2025 IPPS payment rule criticized

Editor's Note

The American Hospital Association (AHA) criticized new inpatient prospective payment system rates issued August 1 by the Centers for Medicare and Medicaid Services (CMS), citing the potential of financial struggles for hospitals and reduced access for patients, particularly in rural or underserved areas.

Under the new rule, most provisions of which will take effect October 1, Medicare inpatient prospective payment system rates will increase 2.9% for fiscal year 2025. Reflecting a hospital market basket increase of 3.4% and a 0.5% productivity cut, the increase applies to hospitals that are meaningful users of electronic health records and submit quality measure data, AHA reports.

Overall payments are expected to rise by $2.9 billion. This includes a $200 million reduction in disproportionate share hospital payments due to a lower uninsured rate, a $300 million increase in new medical technology payments, and a $400 million decrease in rural health payments unless specific programs are extended by legislation. According to AHA, these payment updates are likely to worsen financial challenges for hospitals as well as patient access to care, particularly in rural and/or underserved communities.

CMS also finalized several provisions in the new Transforming Episode Accountability Model (TEAM), AHA reports. These include mandatory participation for inpatient PPS hospitals in certain areas, a five-year model term starting January 1, 2026, and five different surgical episode categories. The model also offers a lower discount factor and a longer glidepath to downside risk for safety net hospitals. However, AHA argues this mandatory bundled payment model may harm hospitals lacking adequate size or resources.

Other aspects of the rule detailed in the report include new means of determining the area wage index, a separate IPPS payment for small, independent hospitals to access essential medicines, new graduate medical education slots, and a requirement for hospitals to report data on acute respiratory illnesses starting November 1.