In recent weeks, CMS has issued the FY2025 proposed 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 a majority of the updates will not have a significant negative impact to these venues of care, there are a few notable proposed changes that could have a significant effect.
- All venues: While a positive move by CMS to show positive increases across the board, net increases of between 1.6% to 4.1% for these inpatient venues of care is incommensurate to the rising costs of healthcare. Without significant increases, it will continue to be difficult to maintain financial viability for many facilities.
- Long Term Acute Care Hospitals: The proposed fix loss threshold will significantly impact reimbursement for patients that require extensive care and incur significant charges for a long term acute care stay. Despite the transitional year to fully implement this change, raising the threshold from $59,873 to $90,921 will increase the burden on LTACHs to provide extended care without the ability to reach additional reimbursement thresholds.
- Inpatient Rehabilitation Facilities and Inpatient Psychiatric Facilities: For IRFs and IPFs transitioning from rural to urban status based on CBSA revisions, CMS is proposing to phase out rural adjustments. The phase-out would occur by two-third in FY2025 and one-third in FY2026. There is no adjustment proposed for FY2027. Although the proposed number of providers is not expected to be large, the impact to those providers may be significant.
- Skilled Nursing Facilities: While patient quality and safety are the highest priority for both providers and regulators alike, the proposed revision of enforcement regulations would allow for an increase in the amount of Civil Monetary Penalties that can be incurred for deficiencies in those areas. This proposed 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 proposed rules as well as the dates by which comments must be submitted to CMS. If you would like assistance in submitting comments to CMS and/or strategic planning for any proposed changes, please contact our office to further discuss.
FY 2025 Inpatient PPS Proposed Rules
On April 10, 2024, CMS issued its FY 2025 Inpatient PPS Proposed Rules. While there are positive proposals as far as rate increase this percentage increase is incommensurate to the rising costs of care and may result in continued struggle for financial viability of hospitals.
- Payment Update
- CMS is proposing a 2.6% increase in IPPS payments after an increase in market base of 3.0% and a productivity reduction of 0.4%.
- Wage Index
- CMS is proposing to revise the hospital labor market areas.
- CMS is also proposing to continue its low-wage index policy. Under this policy, any hospital under the 25th percentile will have its wage index increased by half the difference for that individual hospital and the 25th percentile value for all hospitals.
- Transforming Episode Accountability Model (TEAM)
- CMS is proposing 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.
- Participants would monitor expense and quality metrics while increasing access to care.
- This proposed 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.
- CMS is proposing to distribute at least 10% of the total residency positions among four hospital types: (1) hospitals in rural areas; (2) hospitals exceeding their residency cap; (3) hospitals within states that maintain new medical schools and (4) hospitals that serve health professional shortage areas (HPSA).
- DRG Changes
- Under the rules, CMS is proposing to add 10 new MS-DRGs and eliminate 3. Most are maintained in the category pertaining to the Musculoskeletal system.
- CMS is proposing to finalize the comorbidity analysis from FY2021 rules.
- CMS is also proposing changes to the severity level assigned to 7 ICD-10 codes related to the social determinants of health.
- Conditions of Participation
- Under this rule, CMS would require the continued reporting once per week on COVID-19, influenza and respiratory syntactical virus that was instituted under the pandemic.
- Access to Essential Medicines
- To improve access to care, CMS is proposing a separate payment to small hospitals (100 beds or less) to enable a six month stock of essential medicines.
- Inpatient Quality Reporting
- Under the FY2025 rules, CMS is proposing to add seven new quality measures related to safety practices, care of older adults, death rates among surgical patients, falls and post-operative respiratory failure, central line associated bloodstream infections and catheter-associated urinary tract infections in oncology units.
- CMS is also proposed to remove measures over the next three fiscal years and other mandatory reporting for other harm related measures.
CMS will accept comments by June 10, 2024.
FY 2025 Long Term Care Hospital PPS Proposed Rules
On April 10, 2024, CMS issued its FY2025 LTCH PPS Proposed 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 1.6% with updates to both standard rate as well as site neutral cases. Based on LTCH cases in FY2023, the estimated case amounts are 71% of discharges reimbursed under standard rate and 29% reimbursed under the site neutral rate.
- Standard Rate Cases
- CMS is proposing to increase standard rates cases by 1.2%. This includes a 3.2% increase that is impacted by a 0.4% productivity reduction mandate. There are also proposed decreases to High Cost Outlier payments that impact the standard rate impact by 1.3%. The proposed standard rate is an increase to $49,262.80 against a FY2024 standard rate of $48,116.62.
