CMS FINAL RULES: IMPROVEMENTS FROM PROPOSED BUT NOT ENOUGH TO MOVE THE NEEDLE

CMS issued the FY2025 final rules for its Inpatient venues of care including short term acute care hospitals, long term acute care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities and skilled nursing facilities.  While increases were slightly higher than those proposed earlier this year, most will continue to struggle with the increased cost of care.

• All venues: While a positive move by CMS to show positive increases across the board, net increases of between 2.2% to 4.2% for these inpatient venues of care is incommensurate to the rising costs of healthcare. 

• Long Term Acute Care Hospitals: Despite a decrease of the proposed fixed loss threshold, the finalized amount will significantly impact reimbursement for patients that require extensive care and incur significant charges for a long term acute care stay. The final rule increases the amount from $59,873 to $77,048 with no transitional period.  

• Inpatient Rehabilitation Facilities and Inpatient Psychiatric Facilities: For IRFs and IPFs transitioning from rural to urban status based on CBSA revisions, CMS finalized the phase out of rural adjustments.   The phase-out will occur by two-third in FY2025 and one-third in FY2026.  There will be no adjustment for FY2027. Although the number of providers is not expected to be large, the impact to those providers may be significant.

• Skilled Nursing Facilities: CMS finalized the proposed enforcement changes of Civil Monetary Penalties that can be incurred for deficiencies in patient safety areas. This change could create a devastating impact to providers that are working to correct deficiencies while continuing to incur per diem and per instance penalties.

In addition to the above, the following includes an overview of key final rules. 

FY 2025 Inpatient PPS Final Rules

On August 1, 2024, CMS issued its FY 2025 Inpatient PPS Final Rules.  While there are positive increases as far as rate adjustments, the percentage of increase is incommensurate to the rising costs of care and may result in continued struggle for financial viability of hospitals.  

• Payment Update
  • CMS finalized a 2.9% increase in IPPS payments after an increase in market base of 3.4% and a productivity reduction of 0.5%. For any hospitals that do not meet quality reporting requirements and/or meaningful use requirements, the payments will be reduced.
• Wage Index
  • CMS finalized revisions to the hospital labor market areas using 2020 Census data.
  • CMS is also finalized plans to continue its low-wage index policy for at least three more years. Under this policy, any hospital under the 25^th percentile will have its wage index increased by half the difference for that individual hospital and the 25^th percentile value for all hospitals.
• Transforming Episode Accountability Model (TEAM)
  • CMS has established a new reimbursement model for selected hospitals to maintain high quality of care for certain surgical procedures. This model aims at high quality of care for high cost, high volume surgical procedures. 
  • Procedures that are a part of the TEAM bundled program include:
    • Lower Extremity Joint Replacement
    • Surgical Hip Femur Fracture Treatment
    • Spinal Fusion
    • Coronary Artery Bypass Graft
    • Major Bowel Procedure
  • Participants have been identified and will monitor expense and quality metrics while increasing access to care.
  • This model would begin in January 2026 and go through December 2030.
• Graduate Medical Education
  • Two hundred residency positions were added under the Consolidated Appropriations Act in 2023 which will start in FY2026. It is stipulated, however, that at least 100 of those must be for psychiatric or psychiatric subspecialty residents.
  • Hospitals receiving positions with be notified by January 31, 2026.
• DRG Changes
  • CMS deleted DRGs 453, 454, 455, 459 and 460
  • CMS created new DRGs 426, 427, 428, 447, 448, 429, 450 and 451
  • CMS is delaying finalization of the comorbidity analysis from FY2021 rules.
• Conditions of Participation
  • CMS finalized the requirements to electronically report COVID-19, influenza and respiratory syntactical virus. This reporting will begin on November 1, 2024.
• Access to Essential Medicines
  • To improve access to care, CMS is finalizing a separate payment to small hospitals to enable a stock of essential medicines. 
• Inpatient Quality Reporting
  • Under the FY2025 rules, CMS is adding seven new quality measures, removing five and modifying two measures. The seven new quality measures include the following:
    • Hospital Harm -Falls with Injury (beginning CY2026)
    • Hospital Harm- Post Operative Respiratory (beginning CY2026)
    • 30 day Standardized Risk- Standardized Death Rate among Surgical Patients with Complications (July 1,2023- June 30, 2025)
    • Patient Safety Structural Measure (beginning CY 2025)
    • Age Friendly Structural Measure (beginning CY2025)
    • Catheter-Associated Urinary Tract Infection Standardized Infection Ratio stratified for oncology locations (beginning CY2026)
    • Central Line- Associated Bloodstream Infection Stanrdized Infection Ratio stratified for oncology locations (beginning CY2026)
  • The five quality measures being removed include the following:

• • • Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Acute Myocardial Infarction (beginning with FY2026 payment determination)
    • Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Heart Failure (beginning with FY2026 payment determination)
    • Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Pneumonia (beginning with FY2026 payment determination)
    • Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty (beginning with FY2026 payment determination)
    • Death Among Surgical Inpatients with Serious Treatable Complications (beginning with FY2027 payment determination)

• The two quality measures being modified include the following:
  • Global Malnutrition Composite Score – adding patients 18-64 to current base (beginning with CY2026)
  • Hospital Consumer Assessment of Healthcare Providers and Systems Survey measure- add three new sub-measures, remove one sub measure and revisions of one sub measure (beginning with CY2025)

FY 2025 Long Term Care Hospital PPS Final Rules

On August 1, 2024, CMS issued its FY2025 LTCH PPS Final Rules.  There are changes proposed to standard and site neutral rate cases, with substantial changes proposed for the fixed loss amount for high cost outlier cases. Key proposed changes are noted below.

• Payment Update
  • The overall payment update will increase payments by 2.2% with updates to both standard rate as well as site neutral cases.
    • Standard LTCH PPS payments will increase by 2.0%
    • Site Neutral LTCH PPS payments will increase by 4.2%
  • The FY25 standard rate is $49,383.26 against a FY24 standard rate of $48,116.62
  • High Cost Outlier Threshold
    • CMS will increase the fixed loss amount from $59,873 (FY24) to $77,048 (FY25). This is lower than the $90,921 fixed loss amount in the proposed rule but is still a significant increase with severe impact to this venue of care.
  • LTCH PPS Market Basket Rebase
    • Utilizing cost report data from FY2022, CMS re-evaluated utilization and updated the market basket. While the methodology previously used remains the same, the weighting of contract labor cost category will increase to 12.6% from 4.4%. 
  • LTCH Quality Reporting
    • There are no proposed updates to the LTCH Quality Reporting Program for FY2025.
    • There are, however, four measures for patient assessment items beginning with the FY2028 LTCH QRP related to social determinants of health:
      • Living Situation (1 item)
      • Food (2 items)
      • Utilities (1 item)
    • CMS is finalizing the modification to the Transportation patient assessment items.
    • CMS Finalized the extension of the window for admission assessment from 3 to 4 days beginning with patients admitted October 1, 2026.

FY2025 Skilled Nursing Facility Final Rules

On July 31, 2024, CMS issued its final rules for FY 2025 for Skilled Nursing Facilities.  Highlights of the proposed rules include the following:

• Payment Update
  • CMS proposes an overall adjustment of 4.2%. Factors comprising this update include a 3.0% market basket update, productivity reduction of less than 0.5% and a 1.7% forecast error adjustment to the FY2023 market basket.
  • CMS is rebasing the SNF market basket to a 2022 base year. This also includes an update to the SNF PPS wage index.  By using the Core-Based Statistical Area (CBSA), this plan should provide greater accuracy for costs associated within the facility location.
• Technical Changes to the Patient Driven Payment Model (PDPM)
  • CMS is moving forward with finalizing changes ot the PDPM code mapping. The changes are anticipated to allow for more accurate primary diagnoses for skilled services.
• Nursing Home Enforcement Authority
  • Of greatest impact within the final rules is the revision of enforcement regulations which include the authority to impose civil monetary penalties for deficiencies in quality or safety on a per diem and per instance basis. These revisions will allow an increase in the amount of CMPs to allow for national consistency.
• SNF Quality Reporting
  • There are no proposed updates to the SNF Quality Reporting Program for FY2025.
  • There are, however, proposed measures for futures dates such as new patient assessment items beginning with residents admitted on October 1, 2025.
  • The four new items include Social Determinants of Health elements including:
    • Living Situation (1 item)
    • Food (2 items)
    • Utilities (1 item)
  • CMS is also finalizing an IRF -PAI modification pertaining to transportation which will begin with patients admitted on or after October 1, 2025
  • CMS is finalizing a policy pertaining to participation in a data validation process beginning FY2027. The proposal would adopt the same validation process for SNF QRP as is in place for the SNF Value Based Purchasing (VBP) Program.
• SNF Value Based Purchasing Program
  • CMS is finalizing updates to the VBP program pertaining to measure selection, retention and removal policy, a technical measure update policy and updates to the review and corrections policy that would go into effect FY 2026.

FY2025 Inpatient Rehabilitation Facility PPS Final Rules

On July 31, 2024, CMS issue its final rules for the FY 2025 Inpatient Rehabilitation Facility PPS.   Below are highlights of the final rules.

