New Mandatory Model Proposed to Improve Health Outcomes Post-Surgery and Advance Climate Resiliency
Today, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule updating Medicare payments and policies for inpatient hospitals and long-term care hospitals. The proposed rule takes a variety of approaches to improving the health of people with Medicare by addressing social determinants of health, strengthening emergency preparedness, and improving maternal health. The fiscal year (FY) 2025 Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) rule builds on the Biden-Harris Administration’s work to support historically underserved and under-resourced communities and promote value-based care.
“Hospitals should be a place you go into and get the care you need, regardless of whether you’re struggling to afford your rent, the color of your skin, or what else is going on in the world around you,” said U.S. Department of Health and Human Services Secretary Xavier Becerra. “The Biden-Harris Administration is doing everything in its power to ensure hospitals have the prescription drugs and supplies they need so providers can focus on what they do best – helping our loved ones be healthy.”
Rate Increases
The proposed increase in operating payment rates for certain acute care hospitals in FY 2025 is projected to be 2.6%. 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” electronic health record users. This reflects the FY 2025 projected Hospital Market Basket Update of 3.0%, reduced by a projected 0.4 percentage point Productivity Adjustment for FY 2025. CMS expects this proposed increase in operating and capital IPPS payment rates, in addition to other changes, would generally increase hospital payments by $3.2 billion.
For Long-Term Care Hospitals (LTCHs), CMS proposes to increase the LTCH PPS standard federal payment rate by 2.8%. CMS expects LTCH payments to increase by 1.6%, or $41 million, primarily due to the proposed update to the rate partially offset by a projected decrease in high-cost outlier payments in FY 2025 compared to FY 2024.
“CMS is proposing changes that will create a more equitable and resilient health care system,” said CMS Administrator Chiquita Brooks-LaSure. “Our proposals around payment and quality focus on rewarding better outcomes and supporting hospitals in their efforts to reach underserved communities and meet their needs. We are also seeking public comment on additional efforts to drive improvements in access to quality care during pregnancy, childbirth, and postpartum.”
Equity
In the 2024 IPPS final rule, CMS finalized an increase in payments to hospitals when they care for individuals experiencing homelessness. Building on this policy and the Biden-Harris Administration’s initiative to address unsheltered homelessness, CMS is proposing to take an additional step and better account for the resources involved in furnishing care to individuals experiencing housing insecurity. CMS is also proposing to add 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. Increased new technology add-on payments proposed in the rule would help improve access to new gene therapy for sickle cell disease, which disproportionately impacts certain underserved populations. In addition, CMS is proposing a separate payment to small independent hospitals, including many rural hospitals, for establishing and maintaining access to a buffer stock of essential medicines to foster a more reliable and resilient supply of these medicines to help safeguard and improve the care hospitals can provide.
CMS’ graduate medical education program enhances the health care workforce and funds additional positions in hospitals serving underserved communities. To further improve access to behavioral health services and consistent with CMS’ overarching behavioral health strategy, the rule implements section 4122 of the Consolidated Appropriations Act, 2023, which requires that at least half of the 200 new graduate medical education slots made available in 2026 under the law go towards psychiatry or psychiatry subspecialties.
Emergency Preparedness
Building on lessons learned from the COVID-19 pandemic, CMS is proposing a permanent streamlined data reporting structure for COVID-19, influenza, and respiratory syncytial virus (RSV), with additional reporting that could be activated in the event of an emergency. The rule also proposes a new attestation-based measure to assess whether hospitals demonstrate a structure, culture, and leadership commitment that prioritizes patient safety.
“Hospitals play such a central role in the diverse communities they serve,” said Meena Seshamani, MD, PhD, CMS Deputy Administrator and Director of the Center for Medicare. “Our proposed payments to hospitals further recognize the cost of unmet social needs, advance access to innovative and essential treatments, expand the behavioral health workforce, and ultimately help provide hospitals the vital tools they need to better serve all communities.”
Testing Innovative Methods to Streamline Better Care at a Lower Cost
As part of this proposed rule, CMS is also proposing a mandatory model to test whether episode-based payments for five common, costly procedures would reduce Medicare expenditures while preserving or enhancing the quality of care. Building on lessons learned from previous models, the mandatory Transforming Episode Accountability (TEAM) Model would incentivize coordination between care providers during a surgery, as well as the services provided during the 30 days that follow, and require referral to primary care services to support continuity of care and drive positive long-term health outcomes. This model would complement other CMS value-based care initiatives by promoting collaboration with accountable care organizations.
“Before and after surgery, people on Medicare often experience fragmented care, especially following hospital discharge. This can lead to complications, prolonged recovery, unnecessary care, and even readmissions,” said Liz Fowler, CMS Deputy Administrator and Director of the CMS Innovation Center. “By bundling all the costs of care for an episode, this proposed rule can incentivize care coordination, improve patient care transitions, and decrease the risk of an avoidable readmission.”
TEAM would also support CMS and HHS efforts to improve quality of care by bolstering the health system’s climate resilience and sustainability. Individuals would be able to collect and voluntarily share greenhouse gas emissions data with CMS, and CMS would provide technical assistance to them to enhance organizational sustainability. Through TEAM, CMS would provide information to assist individuals in addressing threats to the health of individuals and the health care system presented by climate change.
Improving Maternal Health
As part of CMS’ ongoing efforts to drive improvements in access to quality care during pregnancy, childbirth, and postpartum, CMS is seeking public comment on potential solutions that can be implemented through the hospital Conditions of Participation (CoPs). Solutions aim to address well-documented concerns regarding maternal morbidity, mortality, disparities, and maternity care access in the United States without exacerbating access to care issues. In particular, poor maternal health access disproportionately affects non‑Hispanic Black Individuals, American Indian and Alaska Native individuals, low-income individuals, and individuals with disabilities. In 2021, the maternal mortality rate for non-Hispanic Black individuals was 69.9 deaths per 100,000 live births, 2.6 times the rate for non-Hispanic White individuals. Rates for Black women were significantly higher than rates for White and Hispanic individuals.
Specifically, CMS is soliciting comments on what the overarching requirements and structure should be for a possible future obstetrical services CoP as it relates to organization, standards of practice, staffing for obstetrical services, delivery of services for obstetrical units, staff training, and the use of maternal morbidity and mortality data. CMS further solicits comments on how potential obstetrical services requirements could impact access to care and any potential unintended consequences of an obstetrical services CoP. In addition, the rule includes a request for information on the use of the Medicare IPPS payment rates for maternity care by other payers to inform CMS’ understanding of differences that may exist between the hospital resources required to provide inpatient pregnancy and childbirth services to Medicare patients as compared to non-Medicare patients.
The FY 2025 IPPS and LTCH PPS proposed rule 2025 has a 60-day comment period. The proposed rule can be downloaded from the Federal Register at: https://www.federalregister.gov/public-inspection/2024-07567/medicare-and-medicaid-programs-and-the-childrens-health-insurance-program-hospital-inpatient.
For a fact sheet on the IPPS/LTCH PPS proposed payment rule, visit: https://www.cms.gov/newsroom/fact-sheets/fy-2025-hospital-inpatient-prospective-payment-system-ipps-and-long-term-care-hospital-prospective.
For a fact sheet on TEAM, visit: https://www.cms.gov/files/document/team-model-fs.pdf.
For frequently asked questions on TEAM, visit: https://www.cms.gov/team-model-frequently-asked-questions.
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