The Centers for Medicare & Medicaid Services (CMS) on Aug. 1 released the fiscal year (FY) 2025 Inpatient Prospective Payment System (IPPS) final rule. Unless otherwise noted, policies will go into effect Oct. 1.
In the final rule, the CMS finalized an increase to the payment rate by 2.9% for items and services paid under IPPS for FY 2025 and estimated Medicare disproportionate share hospital (DSH) uncompensated care-based payments to be $5.705 billion in 2025. The agency finalized several additional policy changes including continuing their low-wage index policy despite legal challenges, updates to labor market areas for wage index based on 2020 census data, establishing an add-on payment for maintaining a buffer stock of essential medicines for small, independent hospitals, increasing the severity level designation for Z codes describing inadequate housing and housing instability, and updating hospital and Critical Access Hospital infection prevention and control and antibiotic stewardship programs' Conditions of Participation.
For the 200 graduate medical education (GME) positions made available under Section 4122 of the Consolidated Appropriations Act, 2023 (P.L. 117-328), the CMS finalized the proposed distribution methodology that will award all qualifying hospitals that submit timely applications up to 1.0 FTE. If slots remain after all qualifying hospitals have received awards, the CMS will use the same Health Professional Shortage Area (HPSA) distribution methodology that it finalized for the Section 126 distribution, meaning hospitals with the highest HPSA scores would receive prioritization. The CMS will open applications for Section 4122 slots this fall, with an application deadline of March 31, 2025. Awards through Section 4122 will be effective July 1, 2026. Additionally, the CMS finalized a policy that for rounds 4 and 5 of section 126 distributions, the distribution of slots will be prioritized to hospitals that qualify as geographic HPSAs, regardless of HPSA score. Any remaining slots will use the methodology finalized in the FY 2022 IPPS final rule.
The CMS chose not to adopt the proposed definition of “new residency program,” which centered on whether 90% of residents had not previously trained in the program specialty. In the final rule, the CMS published another request for information for invested parties to comment on the definition of “new program.” In the final rule, the CMS provided public notice that the GME slots from the closure of Sacred Heart Hospital in Eau Claire, Wisconsin, are available for redistribution through Section 5506 of the Affordable Care Act (P.L. 111-148).
The final rule also included policies to modify quality reporting and performance requirements as well as a new mandatory Transforming Episode Accountability Model (TEAM) beginning in 2026.