The following represents some of the main takeaways from the rule as outlined by an associated CMS fact sheet.
Payment Rates
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 fiscal year (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.
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.
Low-Wage Hospital Policy
CMS is extending the temporary policy finalized in the FY 2020 IPPS final rule that addresses wage index disparities affecting low-wage index hospitals, which includes many rural hospitals. Specifically, this policy will be effective for at least three more years, beginning in FY 2025. The first full fiscal year of wage data after the COVID-19 PHE is the FY 2024 wage data, which should be available for FY 2028 rulemaking.
The FY 2020 low wage index hospital policy and the related budget neutrality adjustment are the subject of pending litigation in multiple courts. On July 23, 2024, the Court of Appeals for the D.C. Circuit held that the Secretary lacked authority under section 1886(d)(3)(E) or 1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy for FY 2020, and that the policy and related budget neutrality adjustment must be vacated. Bridgeport Hosp. v. Becerra, Nos. 22-5249, 22-5269, (D.C. Cir. July 23, 2024). As of the date of this final rule publication, the time to seek further review of the D.C. Circuit’s decision in Bridgeport Hospital has not expired. The government is evaluating the decision and considering options for next steps.
Access to Essential Medicines Payment
Due to the drug shortage experienced by many hospitals, CMS is finalizing a separate payment under IPPS for small, independent hospitals to establish and maintain a buffer stock of essential medicines as a preventive measure to guard against future shortages. This policy can be leveraged to help foster access to a more reliable, resilient supply of essential medicines for patients of these hospitals. In the future, CMS will assess the program’s impact and consider program expansion and other revisions, where appropriate, to help ensure availability of essential medicines for patients.
GME Residency Slots
Section 4122 of the Consolidated Appropriations Act (CAA) of 2023 requires the distribution of an additional 200 Medicare-funded residency positions (or “slots”) to train physicians. This provision dedicates at least one-half of the total number of positions to psychiatry or psychiatry subspecialty residencies. The law requires CMS to notify hospitals receiving residency positions under section 4122 by January 31, 2026. To meet that deadline, CMS is implementing policies that will govern the application and award process in a manner consistent with the statutory requirements.
The new policies will focus on health professional shortage areas to help bolster the healthcare workforce in rural and underserved areas to the extent slots are available. CMS estimates that this additional funding will total approximately $74 million in support for teaching hospitals from FY 2026 through FY 2036.
Patients with Inadequate Housing
IPPS payment is made based on the use of hospital resources in the treatment of an individual severity of illness, complexity of service, and/or consumption of resources. Generally, a higher severity level designation of a diagnosis code results in a higher payment to reflect the increased hospital resource use.
After review of the impact on resource use generated using claims data, CMS is finalizing the proposal to change the severity designation of the seven ICD-10-CM diagnosis codes that describe inadequate housing and housing instability from non-complication or comorbidity (NonCC) to complication or comorbidity (CC), based on the higher average resource costs of cases with these diagnosis codes compared to similar cases without these codes. The finalized policy will more accurately reflect the resource costs associated with each healthcare encounter when hospitals treat individuals who have inadequate housing and will also improve the reliability and validity of the coded data.
New Technology Add-on Payment
CMS is finalizing the proposal to increase the New Technology Add-on Payment (NTAP) percentage from 65 percent to 75 percent for certain gene therapies approved for new technology add-on payments when indicated and used specifically for the treatment of SCD, beginning in FY 2025 and concluding at the end of the 2- to 3-year newness period for each such therapy.
CMS is finalizing the proposal to use the start of the fiscal year, October 1, instead of April 1, to determine whether a technology is within its 2- to 3-year newness period. This change will be effective starting in FY 2026 for new applicants for NTAP and when extending NTAP for an additional year for technologies initially approved for NTAP in FY 2025 or a subsequent year.
In addition, CMS is finalizing the proposal to no longer consider an FDA marketing authorization hold to be an inactive status for the purpose of NTAP application eligibility beginning with applications for NTAP for FY 2026.