The Centers for Medicare & Medicaid Services (CMS) annually updates the Medicare payment policies for Inpatient Prospective Payment System (IPPS) hospitals and Long-Term Care Hospitals (LTCHs). The proposed rule for fiscal year (FY) 2025 outlines significant changes impacting payment rates and quality reporting programs. For acute care hospitals, understanding these changes, especially concerning quality improvement program measures for FY 2028 payment determination, is crucial for strategic planning and optimal performance. This article delves into the key aspects of the proposed rule, focusing on the quality measures that will shape hospital payments in FY 2028 and beyond.
Understanding the IPPS and LTCH PPS Framework
CMS utilizes the IPPS to pay acute care hospitals for inpatient stays, while LTCHs are reimbursed under the LTCH PPS. These systems operate on prospective payment rates, primarily determined by patient diagnosis, treatments, and illness severity. Hospitals receive a single payment per case based on classifications like Medicare Severity Diagnosis-Related Groups (MS-DRGs) for IPPS and Medicare Severity Long-Term Care Diagnosis-Related Groups (MS-LTC-DRGs) for LTCH PPS.
Annual payment rate updates are mandated, considering fluctuations in the cost of goods and services hospitals use, reflected by the hospital “market basket” index. The IPPS base payment rate is nationally set and adjusted for factors such as patient condition and geographic labor costs. LTCH payment rates are updated using a separate LTCH-specific market basket.
Proposed Payment Rate Adjustments for FY 2025
For FY 2025, a 2.6% increase in operating payment rates is proposed for general acute care hospitals under IPPS that actively participate in the Hospital Inpatient Quality Reporting (IQR) program and are meaningful electronic health record (EHR) users. This figure accounts for a 3.0% projected hospital market basket increase, offset by a 0.4 percentage point productivity adjustment.
It’s important to note that hospitals may also face payment adjustments through programs like the Hospital Readmissions Reduction Program (HRRP), the Hospital Acquired Condition (HAC) Reduction Program, and the Hospital Value-Based Purchasing (VBP) Program. Overall, CMS anticipates a $3.2 billion increase in hospital payments in FY 2025 due to these proposed changes in operating and capital IPPS payment rates. This includes approximately $2.9 billion from rate increases, $560 million more for disproportionate share hospital (DSH) uncompensated care payments, and an estimated $94 million increase for new medical technology add-on payments. However, the potential expiration of additional payments for Medicare-Dependent Hospitals (MDHs) and low-volume hospitals could lead to a $0.4 billion decrease if not extended by legislation.
LTCHs are projected to see a 2.8% increase in the standard payment rate for FY 2025, resulting in an estimated 1.2% or $26 million increase in LTCH PPS payments. This modest increase is primarily influenced by an anticipated 1.3% reduction in high-cost outlier payments.
Focus on Quality: Hospital Inpatient Quality Reporting (IQR) Program Measures for FY 2028
The Hospital IQR Program is pivotal as it directly links payment to quality reporting. Hospitals failing to meet program requirements face a one-quarter reduction in their Annual Payment Update under the IPPS. The FY 2025 proposed rule outlines significant updates to this program, particularly concerning measures impacting payment determination in FY 2028.
New Quality Measures for FY 2028 Payment Determination:
CMS is proposing to adopt seven new quality measures, which will influence the FY 2028 payment determination. These new measures reflect a growing emphasis on patient safety, specific conditions, and healthcare-associated infections:
- Hospital Harm – Falls with Injury eCQM: This electronic Clinical Quality Measure (eCQM) focuses on preventing falls that result in injuries within the hospital setting.
- Hospital Harm – Post-operative Respiratory Failure eCQM: Another eCQM, this measure aims to reduce post-operative respiratory failure, a serious complication.
- Catheter-Associated Urinary Tract Infection Standardized Infection Ratio Stratified for Oncology Locations measure: This HAI measure specifically targets catheter-associated urinary tract infections in oncology settings, recognizing the vulnerability of these patients.
- Central Line-Associated Bloodstream Infection Standardized Infection Ratio Stratified for Oncology Locations measure: Similar to the previous measure, this HAI measure focuses on central line-associated bloodstream infections in oncology locations.
These measures, slated for inclusion in the eCQM measure set beginning with the CY 2026 reporting period, will directly impact the FY 2028 payment determination. Hospitals need to prepare for data collection and reporting on these new metrics to ensure full participation in the IQR program and avoid payment penalties.
Modifications to Existing Measures:
In addition to new measures, CMS is proposing modifications to existing ones, also impacting the FY 2028 payment determination:
- Global Malnutrition Composite Score eCQM: The modification expands the patient cohort for this eCQM to include patients aged 18 to 64, in addition to the current cohort of patients 65 years or older. This change broadens the scope of malnutrition screening and intervention efforts.
This modification, effective for the CY 2026 reporting period/FY 2028 payment determination, requires hospitals to adjust their data collection and reporting processes to accommodate the expanded patient population.
Increased eCQM Reporting Requirements:
CMS is increasing the total number of mandatory eCQMs reported by hospitals over two years, further emphasizing digital quality measurement. For the CY 2026 reporting period/FY 2028 payment determination, hospitals will be required to report on nine total eCQMs, with six selected by CMS and three self-selected by hospitals. This progressive increase in mandatory eCQM reporting signifies a shift towards greater reliance on electronic data for quality assessment.
Implications for Acute Care Hospitals
The proposed changes to the Hospital IQR Program, particularly the new and modified quality measures for FY 2028 payment determination, necessitate proactive preparation by acute care hospitals. Key actions for hospitals include:
- Understanding the New Measures: Hospital staff, especially quality improvement teams and clinical departments, must thoroughly understand the specifications and data collection requirements for the new Hospital Harm eCQMs and HAI measures.
- Data System Readiness: Ensure that EHR systems and data collection processes are equipped to capture and report data for the new eCQMs and modified Global Malnutrition measure.
- Performance Improvement Initiatives: Implement targeted quality improvement initiatives to address the areas covered by the new measures, such as falls prevention, post-operative respiratory failure reduction, and infection control in oncology settings.
- Staff Training: Provide comprehensive training to clinical and administrative staff on the new quality measures, reporting requirements, and performance improvement strategies.
- Monitoring and Feedback: Establish robust monitoring systems to track performance on these measures and provide timely feedback to relevant stakeholders.
By proactively addressing these areas, acute care hospitals can effectively navigate the evolving landscape of quality reporting and ensure optimal performance in the Hospital IQR Program, ultimately impacting their FY 2028 Medicare payments and, more importantly, enhancing patient care quality.
Conclusion
The CMS FY 2025 proposed rule introduces important updates to Medicare payment and quality programs for acute care and long-term care hospitals. For acute care hospitals, the focus on quality improvement program measures for FY 2028 payment determination is paramount. By understanding the new and modified measures within the Hospital IQR Program, and preparing proactively for data collection and performance improvement, hospitals can not only meet the program requirements but also drive meaningful enhancements in patient safety and care quality. Staying informed and adaptable to these evolving measures is crucial for sustained success in the dynamic healthcare environment.
References
- Federal Register: Medicare and Medicaid Programs and the Children’s Health Insurance Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes in Wage Index for Fiscal Year 2025; Proposed Rule
- CMS Innovation Center
- Transforming Episode Accountability Model (TEAM) Fact Sheet
