Medicare reimbursements for inpatient hospital care will increase 2.9% in fiscal 2025 under a final rule the Centers for Medicare and Medicaid Services issued Thursday.
The agency offered hospitals a larger pay hike than the 2.6% it proposed in April, which the industry decried as insufficient. The regulation also includes additional provisions such as higher graduate medical education funding and an initiative to improve drug supplies at small hospitals.
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The Inpatient Prospective Payment System update for the fiscal year that begins Oct. 1 is the difference between a 3.4% market basket increase and a negative 0.5 percentage point productivity adjustment. Hospitals that do not submit quality data or do not meet "meaningful use" standards for electronic health record usage will be paid nearly 30% less.
CMS estimates that Medicare disproportionate share hospital payments will decline $200 million in fiscal 2025.
The final rule boosts graduate medical education funding by $74 million to support 200 additional residency positions from 2026 through 2036. CMS intends to focus on bolstering clinician staffing in health professional shortage areas and on training psychiatrists.
CMS also created an add-on payment to help small, independent hospitals maintain buffer stocks of essential medicines. In addition, the final rule augments the New Technology Add-on Payment to improve access to gene therapies for sickle cell disease.
The regulation extends the low wage index hospital policy, which limits decreases to 5%, through fiscal 2027. However, absent new legislation, the Medicare-dependent and low-volume hospital programs, which provide supplemental payments to rural hospitals, are set to expire Dec. 31.
CMS also took aim at the challenges hospitals face treating patients experiencing housing instability by designating that factor as a complication or comorbidity, which will lead to higher reimbursements.
The inpatient hospital quality reporting program will feature seven new measures, including post-operative respiratory failure and 30-day, risk-standardized death rate among surgical patients. CMS eliminated five quality measures.
Medicare payments have not kept up with rising expenses, Federation of American Hospitals President and CEO Chip Kahn said in a news release.
“We have consistently raised concerns that CMS hospital payment updates have failed to reflect inflation and the costs of hospital care that remain stubbornly high," Kahn said. "Frankly, these inadequate payment updates and CMS’ real Medicare DSH cuts for the most vulnerable leave hospitals struggling to meet patient needs."
Under the same final rule, CMS granted long-term care hospitals a 3% Medicare rate bump.