In this episode, Bob McDowell, BESLER Senior Reimbursement Consultant, will provide us with a glimpse into BESLER’s next Webinar, FY 2025 IPPS Final Rule Summary, that we’re presenting live on Wednesday, September 11, at 1 PM ET.
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Learn how to listen to The Hospital Finance Podcast® on your mobile device.Highlights of this episode include:
- Overview of what’s going to happen in fiscal year 2025
- How CMS has addressed the outcome of the litigation in the fiscal year 2025 final rule
- Rural and smaller hospital facilities changes
- New add-on payment for access to essential medicines
- CMS established new alternative payment model called TEAM
Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome back Bob McDowell, BESLER Senior Reimbursement Consultant. In this episode, Bob will provide us with a glimpse into BESLER’s next Webinar, FY 2025 IPPS Final Rule Summary, that we’re presenting live on Wednesday, September 11th at 1 PM, Eastern Time. Welcome back and thank you for joining us, Bob.
Bob McDowell: Thank you, Kelly. Thanks for having me back again this year to talk about the IPPS Final Rule for federal fiscal year 2025.
Kelly: All right, let’s go ahead and jump in then. So, CMS annually updates the hospital payment rates and the final rule. Can you give us a quick overview as to what’s going to happen in fiscal year 2025?
Bob: Oh, absolutely. This year, there are favorable increases in the hospital federal rates for both short-term and long-term acute care facilities. For short-term acute care facilities, also known as IPPS hospitals, there is an increase to the federal rate of 2.9%. This increase comes from the annual market basket increase of 3.4% and is reduced by a productivity adjustment of a half a percent or 0.5%. CMS also subjected the federal base rate to budget neutrality factors for such items as the MSDRG weighting, adjustments to the wage index, rural demonstration program, and a handful of other items. The overall net-net increase in the federal base rate for federal fiscal year 2025 is 1.67%. The base federal reimbursement rate may be subject to other favorable and unfavorable adjustments from additional CMS programs, such as the Hospital Readmission Reduction Program, the Hospital Acquired Condition Reduction Program, Hospital Value-Based Purchasing Program, and the Interoperability Program. The increase to the federal rate for IPPS hospitals will result in an estimated $2.9 billion in additional payments for federal fiscal year 2025. This $2.9 billion in additional hospital revenues is net of a reduction in the Medicare DSH uncompensated care payment, an increase in new technology add-on payments, and includes decreases for Medicare dependent hospital designation and the low volume add-on payments.
For long-term acute care hospitals, also known as LTCHs, are expected to receive a favorable increase of 2% or an estimated $45 million of additional payments.
Kelly: Wow, thank you for that overview. And there’s been recent litigation settled relating to CMS’s wage index redistribution policy. How has CMS addressed the outcome of the litigation in the fiscal year 2025 final rule?
Bob: I believe you’re asking about the litigation around Bridgeport Hospital versus Becerra. It can be debated that Congress’s provision for wage index adjustment for core-based statistical areas is in sort of a mess at this point. Even MedPac made a comment in his June 2023 report to Congress. The wage index provision was meant to report the wage level in a particular population area without bias in which to make any adjustments to a facility’s federal standardized base rate to fairly reimburse that facility for providing medical services to Medicare beneficiaries. Over the years, CMS has allowed rural facilities to reclassify to urban areas to receive a higher wage index. Urban facilities to reclassify to rule for many diverse purposes, such as to be redesignated as a rural referral center or a sole community hospital. And other facilities to receive a dual classification to be reimbursed under a different wage index for inpatient services than they are for outpatient services. And in addition, CMS makes adjustments for occupational mix and out migration. In federal fiscal year 2020, CMS made a policy to increase the wage index for facilities with a wage index value below the 25th percentile wage index. This was challenged in court by a group of hospital facilities.
