The Centers for Medicare & Medicaid Services (CMS) has recently issued a proposed rule for the fiscal year (FY) 2025 Medicare hospital inpatient prospective payment system (IPPS) and long-term care hospital prospective payment system (LTCH PPS). This proposed rule aims to update Medicare fee-for-service payment rates and policies for inpatient hospitals and LTCHs.

Under the IPPS and LTCH PPS payment systems, CMS establishes base payment rates for inpatient stays based on factors such as diagnosis, services provided, and severity of illness. The proposed rule includes major provisions related to payment rates, adjustments, and updates for both IPPS hospitals and LTCHs.

For general acute care hospitals paid under the IPPS, CMS projects a 2.6% increase in operating payment rates for FY 2025. This increase reflects a projected hospital market basket percentage increase of 3.0%, adjusted by a 0.4 percentage point productivity adjustment. Additionally, CMS expects the proposed changes to increase hospital payments by approximately $3.2 billion, including an increase of $2.9 billion in operating and capital IPPS payment rates.

Furthermore, Medicare uncompensated care payments to disproportionate share hospitals are projected to increase by approximately $560 million in FY 2025. CMS also estimates that payments for inpatient cases involving new medical technologies will increase by approximately $94 million.

Under the LTCH PPS, CMS anticipates a 2.8% increase in the standard payment rate for FY 2025, with LTCH PPS payments projected to increase by approximately 1.2% or $26 million. CMS is seeking comments on the proposed methodology to determine the LTCH PPS outlier threshold and alternative methodologies to lower the threshold.

In an effort to address drug shortages in hospitals, particularly for small, independent hospitals, CMS is proposing a separate payment under the IPPS. This payment would allow these hospitals to establish and maintain a buffer stock of essential medicines for use during future shortages, ensuring a reliable supply of medications for their patients.

CMS is also requesting information on the use of Medicare IPPS payment rates for maternity care by other payers. With a focus on maternal health, the agency aims to assess the differences between hospital resources required for Medicare patients compared to non-Medicare patients. The goal is to gather information on potential disparities and their effect on maternal health outcomes, as well as to explore possible solutions through hospital CoPs.

Additionally, CMS is proposing to update the wage index for inpatient hospital payments based on the latest labor market areas from the Office of Management and Budget (OMB) using 2020 Census data. The agency also plans to extend the low-wage hospital policy, initially implemented in FY 2020, for at least three more years to evaluate its effects and address wage index disparities affecting low-wage index hospitals, including rural hospitals.

The proposed rule is currently open for public comment, and interested parties can download the full document from the Federal Register. CMS will carefully review the feedback received before finalizing the rule, which will then determine the payment rates and policies for FY 2025.

Overall, the proposed changes aim to enhance payment rates, address shortages, and promote better access to care, aligning with CMS's ongoing efforts to ensure quality healthcare for Medicare beneficiaries.