CMS Finalizes $90M Medicare Boost for Inpatient Psychiatric Facilities

The U.S. Centers for Medicare & Medicaid Services (CMS) on Wednesday issued the final rule for the Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) for fiscal 2023, raising rates by 2.5%.

The overall rate increase equates to a $90 million reimbursement boost for inpatient psychiatric providers that treat Medicare patients.

The rule dictates an overall rate increase of 3.8%. However, the rule does not increase the outlier threshold. That’s the amount of money in total Medicare is going to pay all providers for treating “unusually costly patients.”


The outlier threshold remains at 2%. This has the effect of decreasing aggregate payments to inpatient psychiatric providers by 1.2%.

“Note: due to rounding, the 3.8% increase to payment rates and the 1.2% decrease to outlier payments result in a 2.5% overall increase in IPF payments,” a fact sheet from CMS states.

An analysis of the rule by CMS contractor The Bizzell Group LLC states that CMS created the outlier threshold in 2004 to strike “an appropriate balance between patient access, IPF financial risk, and the payment rate reduction required for all cases to offset the cost of the policy.”


The 2023 final rule also makes changes to wage index payment adjustments. The IPF PPS allows for several adjustments to payments at the patient and facility levels including a wage index, which accounts for differences in regional labor costs.

“In order to mitigate instability in IPF PPS payments due to significant wage index decreases that may affect providers in any given year, CMS will apply a permanent 5% cap on decreases in the IPF PPS wage index for FY 2023 and subsequent years, in a budget neutral manner,” the fact sheet states.

Wages and workforce-related issues were prevalent before the pandemic. Following its onset, they have worsened.

The final rule also does not address two issues on which it sought stakeholder input from inpatient psychiatric facility stakeholders: One is accounting for patient social determinants of health and low-income status. The other is the potential use of data and data tools to advance health equity. 

“We will consider this input carefully in developing future policies,” the fact sheet states.

Companies featured in this article: