HHS finalizes new policies to support underserved communities, mitigate drug shortages, and promote patient safety in hospitals
The U.S. Department of Health and Human Services, the Centers for Medicare & Medicaid Services (CMS) issued a final rule updating Medicare payments and policies for inpatient hospitals and long-term care hospitals.
The rule improves the health of people with Medicare by addressing key social determinants of health and strengthening emergency preparedness.
The increase in operating payment rates for certain acute care hospitals in FY 2025 is projected to be 2.9%. This applies to acute care hospitals that 1) receive CMS payments under the IPPS, 2) successfully participate in the Hospital Inpatient Quality Reporting program, and 3) are “meaningful” users of electronic health records. This reflects the FY 2025 projected Hospital Market Basket percentage increase of 3.4%, reduced by a projected 0.5 percentage point Productivity Adjustment for FY 2025. CMS expects this increase in operating and capital IPPS payment rates, in addition to other changes, will increase hospital payments by an estimated $2.9 billion.
For LTCHs, CMS will increase the LTCH PPS standard Federal payment rate by 3.0%. CMS expects LTCH payments to increase by 2.0%, or $45 million, primarily due to the update to the rate partially offset by a projected decrease in high-cost outlier payments in FY 2025 compared to FY 2024.
In the FY 2024 IPPS final rule, CMS finalized a policy change to recognize the higher costs that hospitals incur when they provide hospital services for individuals experiencing homelessness. Building on this policy, CMS is taking an additional step to better account for the resources involved in furnishing care to individuals experiencing housing insecurity, meaning that hospitals will generally receive higher payments when a patient is experiencing housing insecurity. CMS is also adding new social determinants of health data elements into LTCH quality reporting, requiring LTCHs to report elements on housing, food and utility stability, and access to transportation, which are factors that influence the resources required for their care.
CMS is also promoting access to treatments that could help support rural and underserved communities. The increased new technology add-on payments finalized in this rule will help improve access to new gene therapy for sickle cell disease. In addition, CMS is finalizing a separate payment to small independent hospitals, including many rural hospitals, for establishing and maintaining access to a buffer stock of essential medicines, which will help to mitigate drug shortages and improve the care hospitals can provide to their patients.
Finally, the rule implements section 4122 of the Consolidated Appropriations Act, 2023, which provides Medicare funding for 200 new graduate medical education slots starting in 2026, of which at least half must be distributed for a psychiatry or psychiatry subspecialty residencies.
CMS is finalizing several new hospital quality initiatives, including digital measures for patient harm events, expansion of healthcare-associated infection measures to oncology wards, and structural measures to support safety and age-friendly care. The new attestation-based structural measures assess whether hospitals demonstrate a structure, culture, and leadership commitment that prioritizes and implements best practices for patient safety and age-friendly care.
Building on lessons learned from the COVID-19 pandemic, CMS is finalizing a permanent streamlined data reporting structure for COVID-19, influenza, and respiratory syncytial virus (RSV), with additional reporting requirements that could be activated in the event of a declared public health emergency.
As part of this rule, CMS is finalizing a 5-year mandatory CMS Innovation Center model, beginning in January 2026, to test whether episode-based payments for five common, costly procedures performed at participating acute care hospitals would reduce Medicare expenditures while preserving or enhancing the quality of care. Building on lessons learned from previous models such as the Comprehensive Care for Joint Replacement Model, the mandatory Transforming Episode Accountability Model (TEAM) aims to incentivize improved coordination between healthcare providers during surgery, as well as the services provided during the 30 days that follow.
Participants may choose to collect and voluntarily share greenhouse gas emissions data with CMS, and CMS will provide technical assistance to them to enhance climate sustainability for their organizations. Through TEAM, CMS will provide information to assist participating hospitals in addressing threats to the health of individuals and the healthcare system presented by climate change.
