CMS Issues FY 2025 Hospital IPPS and LTCH Prospective Payment System Final Rule

Additional Details 

Payment Updates

• IPPS: The finalized 2.9% payment increase for FY 2025 is slightly higher than the initially proposed 2.6% payment increase. The 2.9% update is estimated to increase hospital payments by $2.9 billion in FY 2025. 
  • While CMS anticipates operating and capital IPPS payment rates will increase by $3.2 billion, the agency is also projecting that payments to disproportionate share hospitals will decrease by $200 million. Additionally, under current law, CMS provides additional payments to Medicare-dependent hospitals (MDHs) and temporary payments to low-volume hospitals. Unless extended by legislation, these payments are set to expire on December 31, 2024, and would result in an estimated $400 million decrease in payments to these hospitals in FY 2025. CMS estimates a $300 million increase in new medical technology payments. 
• LTCH: For FY 2025, CMS finalized changes that would increase payments for discharges paid the LTCH standard payment rate by approximately 2.0%, or $45 million. This includes a 3.0% market basket update, slightly higher than the previously proposed 2.8%. However, this amount is reduced by the productivity adjustment and a projected 0.8% decrease in high-cost outlier payments as a percentage of total LTCH PPS standard payments.
  • CMS finalized a rebasing of the LTCH market basket to a 2022 base year.  
  • CMS also finalized an increase to the LTCH outlier threshold for FY 2025 that is higher than it has historically been and will ensure that estimated outlier payments are approximately 8% of total payments, as required by statute. 

Coding and Coverage Changes

• NTAP Program:CMS finalized its proposal to raise the NTAP percentage (or the limit on NTAPs) from 65% to 75% of the average cost of the technology or the average cost in excess of the MS-DRG payments (whichever is lesser) for a gene therapy that supports the treatment of SCD. 
  • This policy will begin in FY 2025 and conclude at the end of the two-to-three-year newness period for any such gene therapy.
• Note: CMS generally did not finalize proposed changes to severity designations for the ICD-10-CM diagnosis codes, other than a change to the designation for diagnosis codes in category Z16 (resistance to antimicrobial drugs) from a non–complication or comorbidity (NonCC) to complication or comorbidity (CC).

Quality Program Updates

Hospital Inpatient Quality Reporting (IQR) Program

• CMS finalized its proposal to add the following seven measures to the IQR program, including two electronic clinical quality measures (eCQMs), one claims-based measure, two structural measures, and two healthcare-associated infection (HAI) measures as follows: 

1. Hospital Harm: Falls with Injury (eCQM)
2. Hospital Harm: Postoperative Respiratory Failure (eCQM)
3. Thirty-Day Risk-Standardized Death Rate among Surgical Inpatients with Complications (Claims Based)
4. Patient Safety Structural measure
5. Age-Friendly Hospital Structural measure
6. Catheter-Associated Urinary Tract Infection Standardized Infection Ratio Stratified for Oncology Locations measure (HAI)
7. Central Line–Associated Bloodstream Infection Standardized Infection Ratio Stratified for Oncology Locations measure (HAI)

• CMS finalized, with modification, the proposal to increase the number of eCQMs reported. Currently, hospitals must report on six total eCQMs, three selected by CMS and three self-selected. CMS has finalized the following changes: 
  • For the CY 2026 reporting period, hospitals will be required to report on eight eCQMs (five selected by CMS and three self-selected). 
  • For the CY 2027 reporting period, hospitals will be required to report on nine total (six selected by CMS and three self-selected). 
  • For the CY 2028 reporting period, hospitals will be required to report on eleven eCQMs (eight selected by CMS and three self-selected). 
• CMS finalized the removal of the following five measures: 

1. Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Acute Myocardial Infarction (AMI Payment)
2. Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Heart Failure (HF Payment)
3. Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Pneumonia (PN Payment)
4. Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty (THA/TKA Payment)
5. CMS PSI-04 Death Among Surgical Inpatients with Serious Treatable Complications

• Finally, CMS finalized minor modifications to two measures: 1) Global Malnutrition Composite Score eCQM, and 2) Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure. 

