The Centers for Medicare and Medicaid Services on Monday proposed increasing hospitalization costs by about $1.6 billion in fiscal 2023.

The proposed rules for the expected payment system for hospital inpatients indicate a 3.2% increase in payments in fiscal 2023 compared to the previous year.

CMS also wants to add health equity measures to the hospital admissions quality reporting program, including tracking hospitals’ commitment to health equity and formally recommending “Birth Friendly” Hospital Designation It was announced last week.

“This year — through a health equity lens — we’re also reimagining the next chapter in quality of care and patient safety,” CMS Administrator Chiquita Brooks-LaSure said in a release.

The proposed raise applies to general acute care hospitals that participate in the hospital admissions quality reporting program and use electronic health records. CMS noted that other compensation adjustments may affect inpatient rates, including adjustments from hospital value-based purchasing programs.

CMS estimates that Medicare disproportionate hospital payments and Medicare unpaid care payments will be cut by about $800 million next year. Additionally, payments to Medicare-affiliated and low-capacity hospitals could be cut by $600 million if Congress does not extend additional payments due this year. Long-term care hospitals could add $25 million.

The agency believes it can resume the traditional method of using the latest data to set rates for 2023, with some modifications.

“CMS believes that it is reasonable to assume that some Medicare beneficiaries will continue to be hospitalized for COVID-19 at IPPS hospitals and LTCHs in FY 2023. However, we also believe it is reasonable to assume based on currently available information: COVID-19 in FY 2023 19 Hospitalizations will be fewer than reflected in the fiscal 2021 data,” a fact sheet for the proposed rule said.

CMS proposes to allocate approximately $6.5 billion in unpaid care costs in 2023, a decrease of more than $650 million from fiscal 2022. The agency hopes to use audit data from the hospital’s 2018 and 2019 cost reports on the cost of unpaid care for the most recent two years, with changes proposed to comments that payments on a one-year basis alone would result in significant year-over-year changes. CMS proposes establishing new supplemental payments for tribal hospitals and Puerto Rico facilities and discontinuing low-income insurance days as an alternative to unpaid care.

Under the proposed rules, hospitals could see changes to their quality reporting requirements. Hospitals that fail to submit quality data or meet the requirements of the Inpatient Quality Reporting Program will receive a 25% reduction in their annual payment updates.

CMS proposes to add a measure on hospitals’ commitment to health equity starting in 2023 that would cover strategic planning activities, data collection and analysis, quality improvement, and leadership engagement. The agency also wants to add a measure to screen for social drivers of health, starting with voluntary reporting in 2023 and moving to mandatory reporting in 2024.

CMS proposed several other new measures, including two e-quality measures for perinatal health and one e-quality measure for opioid-related adverse events. Beginning with payment decisions in fiscal year 2024, CMS proposes to require a per-beneficiary Medicare spending measure.

Additionally, the rule recommends requiring hospitals and critically ill hospitals to continue reporting COVID-19 and seasonal flu data through April 30, 2024. If officials declare an infectious disease or pathogen-related emergency in the future, CMS recommends requiring hospitals to report data elements as determined by the HHS Secretary at the Centers for Disease Control and Prevention.

The proposal asks for feedback on several issues, including how payments are adjusted to account for the cost of purchasing domestic N95 masks, how the agency is helping hospitals identify threats to operations from climate change, CMS’ use of measurement and stratification to promote health equity and future-proofing Potential revisions to the definition of digital quality measures.