• Payment Update
  • The overall payment update will increase payments by 3.0% after a market basket update of 3.5% and a productivity reduction of 0.5%. This is a slight increase from what was included within the proposed rules. The conversation factor for standard payments will increase from $18,541 to $18,907.
  • CMS also finalized the update to the outlier threshold by 15.5% from $10,423 to $12,043 which limits outlier payments to 3% of total payments.
• Labor Related Share
  • The FY2025 final rule increased the labor related share from 74.1% to 74.4%.
• Wage Index Adjustment
  • CMS finalized the IRF PPS wage index using the Office of Budget and Management data which revised the current CBSAs. There will be a 5% cap implemented on negative wage index changes.
  • For IRFs transitioning from rural to urban status based on CBSA revisions, CMS finalized the phase out of rural adjustments. The phase-out will occur by two-thirds in FY2025 and one-third in FY2026.  There will be no adjustment for FY2027.
• IRF Quality Reporting
  • There are no updates to the IRF Quality Reporting Program for FY2025.
  • There are, however, measures such as new patient assessment items beginning in FY2028. The four new items include Social Determinants of Health elements including:
    • Living Situation (1 item)
    • Food (2 items)
    • Utilities (1 item)
  • CMS is also finalizing an IRF-PAI modification pertaining to transportation which will begin with patients admitted on October 1, 2026.
  • CMS is finalizing the removal of the Admission Class item from the IRF-PAI which will be effective on October 1, 2026. It was noted that IRFs are no longer required to collect this item with patient admissions beginning October 1, 2024.
  • CMS solicited comments on two topics: (1) a composite measure on patient vaccination, pain management and depression, and (2) development of a methodology for 5 star quality rating for IRFs.  Feedback was received and CMS will be using this information for further development.

FY 2025 Inpatient Psychiatric Facility (IPF) PPS Final Rules

On July 31, 2024, CMS issued its final rules for the inpatient psychiatric facility venue of care.  Key proposed changes include the following:

• Payment Update
  • The overall payment update will increase payments by 2.8% after a market basket update of 3.3% and a productivity reduction of 0.5%
  • CMS also finalized the update to the outlier threshold which would limit outlier payments to 2% of total payments.
• Patient Level Adjustment Factors
  • CMS finalized revisions to the patient level adjustment factors including principal diagnosis, comorbidities, age and other per diem adjustments.
  • This revision is based on an updated regression model.
• Electroconvulsive Therapy
  • CMS is increasing to increase the per treatment amount for electroconvulsive therapy (ECT) treatment from $385.58 to $661.52. The final amount is slightly higher than that which was proposed.
• Wage Index Adjustment
  • CMS will be updating the IPF PPS wage index using the Office of Budget and Management data which revised the current CBSAs.
  • For IPFs transitioning from rural to urban status based on CBSA revisions, CMS has finalized a phase out in rural adjustments. The phase-out will occur by two-thirds in FY2025 and one-third in FY2026.  There is no adjustment for FY2027.
• Cost Reporting
  • CMS finalized eligibility for all-inclusive cost reporting to Indian Health Service hospitals, government owned or tribally owned inpatient psychiatric facility hospitals.
• IPF Quality Reporting
  • CMS finalized the addition of one new measure for FY2025, a 30-Day All Cause Emergency Department Visit Following an IPF discharge.
  • CMS did not finalize the proposal to change in the cadence for patient level data submission from annual to quarterly.

FY 2025 Hospice Payment Rate Final Rule

On July 30, 2024, CMS issued its final rules for payment updates for the Hospice revenue of care. Key updates include the following:

• Payment Update
  • The overall payment update will increase payments by 2.9% after a market basket update of 3.4% and a productivity reduction of 0.5%.
  • CMS is also proposing to update the outlier threshold which would limit outlier payments to 2% of total payments.
  • Any Hospice delinquent in quality data submission will experience a -1.1% update.
  • CMS included a statutory cap for FY2025 of $34,465.34 which is an increase from FY2024 cap of $33,494.01.
• Wage Index Adjustment
  • CMS will be updating the statistical areas using the Office of Budget and Management data which revised the current CBSAs.
  • Hospices experiencing a negative impact by the change will be limited to a 5% maximum reduction to their 2024 wage index.
• Hospice Conditions of Participation
  • Language changes are being made to address discrepancies with the Medical Director and Physician Member of the Interdisciplinary Team Group
• HQRP
  • CMS finalized two process measures which are anticipated to begin in FY2028.
    • Timely Follow-Up for Pain Impact
    • Timely Follow-Up for Non-Pain Symptom Impact.
  • These measures will be collected through the new Hospice Outcomes and Patient Evaluation (HOPE) collection instrument which begins in FY2025. The HOPE tool replaces the Hospice Item Set (HIS) and allows for data collection throughout the stay and not only at admission and discharge.
• Hospice CAHPS Survey
  • CMS has finalized the following changes:
    • Addition of web-mail mode
    • Simplification of survey
    • Modification of protocols
    • Addition of Care Preferences measures
    • Revision to Hospice Team Communication and Getting Hospice Care Training measures
    • Removal of items consistent with other changes in the rule

For more information on the Final Rules, please contact Advis.