On Aug. 1, the federal Centers for Medicare & Medicaid Services (CMS) announced its final rule for Medicare fiscal year 2025 Hospital Inpatient Prospective Payment System (IPPS) payment. As the fact sheet for the announcement of the final rule explained, “The increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) program and are meaningful electronic health record (EHR) users is 2.9 percent. This reflects a projected FY 2025 hospital market basket percentage increase of 3.4 percent, reduced by a 0.5 percentage point productivity adjustment. If hospitals fail to successfully participate in the report to IQR program and/or are not meaningful EHR users, their payment update will be decreased.”
The agency noted that, “Overall, for FY 2025, CMS expects the changes in operating and capital IPPS payment rates – in addition to other changes – will generally increase hospital payments by $2.9 billion. Specifically, operating and capital IPPS payment rates will increase hospital payments in FY 2025 by approximately $3.2 billion. In addition, CMS projects Medicare uncompensated care payments to disproportionate share hospitals (DSH) will decrease in FY 2025 by approximately $0.2 billion. CMS also estimates that additional payments for inpatient cases involving new medical technologies will increase by approximately $0.3 billion in FY 2025, primarily driven by the approval of new technology add-on payments for several technologies. Under current law, additional payments for Medicare-Dependent Hospitals (MDHs) and the temporary change in payments for low-volume hospitals are set to expire December 31, 2024. In the past, these payments have been extended by legislation, but if they were to expire, CMS estimates that payments to these hospitals would decrease by $0.4 billion in FY 2025.”
Associations criticize low payment update
National associations representing hospital interests strongly criticized the announcement that CMS was planning to increase Medicare inpatient prospective payment system rates only by a net 2.9-percent increase in fiscal year 2025 over the agency’s 2024 rates. The associations said that the 2.9-percent increase failed to take into account rising operating costs.
Late on Thursday afternoon, leaders at the American Hospital Association (AHA) stated in a post to the association’s website that “The Centers for Medicare & Medicaid Services Aug. 1 issued a final rule that will increase Medicare inpatient prospective payment system rates by a net 2.9 percent in fiscal year 2025, compared with FY 2024, for hospitals that are meaningful users of electronic health records and submit quality measure data. This 2.9-percent payment update reflects a hospital market basket increase of 3.4 percent as well as a productivity cut of 0.5 percent. CMS expects overall payments to increase by $2.9 billion, which 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 programs are not extended by legislation,” the AHA reported.
And the AHA quoted Molly Smith, AHA group vice president for public policy, as stating that “CMS’ payment updates for hospitals 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.”
In a statement shared with the media, Molly Smith, AHA group vice president for public policy, said, “CMS’ payment updates for hospitals 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.”
What’s more, Smith said, “We are troubled that the final long-term care hospital outlier threshold is nearly 30 percent higher than it is currently. Since FY 2021, this figure has increased by more than 180 percent, which forces these hospitals to absorb hundreds of thousands of dollars in additional losses when caring for the sickest patients. This increase will create serious access issues for patients and put additional burden back on acute-care hospitals and other providers that do not specialize in caring for this unique patient population.”
Indeed, Smith noted, “In addition, while the AHA has long supported widespread adoption of meaningful value-based and alternative payment models to deliver high quality care at lower costs, the rule’s mandatory bundled payment model for five different surgical episodes will not advance these objectives. Not only is the model extremely similar to other bundled payment approaches that have failed to meet the statutory criteria for expansion as they have not reduced program costs or generated net savings, it puts at particular risk many hospitals that are not of an adequate size or in a position to support the investments necessary to succeed.”
Meanwhile, the leaders of the Charlotte-based health alliance Premier Inc. expressed similar concerns, releasing a statement attributed to Soumi Saha, PharmD, senior vice president, government affairs. “The continued insufficiency of Medicare payments to hospitals year over year is a threat to the sustainability of American healthcare,” Saha said. “A mere 2.9 percent increase is alarmingly below the true cost of providing care and does not address the stark realities of inflation and operational costs, persistent labor shortages and an aging patient population that will require significantly greater care than generations prior. If we continue to starve the healthcare system, we will only see continued closures, clinician burnout and extended wait times for patient care.”
Further, Saha continued, “Hospitals need the ability to focus on delivering exceptional, patient-centric care, however the payment update only forces hospitals to stretch further to cover basic patient needs. CMS must take advantage of the wealth of data on the labor, operational, and financial pressures facing hospitals to calculate payment rates that accurately reflect the true cost of providing care, enabling hospitals to focus on their core mission – improving the health of their communities and saving lives.”
Quality measure changes noted
The fact sheet accompanying the announcement on Aug. 1 included the following information on quality measures:
“In the FY 2025 IPPS/LTCH PPS final rule, CMS is adopting seven new quality measures, removing five existing quality measures, and modifying two current quality measures. CMS is also finalizing two changes to current policies related to data validation and increasing the total number of mandatory electronic clinical quality measures (eCQMs) reported by hospitals over three years.
Specifically, CMS is finalizing the adoption of two new eCQMs, one claims-based measure, two structural measures, and two healthcare-associated infection (HAI) measures:
Hospital Harm – Falls with Injury eCQM, with inclusion in the eCQM measure set beginning with the CY 2026 reporting period/FY 2028 payment determination.
Hospital Harm – Postoperative Respiratory Failure eCQM, with inclusion in the eCQM measure set beginning with the CY 2026 reporting period/FY 2028 payment determination.
Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications measure beginning with the July 1, 2023 – June 30, 2025 reporting period which impacts the FY 2027 payment determination.
Patient Safety Structural Measure beginning with the CY 2025 reporting period/FY 2027 payment determination, with modification.
Age Friendly Structural Measure beginning with the CY 2025 reporting period/FY 2027 payment determination.
Catheter-Associated Urinary Tract Infection Standardized Infection Ratio measure stratified for oncology locations beginning with the CY 2026 reporting period/FY 2028 payment determination.
Central Line-Associated Bloodstream Infection Standardized Infection Ratio measure stratified for oncology locations beginning with the CY 2026 reporting period/FY 2028 payment determination.
CMS is modifying two current measures:
Global Malnutrition Composite Score eCQM beginning with the CY 2026 reporting period/FY 2028 payment determination. This modification adds patients ages 18 to 64 to the current cohort of patients 65 years or older.
Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure beginning with the CY 2025 reporting period/FY 2027 payment determination. The modifications refine the current HCAHPS Survey by adding three new survey sub-measures, removing one existing survey sub-measure, and revising one existing survey sub-measure.
CMS is finalizing the removal of five measures:
Four payment measures:
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Acute Myocardial Infarction (AMI Payment).
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Heart Failure (HF Payment).
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Pneumonia (PN Payment).
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).
We are finalizing these removals beginning with the FY 2026 payment determination, which is associated with a performance period of: July 1, 2021 – June 30, 2024, for the AMI Payment, HF Payment, and PN Payment measures; and April 1, 2021 – March 31, 2024, for the THA/TKA Payment measure.”
