On April 10, 2024, the Centers for Medicare and Medicaid Services (CMS) released the Fiscal Year (FY) 2025 Hospital Inpatient Prospective Payment System (IPPS) proposed rule (link) with accompanying fact sheet (link). This proposed rule provides updates to Medicare payment policies and rates for inpatient stays at general acute care hospitals and long-term care hospitals (LTCHs) for FY 2025. 

This year’s proposed rule includes a 2.6% increase in overall IPPS payments, separate payments for certain hospitals maintaining a buffer stock of essential medicines, and several policies focused on improving health equity. 

Stakeholder comments are due by June 10, 2024. 

Proposed Changes to Payment Rates Under IPPS
The proposed increase in operating payment rates for acute care hospitals paid under IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and meaningfully use electronic health records is projected to be 2.6%  
If finalized, CMS estimates total IPPS payments to increase by approximately $3.2 billion. Operating and capital IPPS payment rates, in particular, may increase hospital payments by approximately $2.9 billion 
CMS estimates that additional payments for inpatient cases involving new medical technologies will increase by approximately $94 million due to the continuation of new technology add-on payments for some technologies.
Alternative New Technology Add-On Payment (NTAP) Pathways for Medical Devices and Antimicrobial Products
CMS received 23 applications for new technology add-on payments for FY 2025 under the new technology add-on payment alternative pathway. Of the 23 applications received under the alternative pathway, seven applications were not eligible for consideration for new technology add-on payment because they did not meet requirements; two applicants withdrew their applications prior to the issuance of this proposed rule. Of the remaining 14 applications, 12 of the technologies received a Breakthrough Device designation:
Annalise Enterprise Computed Tomography Brain (CTB) Triage – Obstructive Hydrocephalus (OH) 
ASTar® System 
cefepime-taniborbactam 
Edwards EVOQUETM Tricuspid Valve Replacement System (Transcatheter Tricuspid Valve Replacement System) 
GORE® EXCLUDER® Thoracoabdominal Branch Endoprosthesis (TAMBE Device) 
LimFlow™ System 
Paradise™ Ultrasound Renal Denervation System 
PulseSelect™ Pulsed Field Ablation (PFA) Loop Catheter 
restor3d TIDAL™ Fusion Cage 
Symplicity Spyral™ Multi-Electrode Renal Denervation Catheter 
Transdermal Glomerular Filtration Rate (GFR) Measurement System utilizing Lumitrace 
TriClip™ G4 
VADER® Pedicle System 
ZEVTERA™ (ceftobiprole medocaril) 

New Technology Add-On Payments (NTAP)
CMS proposing to continue NTAP for the following technologies for FY 2025 (Table II.E.-01 in the proposed rule):
Thoraflex™ Hybrid Device 
ViviStim® Paired VNS System 
GORE® TAG® Thoracic Branch Endoprosthesis 
iFuse Bedrock Granite Implant System 
CYTALUX® (pafolacianine) (ovarian indication) 
CYTALUX® (pafolacianine) (lung indication) 
EPKINLY™ (epcoritamab-bysp) and COLUMVI™ (glofitamabgxbm) 
Lunsumio™ (mosunetuzumab) 
REBYOTA™ (fecal microbiota, livejslm) and VOWST™ (fecal microbiota spores, live-brpk) 
SPEVIGO® (spesolimab) 
TECVAYLI™ (teclistamab-cqyv) 
TERLIVAZ® (terlipressin) 
Aveir™ AR Leadless Pacemaker 
Aveir™ Dual-Chamber Leadless Pacemaker 
Ceribell Status Epilepticus Monitor 
DETOUR System 
DefenCath™ (taurolidine/heparin) 
EchoGo Heart Failure 1.0 
Phagenyx® System 
REZZAYO™ (rezafungin for injection) 
SAINT Neuromodulation System 
TOPS™ System 
XACDURO® (sulbactam/durlobactam) 
Proposed Change to the Calculation of the Inpatient New Technology Add-On Payment for Gene Therapies Indicated for Sickle Cell Disease
CMS is proposing a change to the NTAP percentage from 65% to 75% for the newly approved gene therapies indicated to treat severe sickle cell disease. Two gene therapies are under review in the current IPPS cycle and would be eligible for increased payments if they are awarded NTAP. CMS notes that they have not yet determined whether any gene therapy indicated and used specifically for the treatment of SCD will meet the specified criteria for new technology add-on payments for FY 2025. 

