The U.S. Centers for Medicare & Medicaid Services (CMS) has released its proposed payment rule for fiscal year 2023, focusing on Medicare reimbursement for inpatient psychiatric facilities (IPFs). The agency proposes a 2.7% increase in inpatient psychiatric facility Medicare rates, following a 2% payment increase finalized in 2022. This proposed raise demonstrates CMS’s commitment to supporting the behavioral health sector amid ongoing financial pressures on healthcare providers.
CMS explained that the 2.7% increase is based on the proposed IPF market basket update of 3.1%, which represents the estimated changes in the costs of providing inpatient psychiatric services. This figure is then reduced by a 0.4 percentage point productivity adjustment, resulting in the net update of 2.7%. Overall, CMS estimates that this adjustment will increase Medicare payments to IPFs by about 1.5%, or roughly $50 million, compared to the current fiscal year.
This payment increase reflects CMS’s recognition of the rising operational costs that inpatient psychiatric facilities face, including labor, equipment, and facility maintenance expenses. With mental health services increasingly in demand, ensuring adequate reimbursement through updated inpatient psychiatric facility Medicare rates is critical to maintaining access and quality care for Medicare beneficiaries.
Stabilizing Wage Index Fluctuations in Inpatient Psychiatric Facility Medicare Rates
A significant feature of the proposed payment rule is the introduction of a 5% cap on decreases to the wage index that determines part of the inpatient psychiatric facility Medicare rates. The wage index accounts for geographic differences in labor costs, which can fluctuate significantly year over year.
CMS proposes that an IPF’s wage index for fiscal year 2023 and subsequent years cannot fall below 95% of its final wage index from the prior fiscal year. This cap aims to provide financial stability and protect inpatient psychiatric facilities from sudden and steep reductions in Medicare payments caused by wage index volatility. By limiting the impact of sharp decreases, CMS hopes to help facilities maintain steady operations and patient care continuity.
This proposed wage index floor is particularly important given workforce challenges in behavioral health, including staff shortages and turnover. Predictable and stable inpatient psychiatric facility Medicare rates help facilities plan budgets, retain qualified staff, and invest in needed infrastructure improvements.
Maintaining Quality Reporting and Focus on Health Equity
The proposed rule does not include changes to the existing IPF Quality Reporting Program. This program requires inpatient psychiatric facilities to collect and report data on quality measures, helping CMS monitor care standards and improve outcomes over time. Maintaining the current reporting framework allows providers to focus on quality improvement efforts without adjusting to new requirements in the near term.
In addition to payment and reporting updates, CMS issued a request for information (RFI) to gather input on how to address persistent health disparities in the U.S. healthcare system. This RFI seeks public feedback on improving data collection and analysis related to disparities across CMS quality programs and policies.
CMS is particularly interested in guidance on several areas:
- Effective approaches to measuring healthcare disparities within Medicare quality programs.
- Principles for selecting disparity reporting measures that accurately reflect social risk factors.
- Guidelines for the collection and use of social risk factor and demographic data.
- Identifying meaningful performance differences related to disparities.
- Best practices for reporting disparity results in a transparent and actionable way.
By soliciting input, CMS aims to enhance its ability to monitor and reduce inequities in health outcomes, which is an increasingly important priority in healthcare policy and practice.
Timeline and Opportunities for Public Comment
The release of the proposed inpatient psychiatric facility Medicare rates rule initiates a public comment period that will remain open until May 31, 2023. This window gives stakeholders—including providers, advocacy organizations, and patients—the opportunity to review the proposal and submit feedback on all aspects of the rule.
Comments submitted during this period will inform CMS’s final decision-making. After considering stakeholder input, CMS plans to publish the finalized payment rule later this year, with new payment rates and policies taking effect on October 1, 2023, marking the start of the fiscal year.
Providers and other interested parties are encouraged to engage actively in this process to ensure their perspectives on reimbursement, wage index protections, quality reporting, and health equity considerations are heard and incorporated.
The Importance of Updated Inpatient Psychiatric Facility Medicare Rates
The 2.7% increase in inpatient psychiatric facility Medicare rates, combined with the wage index cap, represents a meaningful effort to support IPFs during a time of growing demand for mental health services and increasing operational challenges. Reliable and adequate reimbursement is essential for these facilities to continue providing high-quality inpatient psychiatric care to Medicare beneficiaries.
Inpatient psychiatric facilities are a critical component of the behavioral health continuum, offering intensive treatment for serious mental health conditions that cannot be managed in outpatient or community settings alone. Ensuring these providers have sufficient resources to operate effectively directly impacts patient access, quality of care, and overall health outcomes.
Additionally, CMS’s attention to health disparities and its request for information signals a broader commitment to equity within the Medicare program. As inpatient psychiatric facilities serve diverse populations—including vulnerable and underserved groups—improvements in measuring and addressing disparities may lead to more targeted and effective policies in the future.
Conclusion
CMS’s 2023 proposed payment rule for inpatient psychiatric facilities balances increased reimbursement with protections against wage index volatility, while maintaining a focus on quality and advancing health equity. The proposal to raise inpatient psychiatric facility Medicare rates by 2.7%, along with a wage index floor, helps stabilize funding for essential behavioral health services.
Stakeholders should carefully review the proposed rule and submit comments during the open period to influence the final policies. These changes will have important implications for funding, operations, and the delivery of inpatient psychiatric care for Medicare beneficiaries in the coming years.
Staying informed and engaged in the rulemaking process ensures that providers and advocates can help shape a more sustainable, equitable, and effective behavioral health system.
