Health Care Matters | August 9, 2024
CMS Releases the FY 2025 Hospital Inpatient Prospective Payment System (IPPS) Final Rule
CMS finalized an increase of 2.9% in operating payment rates for acute care hospitals paid under IPPS that report through the Inpatient Quality Reporting Program (IQR). 2.9% is on the higher end of rate updates and above the 2.6% initially proposed by CMS. This increase is based on a projected FY 2025 hospital market basket update of 3.4%, reduced by a .5% productivity adjustment. Based on the final rule, hospitals should see an additional 2.9 billion in funds in 2025 over 2024. CMS also finalized a 3% payment update for Long Term Care Hospitals (LTCHs), but at the same time raised the threshold for hospitals to qualify for high-cost outlier payments which is estimated to drop payment by around 2% overall.
The payment rule finalized the proposed new mandatory episode model The Transforming Episode Accountability Model (TEAM). The models requires hospitals in certain geographic regions to participate in 5 surgical episodes and is set to begin in 2026 when other episode models sunset.
Read more analysis on the IPPS from McDermott+ Regs and Eggs.
Why It Matters
The AHA and other hospital trade associations decried certain provisions in the rule stating that it would create hardship in cases where hospital margins are already unsustainable or negative. In addition to the 2.9% rate increase, they also took issue with TEAM, the mandatory episode model, the change to the outlier threshold for LTCHs and the decline in disproportionate share payments by $200 million as opposed to an originally proposed increase. Earnings reports from major hospitals have demonstrated high profit margins due to federal aid from the public health emergency during the COVID-19 pandemic and returning patient volumes but those returns are not shared proportionally across hospitals. According to a report by the Center for Healthcare Quality and Payment Reform, over 700 rural hospitals (30%) are currently at risk of closure.
CVS Health Expands Oak Street Health “Side-by-Side” Senior Focused Health Centers
By the end of the year, CVS Health is planning to roll out 25 Oak Street Health Centers “side-by-side” a CVS pharmacy with another 11 planned for 2025. This follows a pilot program that began in Houston last year following CVS Health’s acquisition of Oak Street Health for $10.6 billion in 2023. Oak Street currently has 200+ standalone health centers.
Why It Matters
CVS Health’s roll-out of senior focused clinics comes at a time when the Medicare Advantage (MA) market is increasingly competitive with plans like CVS owned Aetna trying to capture enrollment. Co-locating primary care with pharmacies have gone through cycles of boom and bust. Walgreens closed most of their VillageMD partnership clinics and Walmart closed its Walmart Health Centers due to losses and a lack of a foreseeable business case just this year. But at the same time, Humana recently announced plans to lease and open senior-focused primary care at 23 of the former Walmart Health clinic locations. It remains to be seen whether there is a business case for Pharmacy Benefit Managers (PBMs) or health plans leveraging senior-focused primary care clinics to gain MA market share or whether this is the type of care seniors are looking for, but in this increasingly competitive landscape, new models will continue to emerge.
What We Are Writing
Check out Our Blog with Insights from the 2025 Medicare Physician Fee Schedule (PFS) Proposed Rule
This year’s proposed rule covers a lot of ground—pressing full steam ahead on eCQMs for ACOs, introducing new payment codes for advanced primary care, and seeking more open-ended comment on a higher risk track of MSSP.
WHAT WE ARE reading
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AI Policy Tracker by Manatt
The latest federal and state legislative activity related AI in the Health Policy space
DID YOU KNOW?
It's National Health Center Week
National Health Center Week (NHCW) takes place August 4-10. Every August NACHC sponsors NHCW to celebrate America’s 1,400 Community Health Centers to increase awareness of the critical role health centers play as the nation’s largest network of primary care providers and highlight the commitment and passion of health center staff, board members, and supporters who make it possible to provide quality, comprehensive healthcare services to more than 31.5 million patients across nearly 15,000 communities annually.