CAR T-Cell Therapies
CMS received a request to expand MS-DRG 018’s title, Chimeric Antigen T-cell therapies and Other T-cell Immunotherapies, to include autologous gene therapies. CMS shared that they do not agree with the MS-DRG request’s basis and will continue with the current titling of MS-DRG 018. CMS solicits feedback on MS-DRG 018 for future consideration.  
Payment for Establishing and Maintaining Access to Essential Medicines
CMS is proposing to establish a separate payment for small, independent hospitals for the IPPS shares of the additional resource costs to voluntarily establish and maintain a 6-month buffer stock of one or more essential medicines, either directly or through contractual arrangements with a pharmaceutical manufacturer, distributor, or intermediary.
A drug will be considered an essential medicine if it is included in the Essential Medicines Supply Chain and Manufacturing Resilience Assessment report (referred to as the ARMI List). 
CMS notes that the appropriate time to establish a buffer stock for a drug is before it goes into shortage. As such, a hospital that newly establishes a buffer stock of the medicine while in shortage will not be eligible for the separate payment; however, if a hospital had already established and was maintaining a buffer stock of that medicine prior to the shortage, the hospital would continue to be eligible for the separate payment for the duration of the shortage. 
CMS defines small, independent hospitals as hospitals with 100 beds or fewer that are not part of a chain organization. 
The separate payment would be for the IPPS share of the additional cost of procuring and maintaining the buffer stock.
Payment adjustments would commence for cost reporting periods beginning on or after October 1, 2024, and could be provided biweekly or as a lump sum at cost report settlement. 
Transforming Episode Accountability Model (TEAM)
CMS is proposing a new mandatory episode-based alternative payment model, titled Transforming Episode Accountability Model (TEAM), running from January 1, 2026, to December 31, 2030. 
Hospitals selected to participate will be responsible for managing the cost of care for the following surgical procedures: Lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure.
Hospitals will continue to bill Medicare FFS as usual, with the total cost compared to a target price set by CMS. 
CMS provides a list of items and services that are included in an episode’s cost of care, which includes Part B drugs and biologics. 