Medicare Promoting Interoperability Program

• CMS finalized the proposal to separate the Antimicrobial Use and Resistance (AUR) Surveillance measure into two measures—one for Antimicrobial Use (AU) Surveillance and a second for Antimicrobial Resistance (AR) Surveillance.
• To align with the IQR program, CMS finalized the adoption of two new eCQMs for hospitals and critical access hospitals (CAHs) to select as one of their self-selected CQMs (Hospital Harm–Falls with Injury and Hospital Harm–Postoperative Respiratory Failure).
• CMS also finalized an increase to the performance-based scoring threshold for eligible hospitals and CAHs, from 60 points to 70 points for the CY 2025 EHR reporting period and from 70 points to 80 points beginning with the CY 2026 EHR reporting period.

Hospital Value-Based Purchasing (VBP) Program

• CMS finalized the proposal to modify scoring and adopt submeasure updates to align the HCAHPS survey measures in the Person and Community Engagement Domain with the Hospital IQR program. 

LTCH Quality Reporting Program (LTCH QRP)

• CMS finalized the adoption of four new SDOH items and modification to one SDOH item. These items are related to living situation, food, and utility.
• CMS also finalized its proposal to extend the LCDS admission assessment period from three days to four days, beginning with LTCH admission on October 1, 2026.
• CMS also noted that it intends to develop a star rating program within the LTCH QRP that can meaningfully distinguish the quality of care offered by providers. 

Other Changes

• TEAM:CMS also finalized a new payment model, TEAM, which will be a five-year mandatory model tested beginning on January 1, 2026, and ending on December 31, 2030. 
  • TEAM will create financial accountability for episodes that begin with one of the following procedures: 1) coronary artery bypass graft surgery (CABG), 2) lower extremity joint replacement (LEJR), 3) major bowel procedure, 4) surgical hip/femur fracture treatment (SHFFT), and 5) spinal fusion. 
  • Episodes will include nonexcluded Medicare Parts A and B items and services, will begin with an anchor hospitalization or anchor procedure, and will end 30 days after hospital discharge. 
  • Under TEAM, all acute care hospitals, with limited exceptions, located within mandatory Core-Based Statistical Areas (CBSAs) will be required to participate in TEAM.
  • For financial risk, TEAM will have a one-year glide path for all participants and a three-year glide path for participants that are safety net hospitals. 
• Distribution of Graduate Medical Education (GME) Residency Slots: Legislation requires the distribution of an additional 200 Medicare-funded residency positions, with at least half being psychiatry or psychiatry subspecialty residences. In this final rule, CMS implemented policies to support the distribution of these slots by January 31, 2026. CMS estimates this additional funding to be approximately $74 million in support for teaching hospitals from FY 2026 through FY 2036. 
• Continuation of the Low-Wage Hospital Policy: CMS finalized its proposal to extend a temporary policy finalized in the FY 2020 IPPS/LTCH PPS final rule by at least three more years, beginning in FY 2025. This policy addresses wage index disparities for low-wage index hospitals, including many rural hospitals. CMS would like to ensure the policy remains in effect for a sufficient period of time following the end of the COVID-19 pandemic before making a final determination on whether to discontinue the policy.
• Separate IPPS Payment for Establishing and Maintaining Access to Essential Medicines: In an effort to curtail hospital drug shortages, CMS finalized the proposal to establish a separate payment under the IPPS for small, independent hospitals to establish and maintain a buffer stock of essential medications.
• Hospital and CAH Data Reporting: CMS finalized an update to hospital and CAH infection prevention and control and antibiotic stewardship programs' Conditions of Participation (CoPs) by requiring hospitals and CAHs to electronically report information about COVID-19, influenza, and RSV beginning November 1. The schedule of data reporting will be specified by the Secretary

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_{Edited by: Matt Maslin}

Published August 6, 2024