Proposed 2025 Medicare Hospital Inpatient Prospective Payment System Update

Proposed 2025 Medicare Hospital Inpatient Prospective Payment System Update

On April 10, 2024, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year (FY) 2025 Medicare hospital inpatient prospective payment system (IPPS) and long-term care hospital prospective payment system (LTCH PPS) proposed rule.

This proposed rule outlines the policies and payment rate updates that will govern Medicare reimbursement for inpatient hospital services in the upcoming fiscal year. It includes key changes related to payment rates, quality initiatives, and regulatory requirements that will impact hospitals participating in the Medicare program. By staying informed about the details of the FY 2025 IPPS and LTCH PPS proposed rule, hospitals and healthcare organizations can prepare for the upcoming changes and proactively adapt their practices to comply with CMS guidelines and optimize their financial performance.

Key Highlights

The proposed increase in operating payment rates for general acute care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) program and are meaningful electronic health record (EHR) users is projected to be 2.6%. This reflects a projected FY 2025 hospital market basket percentage increase of 3.0%, reduced by a 0.4 percentage point productivity adjustment. Our estimates of the national mean base payments align closely with the projected basket increase (simple mean average year-over-year change: 3.04%).

The proposed fixed-loss threshold for FY2025 is $49,237, a 15% increase over the FY 2024 threshold.

Other Proposed Changes to MS-DRGs

  • CMS proposed using the same method to estimate the cost of CAR T cases. Clinical trial cases, which do not incur drug costs, are reimbursed at a lower rate than non-clinical trial cases. Using its standard approach to analyze the latest update of the 2023 Medicare Provider Analysis and Review data, CMS found that clinical trial cases for CAR-T treatment incur 34% of the costs of non-clinical trial cases. The agency proposed increasing the weight for MS-DRG 018 by 4%, which results in about a 7% increase in the mean base payment.
  • The largest percent changes in estimated base payments were for MS-DRG 010 (pancreas transplant), 933 (extensive burns or full thickness burns with mv >96 hours without skin graft), and 770 (abortion with D&D, aspiration curettage or hysterotomy).
  • The MS-DRGs with the largest weights (and estimated base payments) were MS-DRG 018 (chimeric antigen receptor (CAR) t-cell and other immunotherapies), 001 (heart transplant or implant of heart assist system with MCC), and 927 (extensive burns or full thickness burns with mv >96 hours with skin graft).
  • The lowest estimated base payment in the FY2025 PR is MS-DRG 795 (normal newborn, $1,571), followed by 298 (cardiac arrest, unexplained without CC/MCC, $3,470).
  • The agency proposes adding ICD-10-PCS codes describing left atrial appendage closure (LAAC) procedures and cardiac ablation procedures to proposed new MS-DRG 317 (Concomitant Left Atrial Appendage Closure and Cardiac Ablation).
  • The agency proposes deleting existing MS-DRGs 453, 454, and 455 (Combined Anterior and Posterior Spinal Fusion with MCC, with CC, and without CC/MCC, respectively) and to reassign procedures from the existing MS-DRGs, 453, 454, and 455 and MS-DRGs 459 and 460 (Spinal Fusion except Cervical with MCC and without MCC, respectively) to proposed new MS-DRG 402 (Single Level Combined Anterior and Posterior Spinal Fusion Except Cervical), proposed new MS-DRGs 426, 427, and 428 (Multiple Level Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC, with CC, without MCC/CC, respectively), proposed new MS-DRGs 429 and 430 (Combined Anterior and Posterior Cervical Spinal Fusion with MCC and without MCC, respectively), and proposed new MS-DRGs 447 and 448 (Multiple Level Spinal Fusion Except Cervical with MCC, and without MCC, respectively).
  • The agency proposes reassigning cases that report a principal diagnosis of acute leukemia with an “other” O.R. procedure from MS-DRGs 834, 835, and 836 (Acute Leukemia without Major O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) to proposed new MS-DRG 850 (Acute Leukemia with Other O.R. Procedures).

The proposed rule is open for public comment until June 10, 2024; however, interested parties can submit any MS-DRG classification change requests, including any comments and suggestions for FY 2026 consideration by October 20, 2024 via MEARISTM at: Stakeholders are encouraged to review the rule and provide feedback to CMS.

BluePath will track developments on the proposed rule and provide an updated report once the final rule is released.  Contact us at if your organization has questions or needs additional information related to inpatient payment dynamics.

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