CMS proposes payment increases for IPPS hospitals and LTCHs

CMS has proposed a 2.6 percent payment rate increase for acute care hospitals paid under the inpatient prospective payment system (IPPS) in FY 2025.

The payment update reflects a hospital market basket percentage increase of 3.0 percent and a 0.4 percentage point reduction for productivity. IPPS hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) program and are meaningful EHR users will receive the increase.

IPPS hospitals may be subject to additional payment adjustments depending on their performances in the Hospital Readmissions Reduction Program (HRRP), the Hospital Acquired Condition (HAC) Reduction Program, and the Hospital Value-Based Purchasing (VBP) Program.

The IPPS rate increase would boost hospital payments by $2.9 billion in FY 2025. In addition, Medicare uncompensated care payments to disproportionate share hospitals (DSH) would increase by around $560 million and additional payments for inpatient cases involving new medical technologies would grow by $94 million.

The long-term care hospital (LTCH) standard payment rate would increase by 2.8 percent, and LTCH prospective payment system (PPS) payments for discharges would grow by 1.2 percent, totaling $41 million.

The rule included policies aimed at improving health equity among patients. For example, CMS proposed adding new social determinants of health data elements to LTCH quality reporting, requiring LTCHs to report data on housing, food and utility stability, and transportation access.

Proposed new technology add-on payments would help improve access to gene therapy for sickle cell disease, and proposed separate payments to small independent hospitals would help rural hospitals maintain access to essential medicines.

The rule proposed a mandatory bundled payment model to test if episode-based payments for expensive procedures would lower Medicare spending while improving care quality. The procedures in the Transforming Episode Accountability (TEAM) Model include lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure.

The model would incentivize care coordination during surgeries and services provided within the 30 days after a procedure. The model would require referrals to primary care services to support continuity of care and support long-term health outcomes.

The rule proposed changes to the Hospital IQR Program, including adopting seven new quality measures, removing five existing measures, and modifying one electronic clinical quality measure. CMS also proposed measure additions, removals, and adjustments in the Medicare Promoting Interoperability Program, Hospital VBP Program, and LTCH QRP.

To advance the Biden administration’s maternal health initiative, CMS is seeking feedback on the different hospital resources needed to provide inpatient pregnancy and childbirth services to Medicare patients versus non-Medicare patients. The agency is also requesting feedback on requirements and structure for a future obstetrical services Condition of Participation.

The complete FY 2025 Medicare IPPS and LTCH PPS proposed rule can be found here.