FY25 IPPS Final Rule: 6 Changes You Need to Know

IPPS Payment Rates

CMS proposed a 2.9% increase in operating payment rates for general acute care hospitals under IPPS, contingent on participation in the Hospital Inpatient Quality Reporting (IQR) program and meaningful use of electronic health records (EHRs). This increase reflects a projected FY 2025 hospital market basket percentage of 3.4%, adjusted by a 0.5 percentage point productivity reduction.

Hospitals under IPPS may also face other payment adjustments, including penalties for excess readmissions (Hospital Readmissions Reduction Program), a 1% reduction for the lowest-performing quartile on hospital-acquired conditions (HAC) (HAC Reduction Program), and adjustments based on performance in the Hospital Value-Based Purchasing (VBP) Program. Overall, CMS anticipates that theses changes will increase hospital payments by $3.2 billion in FY 2025. This includes a $2.9 billion increase in operating and capital IPPS payment rates and an additional $560 million for Medicare uncompensated care payments to disproportionate share hospitals (DSH). CMS also expects approximately $0.3 billion in additional payments for inpatient cases involving new medical technologies. However, payments for Medicare-Dependent Hospitals (MDHs) and low-volume hospitals are set to expire by December 31, 2024, potentially leading to a $0.4 billion decrease in payments if not extended by legislation.

CMS Proposal for IPPS Payment on Essential Medicines

Recognizing the critical need to address drug shortages, CMS will implement a new IPPS payment category aimed at supporting small, independent hospitals. These hospitals often struggle more during supply disruptions because they lack the resources of larger or chain-affiliated hospitals. The policy enables these hospitals to establish and maintain a buffer stock of essential medicines to mitigate future shortages. This initiative aims to ensure more reliable and resilient access to necessary medicines for patients in these hospitals, improving overall healthcare delivery.

Social Determinants of Health Diagnosis (SDOH) Codes

CMS determines IPPS payments based on hospital resource use related to patient severity, service complexity, and resource consumption. As a result of data analysis showing higher resource costs associated with certain ICD-10-CM diagnosis codes for inadequate housing and housing instability, CMS proposed changing their severity designation from non-complication or comorbidity (NonCC) to complication or comorbidity (CC). This adjustment aims to better reflect the actual resource needs in cases involving these codes, aligning with the presidential administration’s focus on social factors' impact on health and resource utilization. This supports efforts by the U.S. Interagency Council on Homelessness, emphasizing housing stability as crucial for health and well-being. This policy change would enhance the accuracy and relevance of hospital encounter data, contributing to advancing health equity initiatives.

Changes to New Technology Add-on Payment (NTAP) for FY 2025

CMS made changes to promote access to new gene therapies, particularly for treating sickle cell disease (SCD). Starting in FY 2025, they plan to increase the New Technology Add-On Payment (NTAP) percentage from 65% to 75% for gene therapies specifically indicated for SCD. This adjustment aligns with CMS' Sickle Cell Disease Action Plan and aims to facilitate access to these potentially life-saving treatments.

Hospital Inpatient Quality Reporting (IQR) Program

The Hospital IQR Program is a pay-for-reporting quality initiative that imposes payment reductions on hospitals failing to meet its requirements. In the final rule for FY 2025 IPPS/LTCH PPS, CMS will implement seven new quality measures, eliminate five existing ones, and modify two electronic clinical quality measure (eCQM). They also will make changes to data validation policies, including increasing the mandatory reporting of eCQMs over two years and making cross-program adjustments to the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure.

Specifically, CMS will adopt:

• Two new eCQMs: Hospital Harm – Falls with Injury and Hospital Harm – Post-operative Respiratory Failure.
• One claims-based measure: Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications (Failure-to-Rescue).
• Two structural measures: Patient Safety Structural Measure and Age Friendly Hospital Structural Measure.
• Two healthcare-associated infection measures: Catheter-Associated Urinary Tract Infection Standardized Infection Ratio Stratified for Oncology Locations and Central Line-Associated Bloodstream Infection Standardized Infection Ratio Stratified for Oncology Locations.

These measures would be phased in starting from various reporting periods, impacting payment determinations in FY 2027 and beyond.

Hospital and Critical Access Hospital (CAH) Data Reporting

CMS updated Conditions of Participation (CoPs) for hospital and Critical Access Hospital (CAH) infection prevention, control, and antibiotic stewardship programs by extending COVID-19 and influenza data reporting requirements. This aims to balance the need for robust virus surveillance data with minimizing facility burden. CMS plans to replace COVID-19 and influenza reporting with a new standard starting October 1, 2024, requiring hospitals and CAHs to electronically report data on confirmed infections of COVID-19, influenza, and respiratory syncytial virus (RSV), hospital bed census, capacity, and limited patient demographic information weekly outside of public health emergencies (PHEs).

During a national PHE for acute respiratory illness, additional reporting categories such as facility operational status, staffing shortages, and medical supplies would be required. CMS seeks feedback on reducing reporting burden while ensuring data adequacy, expanding reporting requirements, the value of data in healthcare safety, system readiness, and including demographic data like race/ethnicity and socioeconomic factors in ongoing reporting from October 1, 2024. Additionally, CMS issues a Request for Information (RFI) to enhance hospital and CAH participation in CDC's National Syndromic Surveillance Program (NSSP). Suggestions include mandating or incentivizing hospitals to report data to NSSP and expanding syndromic surveillance reporting to inpatient settings.