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FY 2024 IPPS Update Regarding Rural Floor Implications

Germane Solutions remains committed to providing annual IPPS updates to our valued clients and GME stakeholders to better assist in your strategic GME decisions and development. CMS has recently released the FY 2024 Proposed IPPS Rulings. Some of the value propositions are discussed below.


Background:

It was previously established in the FY 2012 IPPS Final rulings that rural hospitals reclassifying to another State’s rural area were not eligible for that state’s rural floor. The rural floor may only apply to urban hospitals.

Since 2012, CMS’s policy has been to exclude the wage data of hospitals that have reclassified to rural under §412.103 if they have also reclassified through MGCRB.


The final rule for calculating the rural floor is that the rural wage indexes set the rural floor.


Rural Floor Calculation Updates:

In this proposed ruling, CMS is revising the policy to which the rural floor is the same as the rural wage index. They believe that this change to the wage index policy will resolve concerns about the rural floor.


Beginning with FY 2024, CMS is proposing to include hospitals with §412.103 reclassifications along with geographically rural hospitals in all rural wage index calculations and to exclude “dual reclass” hospitals implicated by the hold harmless provisions. Hospitals reclassified under §412.103 will no longer be affected by the previous policies, as they will now be included in the calculation of the rural floor. This proposal also benefits geographically rural hospitals as the rurally designated hospitals will now be included in the rural floor calculation.


This change reflects a dramatic reduction in the number of different wage index values to be paid for each state. Whereas CMS has identified a total of 518 different CBSA areas (one rural or imputed rural for each state plus all the urban areas in each state), the proposed rules now have only 225 different payment values. This means that there are 293 CBSA areas that are paid at the rural floor. In fact, there are a total of 9 states (4 of which are frontier states, MT, ND, SD and WY) where every hospital in the state is set to be paid at the same wage index value (non-frontier states of AK, DC, RI, DE, NH). This policy also means that certain states realized a dramatic shift in the number of different CBSA payment rates in the state.

As an example, in CA there are 30 CBSAs and now 20 of those CBSAs will now be paid at the rural floor. Similarly, NY has 15 CBSAs and now 12 of those CBSAs will be paid at the rural floor, which leaves only 3 remaining CBSA areas with a wage index value higher than the rural floor. Conversely, as an example, KY has 10 CBSAs and only 2 of those CBSAs will be paid at the rural floor, which leaves 8 CBSA areas with a wage index value higher than the rural floor. Thus, there is wide variability between the states.


CMS also proposes to continue the low wage index payment policy based on the 25th percentile wage index value of 0.8615. Thus, for every wage index value for a hospital that is lower than 0.8615, that hospital’s payment wage index is their raw wage index value plus 50% of the difference between that raw wage index value and 0.8615. There are a total of 18 states where the rural floor is low enough to qualify for this “quartile adjustment”.


Wage Index Revisions:

Effective for reclassification applications due to the MGCRB for reclassification beginning in FY 2023, a §412.103 hospital could apply for a reclassification under the MGCRB using the State's rural area as the area in which the hospital is located.


Applications for FY 2025 reclassifications are due to the MGCRB by September 1, 2023.


Under the regulations of 42 CFR 412.273, hospitals that have been reclassified by the MGCRB are permitted to withdraw their applications if the request for withdrawal is received by the MGCRB any time before the MGCRB issues a decision on the application, OR within 45 days of the date that CMS' annual notice of proposed rulemaking is issued in the Federal Register.


Germane Solutions’ Contribution:

Germane Solutions has helped many hospitals reclassify as rural under § 412.103 (often referred to as a Rural Designation) and through wage index reclassifications with the MGCRB. The Rural Designation strategy has multiple benefits for teaching hospitals, some of which can significantly affect GME funding. In addition, the changes to how CMS calculates the rural floor can have a significant impact on those hospitals in the state where their raw wage index value is less than the rural floor as no hospital in the state would use a wage index less than the rural floor wage index. To find out if your hospital would financially benefit from the implementation of these strategies, please reach out to Germane for assistance in that evaluation.


Germane Solutions’ team of experts would be happy to assist you through the process and answer the questions you have.


The full text of the 2024 IPPS Proposed Ruling can be found here: https://public-inspection.federalregister.gov/2023-07389.pdf

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