Preparing Now for Coding Impacts of CMS IPPS Final Rule

By Leigh Poland RHIA,

August 3, 2023

On August 1, 2023, the Centers for Medicare & Medicaid Services (CMS) issued the final rule for the fiscal year (FY) 2024 Hospital Inpatient Prospective Payment System (IPPS). The rule includes updates and changes to reimbursement factors and programs such as the Hospital Value-Based Purchasing (VBP) Program and the Hospital Readmissions Reduction Program (HRRP), and Hospital-Acquired Condition (HAC) Reduction Program. The rule also includes updates for long-term care hospitals (LTCHs) and their payment system, as well as modifications to the LTCH Quality Reporting Program.

The final rule will go into effect on October 1, 2023. Key highlights include the creation and deletion of Medicare Severity Diagnosis Related Groups (MS-DRGs) and updates to the complication and comorbidity (CC) and major complications and comorbidities (MCC) lists. There are also changes to the code edits and the inclusion of new International Classification of Diseases, tenth edition (ICD-10) codes as well as the New Technology Add-on Payment (NTAP) program.

The MS-DRG system determines payment for inpatient stays. CMS reviews claims data and adjusts the MS-DRGs based on factors such as cost, length of stay, and diagnoses. For the upcoming year, CMS created 15 new MS-DRGs and deleted 16 existing ones.

The majority of the MS-DRG changes focused on the circulatory system chapter (MDC05) involving procedures such as cardiac defibrillator implantation and percutaneous cardiovascular interventions. Changes are also being made to MS-DRGs related to eye disorders, ultrasound thrombolysis procedures, and appendectomies. The changes aim to improve the accuracy and appropriateness of reimbursement by aligning the MS-DRGs with specific diagnoses and procedures. CMS considers factors such as cost, severity, and length of stay when restructuring the MS-DRGs.

The rule includes adjustments related to Social Determinants of Health (SDoH), recognizing the influence of social and economic circumstances on healthcare outcomes. Notably, the addition of homelessness as a coded complication and comorbidity is a step to support efforts to advance health equity.

Additionally, CMS has identified new codes and code changes to the CC/MCC list. The MCC list has 18 codes added and others deleted to align with the changes made to the code set. For example, sickle cell diagnosis codes are more specific, and the code set for gram-negative pneumonia has been expanded as a major complication. The complication and comorbidity list has 78 additions as well as some deletions related to supraventricular tachycardia, changes to appendicitis codes, short bowel syndrome, osteoporosis with a pathological fracture, and various congenital conditions.

CMS has also implemented changes to the Medicare Code Editor (MCE) within the grouping process. These edits provide warnings or restrictions on the use of certain codes. For instance, external cause codes, which provide injury details, can no longer be used as principal diagnoses (PDX) and should only be utilized as secondary diagnoses. Similarly, specific ICD-10 codes, such as E20.811 for secondary hyperparathyroidism and H36.89 for other retinal disorder, should not be used as PDX and should be sequenced as secondary diagnoses. To encourage specificity and accuracy in coding, CMS has expanded the list of unacceptable PDX codes by adding 39 new ICD-10-CM codes. These codes, including family history-related codes and noncompliance codes, should not be used as PDX. CMS has added 12 new codes to the unspecified code edit list to avoid. These codes trigger warnings, urging coders to seek more detailed information in the medical record to select a more specific code.

Lastly, within the IPPS, Medicare provides bundled payments for inpatient hospital stays, covering various services and supplies and add-on payments are available for certain devices or new technologies that meet specific criteria. These additional payments serve to compensate for the use of these products and services. Updates and changes have also been made to the NTAP program. For example, some NTAP payments related to COVID-19 treatments will be discontinued though several are classified as new technology for the fiscal year 2024 and will continue to receive payments in addition to the MS-DRG payment as long as they are utilized and coded appropriately. Additionally, CMS has added 29 new technology add-on payments for the fiscal year 2024 for qualifying innovative treatments and procedures.

Healthcare organizations should review and understand the changes to effectively prepare for the upcoming fiscal year and ensure compliance with the new coding guidelines. Preparing ahead of time is critical to effectively adapt to the coding impacts for the fiscal year 2024 and avoid potential challenges that can negatively impact the bottom line. Please contact us for more information or assistance in improving coding accuracy, capturing the complexity of patient conditions, and ensuring appropriate reimbursement for healthcare services.

Leigh Poland

Leigh Poland RHIA, CCS


Leigh has over 20 years of coding experience and has worked in the coding and education realm over the last 20 years. Her true passion is coding education making sure coders are equipped to do their job accurately and with excellence. Academically, Leigh has graduated from Louisiana Tech University with a Bachelor of Science. Leigh has had the opportunity to present many times in the past at the AHIMA, ACDIS, and AAPC National Conventions. She has been a guest speaker on AHIMA webinars and has written several articles that were published in the AHIMA Journal. Leigh has traveled the US and internationally providing coding education.

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