FY 2025 Medicare Inpatient Prospective Payment System Final Rule

Nov 12, 2024

On August 1, the Centers for Medicare & Medicaid Services (CMS) released the Inpatient Prospective Payment System (IPPS) final rule (CMS-1808-F) for FY 2025. This rule updates payment policies and payment rates for acute care inpatient hospital services furnished under Medicare. In addition, this year’s rule addresses drug shortages by proposing to make a separate payment to small, independent hospitals to establish and maintain a buffer stock of essential medicines. Also included in the rule are policies to address health equity by capturing data on housing instability and providing additional funding for graduate medical education (GME) slots with the goal of encouraging new physicians to practice in rural and underserved areas. CMS has also prepared a fact sheet that highlights some of the major policies proposed in the rule. Note that the page numbers refer to the unpublished version of the proposed rule, linked above.

CHANGES TO SEVERITY LEVELS SOCIAL DETERMINANTS OF HEALTH (SDOH) – INADEQUATE HOUSING/HOUSING INSTABILITY (P. 250)

Highlight: The agency continues to promote policy to support and understand the impact of SDOH on healthcare.

Building on last year’s final policy to move certain SDOH diagnosis codes from a non-complication or comorbidity (NonCC) to a complication or comorbidity (CC), in this year’s rule, CMS finalized its proposal to move seven inadequate housing and housing instability ICD-10-CM codes from a NonCC classification to a CC classification. Through this change, CMS will recognize housing instability and inadequate housing as an indicator of increased resource utilization in the acute inpatient hospital setting. The ICD-10-CM codes included in this proposal are Z59.10, Z59.11, Z59.12, and Z59.19 to describe inadequate housing, and Z59.811, Z59.812, and Z59.819 to describe housing instability. ICD-10-CM Z codes are used to on claims to describe and collect data on SDOH.

PROPOSED CHANGES TO THE CALCULATION OF THE INPATIENT NEW TECHNOLOGY ADD-ON PAYMENT FOR GENE THERAPIES INDICATED FOR SICKLE CELL DISEASE (P. 646)

Highlight: CMS increases the NTAP payment from the traditional 65% to 75% for gene therapy for sickle cell disease.

Recognizing that cell and gene therapies are “among the costliest treatments to date,” CMS has finalized its policy to provide additional payment under the existing new technology add-on payment (NTAP) policy, for cell and gene therapy used in the treatment of sickle cell disease (SCD). In addition to noting the expense of therapies for SCD, the agency has stated that “facilitating access to these gene therapies for Medicare beneficiaries with SCD may have the potential to simultaneously improve the health of impacted Medicare beneficiaries and potentially lead to long-term savings in the Medicare program.” The agency also expressed concern about a hospital’s ability to sustain financial losses to provide access to these therapies.

For certain gene therapies for the treatment of SCD, that are approved for NTAPs, and “if the costs of a discharge involving the use of gene therapy for treatment of SCD exceed the full DRG payment” then despite comments, including from ASH, requesting a higher NTAP amount, CMS will provide an add-on payment equal to the lesser of a) 75% of the costs of the new medical service or technology; or b) 75% of the amount by which the costs of the case exceed the standard DRG payment. The traditional NTAP add-on payment amount is 65%.

In its response to comments requesting a NTAP of 100% for gene therapies for SCD, CMS expressed concern about the high cost of these products and creating incentives to increase prices. To discourage higher prices of these and other new technologies, CMS believes that its standard add-on payment of 65% is generally appropriate and that the higher NTAP payment of 75% is appropriate for gene therapies for SCD. Additionally, the agency rejected calls to adopt further structural changes to its current payment mechanisms for these therapies, finding them to be premature.

NEW TECHNOLOGY ADD-ON PAYMENT APPLICATIONS FOR CASGEVY™ (P. 396) AND LYFGENIA™ (P. 508)

Highlight: CMS seeks comment on new therapies for treatment of SCD.

In this final rule, CMS provides information and discussion on the evaluation of two NTAP applications for the treatment of sickle cell disease (SCD). The first is from Vertex Pharmaceuticals, Inc. requesting an NTAP designation for Casgevy™ (exagamglogene autotemcel), a hematopoietic stem cell and progenitor cell therapy to treat sickle cell disease patients twelve years and older with recurrent vaso-occlusive crises (VOC), and the other is from Bluebird bio, Inc. for Lyfgenia™ (lovotibeglogene autotemcel), a stem cell-based gene therapy to treat patients twelve years and older with SCD, and history of vaso-occlusive events (VOE). After reviewing the comments and evidence, CMS found that Casgevy™ and Lyfgenia™ meet the criteria and approved a NTAP for the product’s SCD indication for FY 2025.

Vertex submitted an NTAP designation application for Casgevy™ when used to treat transfusion-dependent beta thalassemia (TDT). The indication for the use of Casgevy™ was considered by CMS as a separate NTAP application since the indications for use are different. However, the agency did not find that it met the NTAP criteria for its TDT indication.

PAYMENT ADJUSTMENT FOR CERTAIN CLINICAL TRIAL AND EXPANDED ACCESS USE FOR IMMUNOTHERAPY CASES (P. 1048)

Highlight: CMS maintains policy for calculating relative weights of MS-DRG for CAR T-cell treatment.