- High Cost Outlier Threshold
- The proposed increase in the fixed loss amount from $59,873 to $90,921 will have the largest impact to LTCHs if passed as proposed. This will make it harder to reach high cost outlier payments for those cases requiring extensive care, and risk financial ability to care for this patient population. CMS recognizes the severity of this impact and is proposing a one-year transition amount of FY 2025 in the amount of $75,397.
- Site Neutral Rate Cases
- The proposed increase for site neutral cases is 4.7% over FY2024 rates. CMS has estimated that 12% of FY2025 PPS payments will be comprised of site neutral patients.
- LTCH PPS Market Basket Rebase
- Utilizing cost report data from FY2022, CMS is re-evaluating utilization and updating the market basket. While the methodology previously used remains the same, the weighting of contract labor cost category is proposed to 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, proposed measures for futures dates such as new patient assessment items beginning in FY2028 related to social determinants of health and extension of the window for admission assessment from 3 to 4 days beginning with patients admitted October 1, 2026.
- CMS is also soliciting 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 LTCHs.
CMS will accept comments by June 10, 2024.
FY2025 Skilled Nursing Facility Proposed Rules
On March 28, 2024, CMS issued its proposed rules for FY 2025 for Skilled Nursing Facilities. Highlights of the proposed rules include the following:
- Payment Update
- CMS proposes an overall adjustment of 4.1%. Factors comprising this update include a 2.8% market basket update, productivity reduction of 0.4% and a 1.7% forecast error adjustment to the FY2023 market basket.
- CMS is also proposing a rebasing to the SNF market basket.
- Technical Changes to the Patient Driven Payment Model (PDPM)
- CMS is proposing code mapping changes to it PDPM ICD-10 code mapping.
- Nursing Home Enforcement Authority
- Of greatest impact within the proposed rules is the proposed 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 proposed 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 in FY2027.
- CMS is also proposing 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
- There are proposed updates ot the VBP program pertaining to measure selection, retention and removal policy that would go into effect FY 2026.
CMS will accept comments by May 28, 2024.
FY2025 Inpatient Rehabilitation Facility PPS Proposed Rules
On March 27, 2024, CMS issue its proposed rules for the FY 2025 Inpatient Rehabilitation Facility PPS. While there are no major changes to the IRF PPS, the following are key highlights of the proposed rules.
- Payment Update
- The overall payment update will increase payments by 2.8% after a market basket update of 3.2% and a productivity reduction of 0.4%. The proposed conversation factor for standard payments would increase from $18,541 to $18,872.
- CMS is also proposing to update the outlier threshold which would limit outlier payments to 3% of total payments.
- Labor Related Share
- The FY2025 proposal will increase the labor related share from 74.1% to 74.2%.
- Wage Index Adjustment
- CMS will be updating 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 is proposing to phase out rural adjustments. The phase-out would occur by two-third in FY2025 and one-third in FY2026. There is no adjustment proposed for FY2027.
- IRF Quality Reporting
- There are no proposed updates to the IRF Quality Reporting Program for FY2025.
- There are, however, proposed measures such as new patient assessment items beginning in FY2028.
- CMS is also soliciting 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.
CMS will accept comments by May 28, 2024.
FY 2025 Inpatient Psychiatric Facility (IPF) PPS Proposed Rules
On March 28l 2024, CMS issued its proposed 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 2.6% after a market basket update of 3.1%, a productivity reduction of 0.4% and the update to the outlier threshold.
- CMS is also proposing to update the outlier threshold which would limit outlier payments to 2% of total payments.
- Patient Level Adjustment Factors
- CMS is proposing to change the patient level adjustment factors including principal diagnosis, comorbidities, age and other per diem adjustments.
- Electroconvulsive Therapy
- CMS is proposed to increase the per treatment amount for electroconvulsive therapy (ECT) treatment from $385.58 to $660.30.
- 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 is proposing to phase out rural adjustments. The phase-out would occur by two-third in FY2025 and one-third in FY2026. There is no adjustment proposed for FY2027.
- Cost Reporting
- CMS is proposing to limit all-inclusive cost reporting to government owned or tribal owned inpatient psychiatric facility hospitals.
- IRF Quality Reporting
- CMS is proposing to add one new measure for FY2025, a 30-Day All Cause Emergency Department Visit Following an IPF discharge.
- CMS is also proposing a change in the cadence for patient level data submission from annual to quarterly.
- CMS is also soliciting comments on two topics: (1) elements for collection under the patient assessment and (2) future revisions to IPF PPS facility level adjustments.
CMS will accept comments by May 28, 2024.
Published: April 16, 2024
