CMS issues final IPPS and LTCH rules

Updates to IPPS

According to the final rule, Medicare reimbursements for inpatient hospital care will increase 2.9% in FY 2025, up from the 2.6% increase CMS proposed in April.

The increase includes a 3.4% market basket increase and a negative 0.5 percentage point productivity adjustment. Hospitals that don't submit quality data or don't meet "meaningful use" standards for EHR usage will be paid almost 30% less.

Overall, CMS estimates that payments will increase by $2.9 billion. This includes a $200 million decrease in disproportionate share hospital payments — due to a decrease in the 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 program aren't extended by legislation.

The rule also increases graduate medical education funding by $74 million to support 200 additional residency positions from 2026 to 2036. CMS said it intends to focus on bolstering clinician staffing in health professional shortage areas and training psychiatrists.

CMS also developed an add-on payment to help small, independent hospitals maintain buffer stocks of essential medicines. The rule also bolsters the new technology add-on payment to improve access to gene therapies for sickle cell disease.

In addition, the rule extends the low wage index hospital policy, which limits decrease to 5% through FY 2027. However, without new legislation, the Medicare-dependent and low-volume hospital programs will expire on Dec. 31.

CMS also added seven new measures to the inpatient hospital quality reporting program (QRP), including post-operative respiratory failure and 30-day risk-standardized death rate among surgical patients. CMS also eliminated five quality measures.

Updates to LTCH

CMS will increase payments to LTCHs by 2%, or $45 million, in FY 2025 compared to FY 2024.

This payment increase includes a 3% market basket update, a 0.5 percentage point decrease for productivity, and a cut related to outlier payments, as well as other policies.

Due to an increase in the outlier threshold, CMS will also reduce outlier payments as a percentage of total LTCH prospective payment system standard federal payment rate payments by 0.8%.

In the rule, CMS didn't adopt or remove quality measures from the LTCH QRP, but LTCHs will be required to collect and report specific data elements related to living situation, food, and utilities beginning with the FY 2028 LTCH QRP.

Reaction

In a statement, Chip Kahn, president and CEO of the Federation of American Hospitals, said that Medicare payments haven't kept up with rising expenses.

"We have consistently raised concerns that CMS hospital payment updates have failed to reflect inflation and the costs of hospital care that remain stubbornly high," he said. "Frankly, these inadequate payment updates and CMS' real Medicare [disproportionate share hospital] cuts for the most vulnerable leave hospitals struggling to meet patient needs."

In a statement, Molly Smith, group VP for public policy at the American Hospital Association (AHA), said that CMS' payment updates "will exacerbate the already unsustainable negative or break-even margins many hospitals are already operating under as they care for their patients. The AHA is deeply concerned about the impact these inadequate payments will have on patient access to care, especially in rural and underserved communities."

Smith added that the adjustments to the final LTCH outlier threshold is "nearly 30% higher than it is currently," and has increased by more than 180% since FY 2021, "which forces these hospitals to absorb hundreds of thousands of dollars in additional losses when caring for the sickest patients."

The increase will "create serious access issues for patients and put additional burden bad on acute-care hospitals and other providers that do not specialize in caring for this unique patient population," Smith added. (Kacik, Modern Healthcare, 8/1; AHA News, 8/1 [1]; AHA News, 8/1 [2]; AHA press release, 8/1)

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