On April 10, 2024, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2025 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) proposed rule. The rule would update Medicare fee-for-service payment rates and policies for inpatient hospitals and LTCHs for FY 2025.
Initial highlights of the proposed rule are included below.
Standardized Amount
CMS proposes an increase of 2.6% in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting program and are meaningful electronic health record users. This reflects a projected FY 2025 hospital market basket percentage increase of 3.0%, reduced by a 0.4 percentage point productivity adjustment.
Medicare Severity Diagnosis-Related Group Updates
In the 2021 IPPS final rule CMS finalized its proposal to evaluate existing Medicare Severity Diagnosis-Related Group Updates (MS-DRGs) with a three-way severity level split to ensure that the base MS-DRG contains a meaningful volume of cases and satisfies other set criteria. For FY 2025, CMS proposes delaying implementing these criteria to existing MS-DRGs for another year.
CMS also proposes finalizing nine guiding principles for determining which secondary diagnosis codes can trigger a complication or comorbidity (CC) or a major complication or comorbidity (MCC). The agency also proposes adding seven diagnoses describing housing instability as CCs.
Social Determinants of Health
CMS proposes adding new social determinants of health (SDOH) data elements into LTCH quality reporting. If finalized, LTCHs would be required to report on housing, food and utility stability, and access to transportation, which are factors that influence the resources required for patient care. The rule also proposes changing the severity level designation for SDOH diagnosis codes, changing inadequate housing and housing instability from non-complication or comorbidity to complication or comorbidity, to indicate increased resource utilization in the acute inpatient hospital setting.
Drug Shortages and Other Payment Models
To help mitigate future drug shortages, CMS proposes establishing a separate payment to support small, independent hospitals in establishing and maintaining a buffer stock of essential medicines.
CMS also proposes testing a mandatory episode-based payment model called the Transforming Episode Accountability Model (TEAM). This five-year model, which would begin in 2026, would require acute care hospitals in specific geographic regions to be accountable for the cost of care for Medicare beneficiaries during and after certain surgical procedures. Selected hospitals would also be required to refer patients to primary care services to “support optimal, long-term health outcomes.”
Graduate Medical Education
CMS proposes new policies governing the distribution of an additional 200 Medicare-funded residency positions to train physicians by January 31, 2026, with at least 100 of the positions going to psychiatry or psychiatry subspecialty residencies. CMS also proposes modifications to the criteria regarding whether a residency program can be considered “new” for the purpose of determining if a hospital can receive additional direct Graduate Medical Education and/or Indirect Medical Education positions for that program and the agency is soliciting comments to guide future proposals around newness.
Requests for Information:
The proposed rule includes a request for information (RFI) to advance patient safety and outcomes across CMS’ hospital quality programs. The agency is specifically interested in feedback on adopting measures that represent a range of outcomes including unplanned returns to emergency departments, timely receipt of observation services after a patient’s discharge from an inpatient stay, and overall improvement in discharge processes.
The proposal also includes two RFIs aimed at improving maternal health. The first requests information on using Medicare IPPS payment rates for maternity care by other payers to inform CMS’ understanding of differences that may exist between the hospital resources required to provide inpatient pregnancy and childbirth services to Medicare patients compared to non-Medicare patients. The second RFI solicits comments on what the overarching requirements and structure should be for a possible future obstetrical services condition of participation (CoP) as it relates to organization, standards of practice, staffing for obstetrical services, delivery of services for obstetrical units, staff training, and the use of maternal morbidity and mortality data.
The Association for Clinical Oncology (ASCO) will continue to analyze the proposed rule and will submit comments, which are due to the agency by June 10, 2024.
Bookmark ASCO in Action for updates, as well as news, advocacy, and analysis on cancer policy.
