2025 IPPS proposed rule covers reimbursement updates, major mandatory bundled payment model

CMS is considering a relatively low reimbursement increase for inpatient hospital services in 2025 but an increase to certain new technology add-on payments (NTAP), according to the fiscal year (FY) 2025 Inpatient Prospective Payment System (IPPS) proposed rule. The proposed rule, released April 10, also details a new, mandatory bundled payment program, code updates, and a slew of other program and policy updates.

CMS is proposing a 2.6% payment increase for FY 2025. The agency projects it would increase payments to hospitals by $2.9 billion, in addition to a $560 million increase in disproportionate share hospital payments and a $94 million increase in NTAP payments. For comparison, CMS proposed a 2.8% increase for 2024 and finalized a 3.1% payment increase for 2024. Industry stakeholders, including the American Hospital Association, have already slammed the proposal as insufficient and out of touch with hospitals’ mounting operating costs.

CMS is considering a sweeping new mandatory episode-based payment model for certain surgeries. The Transforming Episode Accountability Model (TEAM) would focus on episodes of care initiated by the following procedures:

• Coronary artery bypass graft
• Lower extremity joint
• replacement
• Major bowel procedure
• Surgical hip/femur fracture treatment
• Spinal fusion

Hospitals selected to participate in TEAM would continue to bill Medicare fee-for-service, but would receive a target price based on the non-excluded Medicare Parts and B services and items included in the episode, according to CMS’ TEAM fact sheet. If hospitals’ spending is below the target price, they may earn additional payment from CMS, depending on quality performance adjustments. However, hospitals may end up owing CMS if their spending, subject to quality performance adjustments, is above the target price.

CMS is proposing to increase the NTAP percentage from 65% to 75% for gene therapies for sickle cell disease. It is also proposing to use the start of the fiscal year, October 1, instead of April 1 for newness determinations. The latter change would be effective starting in FY 2026.

Other proposals include:

• Changing the severity designation of the seven ICD-10-CM diagnosis codes that describe inadequate housing and housing instability from non-complication or comorbidity to complication or comorbidity
• A separate payment under the IPPS for small, independent hospitals to establish and maintain a buffer stock of essential medicines for use during future shortages
• Extending the low-wage hospital policy finalized in the 2020 IPPS final rule
• Updates to the Hospital Inpatient Quality Reporting, Hospital Acquired Conditions, and the Hospital Value-Based Purchasing programs, as well as other quality and reporting programs for inpatient hospitals and critical access hospitals

Revenue integrity professionals should read the proposed rule carefully. Focus on proposals that will affect your job duties, department, and organization, as well as any proposals that touch on your areas of expertise. Discuss the proposals with your colleagues in other departments that may be affected, and review how the proposals could affect workflows, processes, policies, and revenue if finalized. Finally, consider submitting a comment. CMS uses the rulemaking process to request feedback from all stakeholders, including revenue integrity professionals. Comments are generally due 60 days after the proposed rule is published in the Federal Register. The FY 2025 IPPS proposed rule is scheduled to be published May 2. For recommendations and guidance on writing and submitting comments on proposed rules, see NAHRI’s white paper Advocacy in Action: Commenting on Proposed Rules.