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CMS rule stipulates hospitals will receive 2.7{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} pay boost for inpatient Medicare services


On Wednesday, the Centers for Medicare and Medicaid Services issued the fiscal year 2021 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) final rule, which includes provisions designed to ensure access to potentially life-saving diagnostics and therapies for hospitalized Medicare beneficiaries. 

The changes will affect about 3,200 acute care hospitals and roughly 360 long-term care hospitals. CMS estimates that total Medicare spending on acute care inpatient hospital services will increase by about $3.5 billion in FY 2021, or 2.7{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca}.

The rule creates a new Medicare Severity Diagnostic Related Group (MS-DRG) that provides a predictable payment to help adequately compensate hospitals for administering Chimeric Antigen Receptor T-cell therapies. The current FDA-approved CAR-T-cell cancer therapies use a patient’s genetically modified immune cells to treat specific types of cancer.

Also in the final rule, CMS approved 24 new technology add-on payments (NTAP), which is an additional payment to hospitals for cases involving eligible new and relatively high-cost technologies. 


Last year, to remove barriers to innovation, CMS established alternative streamlined pathways for FDA Breakthrough Devices and FDA Qualified Infectious Disease Products (QIDPs) to qualify for NTAPs. Among CMS’ approval of these 24 additional NTAPs are two technologies for new medical devices that are part of the FDA’s Breakthrough Devices Program and six technologies that received FDA QIDP designation. 

This, said CMS, will provide additional Medicare payment for these technologies while real-world evidence is emerging, giving Medicare beneficiaries timely access to the latest innovations.

CMS is also expanding the add-on payment alternative pathway for antimicrobial products approved under FDA’s Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway), which encourages the development of safe and effective drug products that address unmet needs of patients with serious bacterial and fungal infections. Specifically, an antibacterial or antifungal drug approved under the LPAD pathway is used to treat a serious or life-threatening infection in a limited population of patients with unmet needs.

CMS is also taking steps to ensure that the Medicare fee-for-service program adopts pricing strategies based on real-world market forces. Medicare generally pays hospitals a rate that is weighted by the relative cost of providing certain services based on a patient’s diagnosis. These weights are currently based in large part on the charges that hospitals report to the federal government, which often have little relevance to the actual rates paid by insurance companies, according to CMS. 

Hospitals are already required to report these negotiated rates as part of the Trump Administration’s efforts to promote price transparency, and CMS is now finalizing a requirement for hospitals to report to CMS the median rate negotiated with Medicare Advantage organizations for inpatient services to use instead of the charge based data. CMS will begin to collect this data in 2021 and will use it in the methodology for calculating inpatient hospital payments beginning in 2024. 

These provisions will introduce the influences of market competition into hospital payment, helping to advance CMS’ goal of utilizing market- based pricing strategies in the Medicare FFS program.

A fact sheet on the final rule is available here.


The Inpatient Prospective Payment System section of the CARES Act directs the Secretary of Health and Human Services to increase the weighting factor of the assigned Diagnosis-Related Group by 20{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} for an individual diagnosed with COVID-19 discharged during the COVID-19 public health emergency.

Twitter: @JELagasse
Email the writer: [email protected]


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