On August 1, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to increase Medicare inpatient prospective payment system rates for certain acute care hospitals by a net 2.9% in fiscal year 2025, compared to FY 2024. This increase applies to hospitals that are meaningful users of electronic health records and submit quality measure data. The 2.9% payment update includes a hospital market basket increase of 3.4% and a productivity cut of 0.5%. CMS anticipates overall payments will rise by $2.9 billion. This total includes a $200 million decrease in disproportionate share hospital payments (due to a reduced uninsured rate), a $300 million increase in new medical technology payments, and a $400 million decrease in rural health payments if the Medicare-dependent hospital and enhanced low-volume adjustment programs are not extended.

For long-term care hospitals (LTCHs), CMS will increase the LTCH PPS standard Federal payment rate by 3.0%. CMS expects LTCH payments to grow by 2.0%, or $45 million, mainly due to the rate update, partially offset by a projected decrease in high-cost outlier payments in FY 2025 compared to FY 2024.

Key provisions of the final rule include:

• Adoption of new core-based statistical areas for determining the area wage index.
• Creation of a separate IPPS payment for small, independent hospitals to maintain access to essential medicines.
• Distribution of new graduate medical education slots under section 4122 of the Consolidated Appropriations Act of 2023.

CMS also introduced several changes to its quality reporting and value programs:

• Addition of seven new measures to the inpatient quality reporting (IQR) program, focusing on hospital patient safety practices and outcomes, and removal of five IQR measures.
• Modification of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey, resulting in updates to HCAHPS sub-measures used in the IQR and Hospital Value-based Purchasing Program.
• Increase in the number of mandatory electronic clinical quality measures hospitals must report for both the IQR and Promoting Interoperability programs.

Additionally, CMS finalized a Condition of Participation requiring hospitals and critical access hospitals (CAHs) to report certain data on acute respiratory illnesses. Starting November 1, CMS will require hospitals and CAHs to report weekly data to the Centers for Disease Control and Prevention on confirmed COVID-19, influenza, and respiratory syncytial virus infections among hospitalized patients, hospital capacity, and limited patient demographic information, including age. CMS will have the authority to increase the frequency and number of data elements hospitals must report during declared public health emergencies.

Action: Final Rule

Agency: Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS)

Date: Provisions of the final rule generally take effect Oct. 1, 2024

The FY 2025 IPPS and LTCH PPS final rule can be downloaded from the Federal Register at: https://www.federalregister.gov/public-inspection/current

For a fact sheet on the IPPS/LTCH PPS final payment rule, visit: https://www.cms.gov/newsroom/fact-sheets/fy-2025-hospital-inpatient-prospective-payment-system-ipps-and-long-term-care-hospital-prospective-0

The Nelson Mullins team is experienced in healthcare regulatory matters. Please reach out to one of our authors Jacob Kohn or Ed White for any questions regarding this topic.