The federal district court granted summary judgment for the hospital facilities and remanded the rule back to CMS with instructions to recalculate the hospital’s wage indexes without the 25th percentile reallocation. On appeal, the DC Circuit agreed with the District Court’s determination that CMS exceeded its authority, but reversed the District Court’s decision to remand the rule, explaining that the rule must in fact be vacated entirely. In the federal fiscal year 2025 final rule, CMS acknowledges the ongoing litigation and is evaluating the decision and is pondering its next steps. So, with further consideration of the current decisions, CMS finalized the low wage index policy again for federal fiscal year 2025.
Kelly: Very interesting. Thanks for that, Bob. Recently, CMS has been pretty accommodating to rural and smaller hospital facilities. Have there been any significant changes in the final rule affecting these types of facilities?
Bob: Well, surprisingly, and without any additional legislation, CMS is allowing Medicare dependent hospitals or the MDH provision to expire on December 31st of 2024 or this year, and in addition, the criteria for hospital facilities who are receiving a low volume add-on payment have significant changes to their qualifying criteria. CMS is allowing the criteria to qualify as a low-volume hospital to revert to pre-2019 criteria of less than 200 total discharges. That includes both Medicare and non-Medicare discharges. And the facility must be more than 25 miles from the next closest Section D hospital facility.
Kelly: Got it. So, what is the new add-on payment for access to essential medicines and who is eligible to receive it?
Bob: In the final rule, CMS has established a policy to provide a separate payment to IPPS hospital facilities for Medicare’s share of the inpatient cost of establishing and maintaining access to a six-month buffer stock of one or more of 86 essential medicines. Advanced Regenerative Manufacturing Institute, or ARMI, has established a list of 86 medicines that are either critical for minimum patient care in acute settings or important for acute care with no comparable alternatives available. It is the cost associated with the warehousing of the buffer stocks that are eligible for a separate payment. Now, to qualify for the additional payment, a facility must be considered a small and independent hospital facility. CMS defined a small hospital as a facility with up to 100 beds and for it to be independent, must not be part of a chain organization.
Kelly: Great. Thank you for explaining that for us. In the fiscal year 2025 final rule, CMS has established a new alternative payment model called TEAM. Can you tell us what that’s all about?
Bob: I’m going to give it a shot. [laughter] The Alternative Payment Model Transforming Episode Accountability Model, or otherwise known as TEAM, is a mandatory alternative payment model. The intent of TEAM is to improve beneficiary care through financial accountability for episode categories that begin with five specific procedures. Those procedures are coronary artery bypass graft surgery or CABF, lower extremity joint replacement or LEJR, major bowel procedure, surgical hip femur fracture treatment, or SHFFT and spinal infusion. TEAM is being used to test whether financial accountability for these episode categories reduces Medicare expenditures while preserving or enhancing the quality of care for Medicare beneficiaries. The initial model performance period is scheduled to last five years. It begins on January 1st of 2026 and runs through December 31st of 2030. CMS has published the list of CBAs who are required to participate in the model. You will probably want to look at the list to see if your CBSA has been chosen. Even though the model is mandatory for hospital facilities in these CBSAs, CMS has made a voluntary provision for hospitals if they would like to participate as well. If you are a facility currently participating in the ACE, BPCI, BPCI Advanced, and/or CJR models, and have been successful, you may want to look at also participating in the new TEAM Model.
The details of the TEAM Model is covered by hundreds of pages in the final rule. More information relating to how the model works will be covered in our upcoming webinar.
Kelly: I bet that is fun reading, Bob. So, thank you so much for joining us today and for sharing this sneak peek into the upcoming BESLER Webinar, FY 2025, IPPS Final Rule Summary, that you’re presenting live on Wednesday, September 11th at 1 PM Eastern Time. And as a bonus, you can earn CPE. Thanks again, Bob.
Bob: And thank you, Kelly, for having me back this year.
Kelly: And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…
[music] This concludes today’s episode of The Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit besler.com/podcasts. The Hospital Finance Podcast is a production of BESLER | SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.
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