On April 10, 2024, CMS released the FY 2025 IPPS Proposed Rule (“Proposed Rule”). The Proposed Rule updates Inpatient Prospective Payment System (“IPPS”) payment rates and makes changes to Disproportionate Share Hospital (“DSH”) payments, various Quality Reporting Programs and requests feedback from the public on several issues.
Increase to Payment Rates Under the IPPS
- CMS proposes to increase operating payment rates for IPPS acute care hospitals by 3% with a productivity adjustment of 0.4 % for FY 2025 resulting in a proposed increase of 2.6%.
- CMS estimates that changes in operating and capital IPPS rates and other policy adjustments will increase hospital payments by $3.2 billion.
- CMS estimates additional payments for inpatient cases involving new medical technologies will increase by $94 million.
- CMS notes that, under current law, add-on payments for Medicare-Dependent Hospitals and the temporary change in payments for low-volume hospitals are both set to expire on December 31, 2024. If these payments expire, CMS estimates that affected hospitals would experience a decrease in payments by $400 million.
- CMS estimates the Long-Term Care Hospital (“LTCH”) standard payment rate will increase by 2.8% and LTCH PPS payments for discharges paid under the LTCH standard payment rate to increase by 1.2%.
DSH Payment Adjustment – Additional Payment for Uncompensated Care and Supplemental Payment
- CMS proposes updates of the three factors used to determine DSH uncompensated care payments.
- Factor 1: CMS continues to use its Office of Actuary’s estimates of Medicare’s DSH payments, using a baseline of $13.9 billion for FY 2025 derived from a case mix that is based on actual claims data reflecting the impact of COVID-19 and declines in Medicaid enrollment.
- Factor 2: CMS calculates Factor 2 as one minus the percent change in the percent of individuals who were uninsured in 2013 compared to the percent of uninsured individuals in CY 2024 and estimated in CY 2025. The proposed FY 2025 uncompensated care amount is $6,498,135,150, an increase of $568 million.
- Factor 3: Factor 3 determines the amount of the uncompensated care payment that each eligible hospital will receive for FY 2025. CMS proposes to use audited data on uncompensated costs from Worksheet S-10 of the FY 2019, 2020 and 2021 cost reports to calculate Factor 3 for all eligible hospitals—including IHS, Tribal hospitals and Puerto Rico hospitals—CMS proposes changes in Factor 3 “scaling factor” for new hospitals and will use the uncompensated care payments from the surviving CCN hospital to calculate the interim uncompensated care payments for newly merged hospitals in FY 2025.
Distribution of Additional Graduate Medical Education Residency Slots Under the Consolidated Appropriations Act of 2023
- CMS will distribute 200 additional residency positions in FY 2026 with one-half to be distributed for psychiatry or psychiatry subspecialty residency training programs. CMS proposes to distribute up to one full-time resident slot to rural hospitals, hospitals whose reference resident level of the hospital exceeds its applicable resident limit, hospitals located in states with new medical schools and hospitals that serve areas designated as health profession shortage areas.
- CMS will notify hospitals of the number of positions distributed to them by January 31, 2026, and the increase will be effective July 1, 2026.
- CMS estimates additional funding will total $74 million from FY 2026 through FY 2036.
IPPS Payment for Stock of Essential Medicines
- CMS proposes an additional IPPS payment for small, independent hospitals (those with less than 100 beds) to establish and maintain a 6-month stock of one or more of the 86 essential medicines for use during future drug shortages. A hospital can directly stock or make contractual arrangements with a pharmaceutical manufacturer, distributor or intermediary to stock the essential medicines.
TEAM Mandatory Model
- CMS is intent on creating a new mandatory alternative payment model, “The Transforming Episode Accountability Model (“TEAM”),” for specific procedures, including coronary artery bypass graft, lower extremity joint replacement, major bowel procedure, surgical hip/femur fracture treatment and spinal fusion. TEAM would test whether financial accountability for these episode categories reduced Medicare expenditures while preserving or enhancing the quality of care for beneficiaries.
Low-Wage Hospital Policy and Updated Labor Market Areas
- Hall Render posted an article, Medicare’s Proposed Updates to Labor Market Areas and Impact on Special Rural Status, on April 12, 2024, which discusses significant changes in labor market delineations based on the 2020 Census.
Hospital Value-Based Purchasing (“VBP”) Program and Inpatient Quality Reporting Program
- CMS proposes to adopt several new measures and remove other measures that will affect a hospital’s VBP and Quality Reporting over the next several years. CMS also plans to modify the HCAHPS Survey but intends to continue using the current six dimensions through FY 2029 and use the updated version beginning in FY 2030.
Medicare Promoting Interoperability Program
- CMS proposes to separate the Antimicrobial Use and Resistance Surveillance measure into two measures, Antimicrobial Use Surveillance and Antimicrobial Resistance Surveillance and added two new eCQMs for eligible hospitals, including Falls with Injury and Postoperative Respiratory Failure.
Updated Conditions of Participation to Require Hospitals and Critical Access Hospitals to Report Acute Respiratory Illnesses
- CMS proposes to replace current COVID-19 and Seasonal Influenza reporting standards applicable to hospitals and critical access hospitals with a new standard to address acute respiratory illness to include COVID-19, influenza and respiratory syncytial virus among hospital patients beginning October 1, 2024.
Requests for Information on Resources Required for Maternity Care and Baseline Standards for Obstetrical Services
- CMS requests feedback on the differences in hospital resources required to provide inpatient pregnancy and childbirth services to Medicare patients, as compared to non-Medicare patients, and the extent to which non-Medicare payers use the IPPS as a basis for determining payment rates.
- CMS also requests feedback on whether it should develop a Conditions of Participation regulation to address concerns regarding maternal morbidity, mortality, disparities and maternity care access in the United States.
Changes to the Severity Level Designation for Z Codes Describing Inadequate Housing and Housing Instability
- CMS proposes to increase the severity designation of seven ICD-10-CM codes to complication or comorbidity that indicate a patient’s inadequate housing or housing instability.
The Proposed Rule will be published in the Federal Register on May 2, 2024, and comments are due on June 10, 2024.
If you have any questions on this topic or would like assistance with submitting comments, please contact:
- Sue Andersen at sandersen@hallrender.com or (301) 785-3996;
- Zeke Shen at zshen@hallrender.com or (414) 721-0912;
- Abigail Kaericher at akaericher@hallrender.com or (202) 742-9674; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot give legal advice outside of an attorney-client relationship.
