2021 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Final Rule

CMS issued the fiscal year (FY) 2021 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) final rule. The changes in the rule will impact approximately 3,200 acute care hospitals and approximately 360 Long-Term Care Hospitals (LTCHs). 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 percent.

CMS’ 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 (CAR) 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, CMS approved a 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 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.

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 FFS program adopts pricing strategies based on real world market forces. 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 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 and help advance CMS’s goal of utilizing market- based pricing strategies in the Medicare FFS program.

For more information, click here to read the fact sheet from CMS.

The final rule will be published in full on the Federal Register on September 18, 2020.

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