Xavier Becerra United States Secretary of Health and Human Services | Official Website
The U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) issued a final rule today updating Medicare payments and policies for inpatient hospitals and long-term care hospitals. The rule, part of the fiscal year (FY) 2025 Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS), aims to improve health outcomes by addressing social determinants of health and enhancing emergency preparedness.
For FY 2025, operating payment rates for certain acute care hospitals are projected to increase by 2.9%. This applies to hospitals that receive CMS payments under the IPPS, participate in the Hospital Inpatient Quality Reporting program, and are meaningful users of electronic health records. CMS expects these changes will result in an estimated $2.9 billion increase in hospital payments.
Long-term care hospitals will see a 3.0% increase in the LTCH PPS standard Federal payment rate. This adjustment is expected to boost LTCH payments by approximately $45 million due to updates partially offset by a decrease in high-cost outlier payments compared to FY 2024.
"HHS continues to make healthcare more accessible and equitable," said HHS Secretary Xavier Becerra. "Every American should be able to get the care they need, regardless of whether they are struggling to afford their rent, the color of their skin, or what else is going on in the world."
"CMS is taking action to create a healthcare system that is more equitable and resilient," said CMS Administrator Chiquita Brooks-LaSure. "The fiscal year 2025 inpatient hospital payment rule will ensure that hospitals in historically underserved areas can provide high-quality care while being rewarded for better outcomes."
In efforts to support underserved communities, CMS has finalized policies recognizing higher costs incurred by hospitals providing services for individuals experiencing homelessness. Hospitals will receive higher payments when patients face housing insecurity. Additionally, new social determinants of health data elements have been added into LTCH quality reporting requirements.
To mitigate drug shortages and improve patient care, CMS has increased new technology add-on payments for treatments such as gene therapy for sickle cell disease. Furthermore, small independent hospitals will receive separate payments for maintaining essential medicine stocks.
"Hospitals are a critical part of the diverse communities they serve," said Meena Seshamani, MD, PhD, CMS Deputy Administrator and Director of the Center for Medicare.
CMS' graduate medical education program will fund additional positions nationwide starting in 2026 with at least half allocated to psychiatry residencies.
New hospital quality initiatives include digital measures for patient harm events and expansion of infection measures to oncology wards. Emergency preparedness protocols have also been strengthened with permanent streamlined data reporting structures based on lessons from COVID-19.
Starting January 2026, CMS will implement a five-year mandatory model testing episode-based payments for common procedures aimed at reducing Medicare expenditures while maintaining or enhancing care quality.
"By bundling all costs of care for an episode, this model is designed to incentivize care coordination," said Liz Fowler, CMS Deputy Administrator and Director of the CMS Innovation Center.
Participants may voluntarily share greenhouse gas emissions data with CMS as part of efforts to enhance climate sustainability within healthcare organizations.
The full text of the FY 2025 IPPS and LTCH PPS final rule can be accessed on the Federal Register website.
