On August 1, 2024, the Centers for Medicare and Medicaid Services (CMS) released the Fiscal Year (FY) 2025 Hospital Inpatient Prospective Payment System (IPPS) Final Rule (link) with accompanying fact sheet (link). This final rule provides updates to Medicare payment policies and rates for inpatient stays at general acute care hospitals and long-term care hospitals (LTCHs) for FY 2025.

This year’s final rule includes a 2.9 percent increase in overall IPPS payments, an increase in the NTAP percentage from 65 percent to 75 percent for certain gene therapies approved for new technology add-on payments when indicated and used specifically for the treatment of sickle cell disease, and separate IPPS payment for establishing and maintaining access to essential medicines.

Changes to Payment Rates Under IPPS

The 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 2.9 percent..
This reflects a projected FY 2025 hospital market basket percentage increase of 3.4 percent, reduced by a 0.5 percentage point productivity adjustment.

Alternative New Technology Add-On Payment (NTAP) Pathways for Medical Devices and Antimicrobial Products

In the IPPS Proposed Rule, CMS received 23 applications for new technology add-on payments (NTAP) for FY 2025 under the new technology add-on payment alternative pathway.
Of the 23 applications received under the alternative pathway, seven applications were not eligible for consideration for NTAP because they did not meet requirements; two applicants withdrew their applications prior to the issuance of the proposed rule; three additional applicants withdrew their respective applications prior to this final rule.
For the remaining 11 applications, CMS is approving 12 NTAPs for FY 2025:
Annalise Enterprise Computed Tomography Brain (CTB) Triage – Obstructive Hydrocephalus (OH)
ASTar^® System
cefepime-taniborbactam
Edwards EVOQUE™ Tricuspid Valve Replacement System (Transcatheter Tricuspid Valve Replacement System)
GORE^® EXCLUDER^® Thoracoabdominal Branch Endoprosthesis (TAMBE Device)
LimFlow™ System
Paradise™ Ultrasound Renal Denervation System
PulseSelect™ Pulsed Field Ablation (PFA) Loop Catheter
Symplicity Spyral™ Multi-Electrode Renal Denervation Catheter
TriClip™ G4
VADER^® Pedicle System
ZEVTERA™ (ceftobiprole medocaril)

New Technology Add-On Payments (NTAP)

CMS is finalizing the continuation of NTAP for the following technologies for FY 2025 (Table II.E.-01 in the final rule):
Thoraflex™ Hybrid Device
ViviStim^® Paired VNS System
GORE^® TAG^® Thoracic Branch Endoprosthesis
Cerament^® G
iFuse Bedrock Granite Implant System
CYTALUX^® (pafolacianine) (ovarian indication)
CYTALUX^® (pafolacianine) (lung indication)
EPKINLY™ (epcoritamab-bysp) and COLUMVI™ (glofitamabgxbm)
Lunsumio™ (mosunetuzumab)
REBYOTA™ (fecal microbiota, livejslm) and VOWST™ (fecal microbiota spores, live-brpk)
SPEVIGO^® (spesolimab)
TECVAYLI™ (teclistamab-cqyv)
TERLIVAZ^® (terlipressin)
Aveir™ AR Leadless Pacemaker
Aveir™ Dual-Chamber Leadless Pacemaker
Ceribell Status Epilepticus Monitor
DETOUR System
DefenCath™ (taurolidine/heparin)
EchoGo Heart Failure 1.0
Phagenyx^® System
REZZAYO™ (rezafungin for injection)
SAINT Neuromodulation System
TOPS™ System
XACDURO^® (sulbactam/durlobactam)
CMS is finalizing the discontinuation of NTAP for the following technologies for FY 2025 (Table II.E.-02 in the final rule):
Intercept^® Fibrinogen Complex (PRCFC)
Rybrevant^® (amivantamab)
StrataGraft^®
aprevo^® Intervertebral Body Fusion Device (TLIF indication)
Hemolung Respiratory Assist System (RAS) (non-COVID-19 related use)
Livtencity™ (maribavir)
Canary Tibial Extension (CTE) with Canary Health Implanted Reporting Processor (CHIRP) System
CMS received 16 NTAP applications for technologies under the traditional pathway. Of the 16 applications received under the traditional pathway, one applicant was not eligible for consideration for new technology add-on payment because it did not meet requirements, and three applicants withdrew their application prior to the issuance of the proposed rule. Prior to the issuance of this final rule, two additional applications were withdrawn (odronextamab (R/R DLBCL indication) and odronextamab (R/R FL indication).
CMS is approving the NTAP application for the following:
CASGEVY™ (exagamglogene autotemcel) for the indication of sickle cell disease
HEPZATO™ KIT (melphalan for injection/hepatic delivery system)
LYFGENIA™ (lovotibeglogene autotemcel)
ELREXFIO™ (elranatamab-bcmm)
TALVEY™ (talquetamab-tgvs)
CMS is not approving the NTAP application for the following:
Casgevy™ (exagamglogene autotemcel) for the indication of transfusion dependent β-thalassemia
DuraGraft^® (Vascular Conduit Solution)
FloPatch FP120
Lantidra™ (donislecel-jujn (Allogeneic Pancreatic Islet Cellular Suspension for hepatic portal vein infusion))
AMTAGVI™ (lifileucel)
Quicktome Software Suite (Quicktome Neurological Visualization and Planning Tool)
Notably, CMS finalized to change the April 1 cutoff to October 1 for determining whether a technology would be within its 2- to 3-year newness period.
This change will be effective starting in FY 2026 for new applicants for NTAP and when extending NTAP for an additional year for technologies initially approved for NTAP in FY 2025 or a subsequent year.
CMS also finalized a proposal to no longer consider a hold status to be an inactive status for the purposes of eligibility for the new technology add-on payment. 

