Hospitals get 2.9% payment increase in final rule
For 2025, CMS is increasing the long-term care hospital standard payment rate by 3%.
Photo: Helen King/Getty Images
The Centers for Medicare and Medicaid Services is increasing payment to inpatient hospitals by 2.9%, a rate the American Hospital Association said is unsustainable.
"CMS' payment updates for hospitals will exacerbate the already unsustainable negative or break-even margins many hospitals are already operating under as they care for their patients," said Molly Smith, group vice president for Public Policy for the AHA. "The AHA is deeply concerned about the impact these inadequate payments will have on patient access to care, especially in rural and underserved communities."
The AHA said it is also troubled that the final long-term care hospital outlier threshold is nearly 30% higher than it is currently.
"Since FY 2021, this figure has increased by more than 180%, which forces these hospitals to absorb hundreds of thousands of dollars in additional losses when caring for the sickest patients," the AHA said.
The AHA also voiced concern about the rule's mandatory bundled payment model for five different surgical episodes.
"Not only is the model extremely similar to other bundled payment approaches that have failed to meet the statutory criteria for expansion as they have not reduced program costs or generated net savings, it puts at particular risk many hospitals that are not of an adequate size or in a position to support the investments necessary to succeed," the AHA said.
Premier's Vice President of Government Affairs Soumi Saha said: "The continued insufficiency of Medicare payments to hospitals year over year is a threat to the sustainability of American healthcare. A mere 2.9% increase is alarmingly below the true cost of providing care and does not address the stark realities of inflation and operational costs, persistent labor shortages and an aging patient population that will require significantly greater care than generations prior."
CMS released the 2025 Hospital Inpatient Prospective Payment System and Long-Term Care Hospitals PPS Final Rule on Thursday.
Last year, inpatient and long-term care hospitals got a 3.1% operating payment rate increase, a rate the AHA deemed inadequate.
WHY THIS MATTERS: PAYMENTS
The 2.9% increase reflects a projected hospital market basket percentage increase of 3.4%, reduced by a 0.5 percentage point productivity adjustment. If hospitals fail to successfully participate in the quality reporting program and/or are not meaningful EHR users, their payment update will be decreased, CMS said.
CMS expects the update in rates will generally increase hospital payments by $2.9 billion. Specifically, operating and capital payment rates will increase hospital payments by approximately $3.2 billion.
In addition, CMS projects Medicare uncompensated care payments to disproportionate share hospitals will decrease in 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 2025, primarily driven by the approval of new technology add-on payments for several technologies.
Under current law, additional payments for Medicare-Dependent Hospitals and the temporary change in payments for low-volume hospitals are set to expire at the end of the year.
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.
For 2025, CMS is increasing the long-term care hospital standard payment rate by 3%. These payments for discharges paid the LTCH standard payment rate are expected to increase by approximately 2%, or $45 million, due primarily to a projected 0.8% percentage point decrease in high-cost outlier payments.
CMS is finalizing an increase to the LTCH outlier threshold for 2025 that is higher than historical norms. This increase is needed to ensure that estimated outlier payments are approximately 8% of total payments, as required by law.
Continuation of the Low-Wage Hospital Policy
CMS is extending the temporary policy finalized in the final rule for 2020 that addresses wage index disparities affecting low-wage index hospitals, which includes many rural hospitals. The policy will be extended for at least three more years, beginning in 2025.
CMS said it believes it is necessary to wait until the low wage index hospital policy has been in place for a sufficient period of time following the end of the COVID-19 public health emergency to evaluate its effects before making any decision to modify or discontinue the policy.
Separate Payment for Access to Essential Medicines
To combat drug shortages, CMS is finalizing a separate payment under the IPPS for small, independent hospitals to establish and maintain a buffer stock of essential medicines as a preventive measure to guard against future shortages. These hospitals are particularly vulnerable to supply disruptions during shortages because they lack the resources of hospitals that are larger and/or are part of a chain organization, CMS said.
Changes to New Technology Add-On Payment
New gene therapies hold tremendous promise to cure previously incurable diseases, including sickle cell disease (SCD). To better promote access to these potentially lifesaving therapies and consistent with CMS' Sickle Cell Disease Action Plan, CMS is finalizing the proposal to increase the NTAP percentage from 65% to 75% for certain gene therapies approved for new technology add-on payments when indicated and used specifically for the treatment of SCD, beginning in 2025 and concluding at the end of the two- to three-year newness period for each such therapy.
CMS is finalizing the proposal to use the start of the fiscal year, Oct. 1, instead of April 1, to determine whether a technology is within the newness period. This change will be effective starting in 2026 for new applicants for NTAP and when extending NTAP for an additional year for technologies initially approved in 2025 or a subsequent year.
THE LARGER TREND
The 2020 low wage index hospital policy and the related budget neutrality adjustment are the subject of pending litigation in multiple courts.
On July 23, the Court of Appeals for the D.C. Circuit held that the Health and Human Services Secretary lacked authority to adopt the policy and that the policy and related budget neutrality adjustment must be vacated.
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 v. Becerra has not expired. The government is evaluating the decision and considering options for next steps, CMS said.
Email the writer: SMorse@himss.org
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