CMS finalizes new payment model, major updates to coding and billing in 2025 IPPS final rule
Hospitals will need to prepare for a new mandatory bundled payment model and significant changes to coding and billing for certain new technologies, social determinants of health (SDOH), and more, according to the fiscal year (FY) 2025 Inpatient Prospective Payment System (IPPS) final rule, released August 1.
CMS finalized a 2.9% payment increase for hospitals that are meaningful EHR users and successfully participate in the Hospital Inpatient Quality Reporting program. This is a slight increase compared to the 2.6% CMS proposed in April. The agency expects that overall inpatient payments to hospitals will increase by $2.9 billion.
CMS is moving forward with its proposal to update the status of seven ICD-10-CM codes describing housing instability or inadequacy from non-complication/comorbidities (non-CC) to CCs. The upgraded codes are as follows:
- Z59.10 (Inadequate housing, unspecified)
- Z59.11 (Inadequate housing environmental temperature)
- Z59.12 (Inadequate housing utilities)
- Z59.19 (Other inadequate housing)
- Z59.811 (Housing instability, housed, with risk of homelessness)
- Z59.812 (Housing instability, housed, homelessness in past 12 months)
- Z59.819 (Housing instability, housed unspecified)
The Transforming Episode Accountability Model (TEAM), a new mandatory episode-based payment model for certain surgeries, was also finalized. The model will start January 2026 and will include 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
TEAM will last for five years and will have three tracks with gradated levels of risk and reward, according to the fact sheet. Hospitals will be selected based on geographic region. Selected hospitals will continue to bill Medicare fee-for-service but will receive a target price for all included services in an episode. Hospitals that spend less than the target price may earn an additional payment from CMS, while hospitals that spend more than the target price may owe the agency a repayment amount.
CMS finalized its proposal to increase the new technology add-on payment (NTAP) for sickle cell disease therapies from 65% to 75%. The agency also moved ahead with its proposal to use the start of the fiscal year (October 1) rather than April 1 to determine the newness period for all NTAP applicants, starting with FY 2026 applicants.
CMS also finalized its proposal to create a separate payment to small, independent hospitals for establishing and maintaining a stockpile of medicines the agency deems “essential.” The policy focuses on these hospitals because CMS believes they are more vulnerable to supply disruptions; however, the agency plans to assess the program in the future and may consider expanding it to other types of hospitals.
The final rule also covers updates to the wage index and numerous quality and reporting programs including a new Condition of Participation requiring hospitals and critical access hospitals to report certain data on respiratory illnesses starting November 1.
Most provisions of the final rule are effective October 1. For details on specific provisions and their effective dates, see the final rule.
Revenue integrity professionals should carefully read the final rule. Make note of any provisions that will require changes to workflows, processes, or systems or will require education and training. Ensure that all changes are implemented and tested by their effective date. Discuss training and education with peers in other departments, such as HIM or CDI, to develop a consistent, coordinated approach. Monitor CMS communications for additional information on TEAM or updates to coding and billing changes.