CMS Issues Proposed IPPS and LTCH PPS Rule

The Centers for Medicare and Medicaid Services (CMS) issued proposed rules for the FY 2025 inpatient prospective payment system (IPPS) and long-term care hospital (LTCH) payment system. The agency proposes raising payments and the industry decried the boost as insufficient.

Hospitals will receive a 2.6% increase or $2.9 billion across the industry. According to RevCycle Intelligence, the payment reflects a market basket percentage increase of 3.0% and a decrease of 0.4% for a reduction in productivity. LTCHs will receive a 2.8% increase and LTCH PPS payments for discharges will also go up 1.2% for $41 million.

The rule would also increase technology-related add-on payments to improve access for gene therapy for sickle cell disease and rural hospitals would be reimbursed for creating and maintaining a surplus precautionary supply of essential medicines. Modern Healthcare reports that the low-wage hospital policy that caps wage index decreases at 5% would be extended through 2027.

Quality reporting will also get some tune ups, this time for the Inpatient Quality Reporting Program (IQR) and the Promoting Interoperability Program. The Healthcare Financial Management Association explains that the IQR tweaks consist of five sub-components including leadership commitment to eliminating preventable harm and the introduction of a Failure-to-Rescue measure for surgical patients with complications.

Hospitals were predictably upset with the proposal as nearly every PPS proposal is now met with the industry describing the pay bumps as “woefully inadequate,” citing the COVID-19 pandemic, inflation and healthcare workforce shortages as concerns. For example, Soumi Saha, senior vice president of governmental affairs with Premier via Chief Healthcare Executive:

With a mere 2.6 percent payment increase that fails to align with the stark realities of inflation and operational costs, persistent labor shortages and an aging demographic, the sustainability of our healthcare system is jeopardized.

The American Hospital Association elaborated that these specific issues make specifics within the proposed rule unfeasible:

We continue to encourage CMS to ensure that episode-based payment models are voluntary. Many organizations are not of an adequate size or in a financial position to support the investments necessary to transition to mandatory bundled payment models. Requiring them to take on risk for large, diverse bundles may require more financial risk than they can bear.

And the Federation of American Hospitals recognized that they have been here before:

Here we go again. Just like last year, with inflation still stubbornly high, CMS fails to meet the moment by once again proposing an inadequate payment update that will leave hospitals struggling to meet the needs of patients.

The proposed IPPS and LTCH PPS Fact Sheet can be read in full at the Centers for Medicare and Medicaid Services.