Hospital Inpatient Quality Reporting (IQR) Program
CMS is proposing the following changes to the Hospital IQR Program. This program is a pay-for-reporting program that reduces payments to hospitals which don’t meet requirements.
FY 2026 payment determination
CMS is proposing to remove the following measures:
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Acute Myocardial Infarction (AMI Payment).  
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Heart Failure (HF Payment).  
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Pneumonia (PN Payment). 
Hospital-level, Risk-Standardized Payment Associated with a 30-day Episode of Care for Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty (THA/TKA Payment). 
CY 2025 reporting period/FY 2027 payment determination
CMS is proposing to add the following measures:
Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications (Failure-to-Rescue) claims-based measure. 
Patient Safety Structural Measure 
Age Friendly Hospital structural measure 
CMS is proposing to modify the following measure:
HCAHPS Survey in the Hospital IQR: These modifications would add three new sub-measures, remove one existing sub-measure, and revise one existing sub-measure. 
CMS is proposing to remove the following measure:
CMS PSI-04 Death Among Surgical Inpatients with Serious Treatable Complications measure 
CY 2026 reporting period/FY 2028 payment determination
CMS is proposing to add the following measures:
Hospital Harm – Falls with Injury eCQM 
Hospital Harm – Post-operative Respiratory Failure eCQM 
Catheter-Associated Urinary Tract Infection Standardized Infection Ratio Stratified for Oncology Locations measure 
Central Line-Associated Bloodstream Infection Standardized Infection Ratio Stratified for Oncology Locations measure 
CMS is proposing to modify the following measure:
Global Malnutrition Composite Score eCQM: This modification adds patients ages 18 to 64 to the current cohort. 
CMS is proposing to increase the total number of eCQMs reported from six to 11 over two years. 
CMS is proposing to modify data validation requirements:
Implement two separate validation scores, one for clinical processes of care (CPOC) measures and one for eCQMs. 
Modify the data validation reconsideration request requirements to make medical records submission optional for reconsideration requests. 
PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
The PCHQR Program is a quality reporting program for the eleven cancer hospitals that are statutorily exempt from the IPPS.
CMS is proposing to:
Adopt the Patient Safety Structural measure beginning with the CY 2025 reporting period/FY 2027 program year. 
Modify the HCAHPS Survey measure beginning with the CY 2025 reporting period/FY 2027 program year. These changes are the same as mentioned above in the Hospital IQR Program.  
Move up the start date for publicly displaying hospital performance on the Hospital Commitment to Health Equity measure to January 2026 or as soon as feasible thereafter. 
Medicare Promoting Interoperability Program
CMS is proposing several changes to the Medicare Promoting Interoperability Program for eligible hospitals and critical access hospitals (CAHs). Specifically, the agency is proposing:
To separate the Antimicrobial Use and Resistance (AUR) Surveillance measure into two measures, an Antimicrobial Use (AU) Surveillance measure and an Antimicrobial Resistance (AR) Surveillance measure, beginning with the EHR reporting period in CY 2025; to add a new exclusion for eligible hospitals or CAHs that do not have a data source containing the minimal discrete data elements that are required for AU or AR Surveillance reporting; to modify the applicability of the existing exclusions to either the AU or AR Surveillance measures, respectively; and to treat the AU and AR Surveillance measures as new measures with respect to active engagement beginning with the EHR reporting period in CY 2025. 
To increase the performance-based scoring threshold for eligible hospitals and CAHs reporting under the Medicare Promoting Interoperability Program from 60 points to 80 points beginning with the EHR reporting period in CY 2025. 
To adopt two new electronic clinical quality measure (eCQMs) that hospitals can select as one of their three self-selected eCQMs beginning with the CY 2026 reporting period:
the Hospital Harm – Falls with Injury eCQM, 
the Hospital Harm – Postoperative Respiratory Failure eCQM. 
To modify one eCQM, the Global Malnutrition Composite Score eCQM, beginning with the CY 2026 reporting period. 
To modify eCQM data reporting and submission requirements by proposing a progressive increase in the number of mandatory eCQMs eligible hospitals and CAHs would be required to report on beginning with the CY 2026 reporting period. 
CMS also has issued an RFI on the Medicare Promoting Interoperability Program’s Public Health and Clinical Data Reporting objective. 
Proposed Changes to Payment Rates under LTCH PPS
In FY 2025, CMS expects the LTCH-PPS payments to increase by 2.8% and LTCH-PPS payments for discharges paid the LTCH standard payment rate to increase by 1.2% ($26 million) due to a projected 1.3% decrease in high-cost outlier payments. 
CMS seeks comment on the proposed methodology utilized to establish the LTCH PPS outlier threshold for discharges paid the LTCH standard federal payment rate and an alternative methodology that would result in a lower outlier threshold.
Health Equity Impacts
CMS is proposing a variety of changes that align with the overarching goal of advancing health equity, as follows:
CMS is proposing to change the severity designation of the seven ICD-10-CM diagnosis codes that describe inadequate housing and housing instability from non-complication or comorbidity (Non-CC) to complication or comorbidity (CC). CMS recognizes inadequate housing and housing instability as indicators of increased resource utilization in the acute inpatient hospital setting. The goal of this proposal is to improve the reliability and validity of the data collected, which will support efforts of advancing health equity. 
CMS is proposing to require Long-Term Care Hospitals (LTCHs) to collect four new items as standardized patient assessment data elements under the SDOH category using the LCDS:
One item for Living Situation 
Two items for Food  
One item for Utilities
For both the Hospital Value-Based Purchasing (VBP) Program and the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program, CMS is proposing to move up the start date for publicly displaying hospital performance on the Hospital Commitment to Health Equity measure to January 2026 or as soon as feasible thereafter. 
 After analyzing various methodologies to identify safety net hospitals, CMS is proposing to use the CMS Innovation Center’s Strategy Refresh definition for identifying safety net hospitals within Transforming Episode Accountability Model (TEAM). CMS is seeking comment on using the CMS Innovation Center’s Strategy Refresh’s definition in TEAM. 
To identify rural hospitals with a single definition, for the purposes of TEAM, CMS is proposing a rural hospital to mean an IPPS hospital that is located in a rural area; is located in a rural census tract; has reclassified as a rural hospital, or is designated a rural referral center (RRC). CMS is seeking comment on their proposal of how to identify rural hospitals.  

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