Calculation of the Inpatient New Technology Add-On Payment for Gene Therapies Indicated for Sickle Cell Disease

CMS is finalizing its proposal to increase the NTAP percentage from 65 percent to 75 percent for certain gene therapies approved for new technology add-on payments when indicated and used specifically for the treatment of sickle cell disease, beginning on or after October 1, 2024, and concluding at the end of the 2 to 3-year newness period for each such therapy. 
If the costs of a discharge involving the use of such therapy for the treatment of sickle cell disease exceed the full DRG payment, Medicare will make an add-on payment equal to the lesser of:
75 percent of the costs of the new medical service or technology; or
75 percent of the amount by which the costs of the case exceed the standard DRG payment.
 These payment amounts would only apply to Casgevy™ (exagamglogene autotemcel) and Lyfgenia™ (lovotibeglogene autotemcel), when indicated and used specifically for the treatment of sickle cell disease, which CMS determined in this final rule meet the criteria for approval for new technology add-on payment, in line with the Administration’s Sickle Cell Disease Action Plan. 

CAR T-Cell Therapies

CMS is finalizing the proposal to maintain the existing title to Pre-MDC MS-DRG 018, “Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies” for FY 2025.
CMS notes they will continue to examine issues with this DRG category as claims data grows.

Payment for Establishing and Maintaining Access to Essential Medicines

CMS is finalizing a separate payment for small, independent hospitals for the IPPS shares of the additional resource costs to voluntarily establish and maintain a 6-month buffer stock of one or more of 86 essential medicines, either directly or through contractual arrangements with a pharmaceutical manufacturer, distributor, or intermediary.
The list of 86 essential medicines stems from the Essential Medicines Supply Chain and Manufacturing Resilience Assessment report (link) (referred to as the ARMI List).
CMS notes that the appropriate time to establish a buffer stock for a drug is before it goes into shortage. As such, a hospital that newly establishes a buffer stock of the medicine while in shortage will not be eligible for the separate payment; however, if a hospital had already established and was maintaining a buffer stock of that medicine prior to the shortage, the hospital would continue to be eligible for the separate payment for the duration of the shortage.

CMS defines small, independent hospitals as hospitals with 100 beds or fewer that are not part of a chain organization. 
The separate payment is for the IPPS share of the additional cost of procuring and maintaining the buffer stock
Payment adjustments would commence for cost reporting periods beginning on or after October 1, 2024, and could be provided biweekly or as a lump sum at cost report settlement.

Transforming Episode Accountability Model (TEAM)

CMS is finalizing the five-year, mandatory Transforming Episode Accountability Model (TEAM) to improve beneficiary care through financial accountability for episodes of care that begin with one of five procedures including:
Coronary artery bypass graft surgery (CABG)
Lower extremity joint replacement (LEJR)
Major bowel procedure
Surgical hip/femur fracture treatment (SHFFT)
Spinal Fusion
The model will begin on January 1, 2026, and run through December 31, 2030.
All acute care hospitals, with limited exceptions, located within Core-Based Service Areas (CBSAs) selected by CMS for model implementation will be required to participate in the model.
Hospitals participating in the BPCI and CJR models located outside of the selected CBSAs will have the opportunity to opt into model participation.
TEAM participants will continue to bill Medicare FFS but will receive target prices for episodes prior to each of their performance years.
The target prices for participants will be adjusted based on a variety of factors including provider and beneficiary level risk-adjustment.
Performance in the model will be assessed by comparing TEAM participants’ actual Medicare FFS spending during a performance year to their reconciliation target price as well as by performance on three quality measures.

Hospital Inpatient Quality Reporting (IQR) Program

CMS is finalizing the following changes for the Hospital IQR Program. This program is a pay-for-reporting program that reduces payments to hospitals which don’t meet requirements.

