Proposed Medicare Inpatient Rule Includes 2.8 Percent Rate Increase

April 25, 2024

The Centers for Medicare & Medicaid Services (CMS) April 10 issued its hospital inpatient prospective payment system (PPS) and long-term care hospital (LTCH) PPS proposed rule for fiscal year (FY) 2025.

WSHA is preparing a detailed summary of the proposed rule and hospital-specific impact analyses, which will be sent within the next few weeks to hospital chief financial officers and finance staff. CMS will accept comments on the proposed rule through June 10. WSHA plans to submit comments and share its draft with member hospitals in advance of the comment deadline.

The proposed rule includes a net 2.6% increase for inpatient PPS payments in FY 2025. This update reflects a hospital market basket increase of 3.0% as well as a productivity cut of 0.4%. WSHA plans to comment that payment update fails to account for inflation and persistent labor, supply and drug costs hospitals are experiencing.

The proposed rule increases net long-term care hospital payments by 1.6% in FY 2025, relative to FY 2024, including both standard rate payments and site-neutral payments.  The increase is again well short of increases to the cost of providing care.  Other provisions in the proposed rule:

  • TEAM model: CMS proposes a global payment initiative Transforming Episode Accountability Model (TEAM) for lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure. It is proposed as a mandatory 5-year model that would be effective 1/1/2026 if finalized in the rule this fall.  The proposal is similar to the previous Medicare joint replacement model and would make the treating hospital financially responsible for global costs, including rehabilitation incurred during the episode of care.
  • Essential medicines: CMS is proposing a separate payment to small, independent prospective payment hospitals for establishing and maintaining access to a buffer stock of essential medicines.
  • Maternal health: In an effort to improve access to quality care during pregnancy, childbirth and postpartum, CMS is seeking public comment on potential solutions that can be implemented through the hospital Conditions of Participation. WSHA has concerns about addressing this issue through additional regulation rather than provision of funding and resources. CMS is also reviewing the MSDRG weights for OB services under Medicare, particularly since the same weights are often used by commercial plans. There is concern that given the low volume of obstetrical cases paid under Medicare, the MSDRG weights may not be reflective of costs of care for the broader population.
    (Andrew Busz,


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