CMS 2025 Final Hospital Inpatient Payment Rule is Official

After backlash from stakeholders, in the final rule on August 1 the Centers for Medicare and Medicaid Services (CMS) increased the inpatient hospital stay from 2.6% as was proposed in the April draft rule, to 2.9% in fiscal 2025. Despite the increase, stakeholders continue to share concerns that the increase is not enough.

Senior Vice President of Government Affairs at Premier Soumi Saha, reacted to the rule,

The continued insufficiency of Medicare payments to hospitals year over year is a threat to the sustainability of American healthcare.

Premier is a healthcare improvement company with more than 4,350 member hospitals and health systems.

CEO Chip Kahn of The Federation of American Hospitals has been vocal saying that Medicare payments have not kept up with rising hospital expenses. Kahn said,

Frankly, these in adequate payment updates and CMS’ real Medicare DSH cuts for the most vulnerable leave hospitals struggling to meet patient needs.

Long term care hospitals were given a 3% rate increase. Along with the pay bump CMS also rolled out a five-year mandatory Transforming Episode Accountability Model (TEAM), according to Inside Health Policy.  TEAM will test common more costly procedures typically performed at hospitals to see if they can reduce Medicare spending while also enhancing care quality.

To receive the 2.9% increase, certain acute care hospitals must:

1.     Receive CMS payments under the Inpatient Prospective Payment System (IPPS)

2.     Successfully participate in the Hospital Inpatient Quality Reporting program and,

3.     Become “meaningful” users of EHR

CMS Administrator Chiquita Brooks-LaSure said, “The fiscal year 2025 inpatient hospital payment rule will ensure that hospitals in historically underserved areas will be able to provide high-quality care to people with Medicare and their communities while being rewarded for better outcomes.”

One element to the final rule will address the unhoused by granting higher payments to hospitals when a patient experiences housing insecurity. Other social determinants of health such as food and utility instability or access to transportation will be taken into account in the reporting. Additionally, a Technology Add-On Payment was included to support small, independent hospitals improve access to gene therapies for sickle cell disease.

Other changes include the elimination of five quality measures and seven new measures to include post-operative respiratory failure and a 30-day risk-standardized death rate among surgical patients. Two existing quality measures were modified. Liz Fowler, Director of CMS’ Innovation Center said, “Before and after surgery, people on Medicare often experience fragmented care, especially following hospital discharge. This can lead to complications, prolonged recovery, unnecessary care, and even readmissions.”

Meanwhile, stakeholders will continue to push for more increases for hospital reimbursements. The Federation of American Hospitals believes the updates have failed to accurately reflect the increasing high cost of hospital care and inflation. Saha recommends CMS take advantage of current data on labor costs, operation and financial pressures hospitals face to calculate rates which truly reflect the costs of providing care.

Read more about the final rule from CMS and checkout more on the industry’s reaction from Healthcare Innovation reporters.