FY 2026 payment determination
CMS is removing the following measures:
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Acute Myocardial Infarction (AMI Payment).
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Heart Failure (HF Payment).
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Pneumonia (PN Payment).
Hospital-level, Risk-Standardized Payment Associated with a 30-Day Episode of Care for Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty (THA/TKA Payment).
FY 2027 payment determination
CMS is adopting the following measures:
Thirty-day Risk-Standardized Death Rate among Surgical Inpatients with Complications measure
Patient Safety Structural Measure
Age Friendly Structural Measure
CMS is modifying the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure
CMS is removing the CMS PSI-04 Death Among Surgical Inpatients with Serious Treatable Complications measure
FY 2028 payment determination
CMS is adopting the following measures:
Hospital Harm – Falls with Injury electronic clinical quality measure (eCQM)
Hospital Harm – Postoperative Respiratory Failure eCQM
Catheter-Associated Urinary Tract Infection Standardized Infection Ratio measure stratified for oncology locations
Central Line-Associated Bloodstream Infection Standardized Infection Ratio measure stratified for oncology locations
CMS is modifying the Global Malnutrition Composite Score eCQM
 CMS is finalizing, with modifications, the proposal to increase the number of eCQMs reported. CMS is finalizing a gradual increase in the number of required eCQMs to be reported until the CY 2028 reporting period/FY 2030 payment determination, where hospitals will be required to report on 11 total eCQMs.

PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

The PCHQR Program is a quality reporting program for the eleven cancer hospitals that are statutorily exempt from the IPPS.
CMS is finalizing the following proposals:
Adoption of the Patient Safety Structural measure beginning with the CY 2025 reporting period/FY 2027 program year, with modification.
Adoption of sub-measure updates to the HCAHPS Survey measure beginning with the CY 2025 reporting period/FY 2027 program year.
Moving up the start date for publicly displaying hospital performance on the Hospital Commitment to Health Equity measure to January 2026 or as soon as feasible thereafter.

 Medicare Promoting Interoperability Program 

CMS is finalizing proposals to:
Separate the Antimicrobial Use and Resistance Masure into two new surveillance measures beginning with the HER reporting period in 2025. The two new measures, which will exclude hospitals or CAH hospitals that do not have the minimum discrete data elements for reporting, are:
The Antimicrobial Use (AU) Surveillance Measure
The Antimicrobial Resistance (AR) Surveillance Measure
Increase the scoring threshold for hospitals and CAHs under the Medicare Promoting Interoperability program.
The threshold for eligible hospitals and CAHs will increase from 60 points to 70 points for the EHR reporting period in CY 2025 and from 70 points to 80 points beginning with the EHR reporting period in CY 2026.
Adopt two new eCQMs that hospitals can select as one of their three self-selected ECQMs beginning with the CY 2026 reporting period:
The Hospital Harm-Falls with injury ECQM 
The Hospital Harm- Postoperative Respiratory Failure eCQM
Modify the Global Malnutrition Composite Score eCQM beginning with the CY 2026 reporting period
Progressively increase in the number of mandatory eCQMs eligible hospitals and CAHs will be required to report on beginning with the CY 2026 reporting period.
Eligible hospitals and CAHs will be required to report a total of eight eCQMs for the CY 2026 reporting period, a total of nine eCQMs for the CY 2027 reporting period, and a total of eleven eCQMs beginning with the CY 2028 reporting period.

Proposed Changes to Payment Rates under Long-Term Care Hospital (LTCH) Prospective Payment System (PPS)

For FY 2025, CMS is increasing the LTCH standard payment rate by 3.0 percent.
LTCH PPS payments for discharges paid the LTCH standard payment rate are expected to increase by approximately 2.0 percent or $45 million, due primarily to a projected 0.8 percent percentage point decrease in high-cost outlier payments as a percentage of total LTCH PPS standard Federal payment rate payments.
CMS is finalizing an increase to the LTCH outlier threshold for FY 2025 that is higher than historical norms. CMS notes that this increase is needed to ensure that estimated outlier payments are 8 percent of total payments, which is the stature requirement.

Health Equity Impacts

CMS is finalizing a change of 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). CMS recognizes inadequate housing and housing instability as indicators of increased resource utilization in the acute inpatient hospital setting. The goal of this change is to improve the reliability and validity of the data collected, which will support efforts of advancing health equity. 
CMS is finalizing the adoption of four new items as standardized patient assessment data elements under the social determinants of health (SDOH) category using the LCDS when a patient is admitted to a long-term care hospital beginning October 1, 2026:
One item for Living Situation
Two items for Food
One item for Utilities
CMS is finalizing the change to move up the start date for publicly displaying hospital performance on the Hospital Commitment to Health Equity measure for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program to January 2026 or as soon as feasible thereafter.
After analyzing various methodologies to identify safety net hospitals, CMS is finalizing the change to use the CMS Innovation Center’s Strategy Refresh definition for identifying safety net hospitals within Transforming Episode Accountability Model (TEAM).
To identify rural hospitals with a single definition, for the purposes of TEAM, CMS is finalizing its definition of a rural hospital as an IPPS hospital that is located in a rural area or is located in a rural census tract.
CMS modified its proposed definition by removing hospitals that have reclassified as a rural hospital and hospitals that are a rural referral center (RRC).

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