performance threshold from 75 to 82 points for the 2024 performance period, potentially creating a more challenging program for participants. Second, CMS proposes five new MIPS Value Pathways (MVPs) focusing on the following topics: (1) women’s health; (2) quality care for the treatment of ear, nose, and throat disorders; (3) prevention and treatment of infectious disorders including Hepatitis C and HIV; (4) quality care in mental health and substance use disorders; and (5) rehabilitative support for musculoskeletal care. CMS also proposes to update existing MVPs by, for example, consolidating MVPs into a single primary care MVP that aligns with the adult core set from the Universal Foundation, a set of quality measures that CMS seeks to apply across value-based care programs. Third, CMS proposes to calculate APM participant determinations at the individual level rather than the entity level to promote the inclusion of specialists in APM entities. Lastly, to align the MSSP with MIPS, CMS proposes to remove the MSSP certified electronic health record technology (CEHRT) threshold requirements beginning performance year 2024 and add a new requirement that all MIPS eligible clinicians, qualifying APM participants (QPs), and partial QPs participating in the ACO, regardless of track, report the MIPS promoting interoperability performance category measures and requirements to MIPS at the individual, group, virtual group, or APM level to earn a MIPS performance category score.