News: FY 2025 IPPS proposal includes new CC designations for SDOH codes, operating payment rate increase

Last week, CMS released the hospital Inpatient Prospective Payment System (IPPS) proposed rule for fiscal year (FY) 2025, according to a press release.

Under last year’s proposed rule, acute care hospitals reporting quality data and meaningfully using EHRs saw a net 2.8% increase in payments in FY 2024 (compared to 2023), an expected increase of $3.3 billion; however, this year, hospitals meeting such requirements will only see a projected 2.6% increase for FY 2025.

The press release also noted that “hospitals [in FY 2025] may be subject to other payment adjustments under the IPPS,” such as:

• Payment reductions for excess readmissions under the Hospital Readmissions Reduction Program (HRRP).
• Payment reduction (1%) for the worst-performing quartile of hospitals under the Hospital Acquired Condition (HAC) Reduction Program. 
• Upward or downward adjustments under the Hospital Value-Based Purchasing (VBP) Program. 

“Overall,” CMS noted, “the proposed changes in operating and capital IPPS payment rates—in addition to other changes—will generally increase hospital payments by $3.2 billion.”

Here are some other noteworthy aspects of the new proposed rule:

• Social determinant of health (SDOH) codes: “CMS is proposing to change the severity designation of the seven ICD-10-CM diagnosis codes that describe inadequate housing and housing instability from non-complication or comorbidity (Non-CC) to complication or comorbidity (CC), based on the higher average resource costs of cases with these diagnosis codes compared to similar cases without these codes.” This change would be in addition to the three SDOH codes related to homelessness that were given CC designations in FY 2024.
• Essential medicines: “CMS is proposing a separate payment under the IPPS for small, independent hospitals to establish and maintain a buffer stock of essential medicines for use during future shortages.”
• Wage index disparities: “CMS proposes to extend a temporary policy finalized in the FY 2020 IPPS/LTCH PPS final rule that addresses wage index disparities affecting low-wage index hospitals, which includes many rural hospitals. Specifically, [CMS] is proposing that this policy would be effective for at least three more years, beginning in FY 2025.”

The full FY 2025 IPPS proposed rule, as well as the FY 2025 Long-Term Care Hospital Prospective Payment System (LTCH PPS) proposed rule, is available on the Federal Register for public comment.

Editor’s note: To read the full proposed rule, click here. To read the CMS fact sheet, click here.