Effective in FY 2021, CMS created a new MS-DRG to capture hospitals cases that includes procedures for CAR T-cell therapies. MS-DRG 018 has a relative weight that is reflective of the typical costs of providing CAR T-cell therapies in the inpatient setting. However, the agency recognized that clinical trial cases, of which there are many, would distort the weight of MS-DRG 018 because of the high cost of the CAR T-cell product. Therefore, the agency must account for cases of CAR T-cell therapy when the product is provided within a clinical trial. For FY2025, CMS will continue to exclude clinical trial cases, which do not include the cost of the CAR T-cell product itself, from the calculation of the relative weight from MS-DRG 018. This ensures that the relative weight of the MS-DRG is not artificially lowered and remains reflective of the true cost of providing CAR T-cell therapy.

ICD-10-CM DIAGNOSIS CODES TO INDICATE DUFFY PHENOTYPE

Highlight: ASH successfully obtains new ICD-10-CM codes to report the Duffy phenotype.

CMS lists new ICD-10-CM codes in the tables released with the IPPS proposed rule, and Table 6A includes four new codes to capture Duffy phenotype status. The new codes are:

  • - Z67.A1: Duffy null
  • - Z76.A2: Duffy a positive
  • - Z76.A3: Duffy b positive
  • - Z76.A4: Duffy a and b positive

ASH requested these new codes through the ICD-10-CM public code request process, and ASH members participated at public meeting to advocate for inclusion of the codes in the ICD-10-CM code listing. The codes will be available for use beginning October 1, 2024.

SEPARATE IPPS PAYMENT FOR ESTABLISHING AND MAINTAINING ACCESS TO ESSENTIAL MEDICINES (P. 1057)

Highlight: Recent drug shortages have led the agency to craft policy to assist small, independent hospitals in maintaining access to essential medicine.

CMS believes that hospitals’ procurement preferences can be leveraged to help foster a more resilient supply of lifesaving drugs and biologicals. Supply chain resiliency is bolstered when institutions have a sufficient inventory of drugs that can be leveraged during supply disruptions and demand increases; this is particularly true for essential medicines. A resilient supply of essential medicines includes medicines from multiple manufacturers, including domestic pharmaceutical manufacturers, and this additional stock would be maintained either at the hospital or off-site through an arrangement with the distributor or wholesaler.

In the CY 2024 Hospital Outpatient Prospective Payment System proposed rule, the agency requested comments on a policy to provide separate payment to hospitals under the IPPS for establishing and maintaining access to a three-month buffer stock but did not finalize policy. Now the agency is finalizing policy to establish a separate IPPS payment for small (100 beds or fewer), independent hospitals for the additional resource costs of voluntarily establishing and maintaining access to a six-month buffer stock of essential medicines beginning with the October 1, 2024, cost reporting period. The separate payment will be for the IPPS share of the additional costs and could be issued in a lump sum, or as biweekly payments to be reconciled at cost report settlement. CMS believes that this policy will support rural hospitals as many meet the criteria of being small and independent. This policy is not budget neutral.

CMS defines a small hospital as “one with not more than 100 beds,” since this definition is consistent with the definition of a small hospital used for Medicare-dependent, small rural hospitals (MDH). To be eligible, the hospital could not exceed the 100-bed limit during the cost reporting period.

Additionally, CMS finalized its policy to provide this separate payment to establish a new buffer stock for any essential medicine listed as “currently in shortage” on the Food and Drug Administration’s (FDA) Drug Shortage Database. Should a hospital already have established a buffer stock of an essential medicine prior to it going into shortage, the hospital would be eligible for the separate payment even if the buffer stock were to drop to less than six months as that stock is drawn down under this proposal. However, in the event a buffer stock supply drops to less than six months for a reason other than an FDA-recognized shortage, the separate payment will be adjusted based on the proportion of the cost reporting period that a six-month buffer stock was maintained.

For the purposes of this policy, the 86 medicines included in the list prepared by the HHS Office of the Assistant Secretary for Preparedness and Response (ASPR) and the Advanced Regenerative Manufacturing Institute’s (ARMI) Next Foundry for American Biotechnology would be deemed as essential medicine and eligible for separate payment for maintaining a buffer stock. The agency believes that the medicines on this list are either critical for minimum patient care in acute settings or important for acute care with no comparable alternatives available. Should this list be updated, all medicines on the updated list would be eligible under this buffer stock policy. The only chemotherapies included on this list are tacrolimus and mycophenolate mofetil.

PAYMENT FOR GRADUATE MEDICAL EDUCATION (P. 943)

Highlight: CMS will distribute 200 new GME residency slots.

CMS will distribute 200 new GME slots for FY 2026, as required under section 4122 of the Consolidated Appropriations Act of 2023. By law, at least half of the positions must go to psychiatry or psychiatry subspecialty residency programs, and no hospital may receive more than ten positions. For hospitals to qualify for an increase in residency slots, they must show a “demonstrated likelihood” of filling positions within the first five training years beginning after the proposed increase would take effect. Additionally, the Secretary is required to distribute at least 10 percent of the aggregate number of total residency positions available to each of the following four categories of qualifying hospitals: rural hospitals, hospitals that are over the GME cap, hospitals in states with new medical schools and hospitals located in Health Professional Shortage Areas (HPSAs).

CMS has finalized a distribution methodology that would award all qualifying hospitals that submit applications on time to receive an award of up to 1.00 full-time employee (FTE). For any remaining slots, CMS will prioritize the distribution based on the HPSA score associated with the program for which each hospital is applying. Consistent with the statutory deadline, CMS expects to notify hospitals of the first awards of positions under this distribution by January 31, 2026.

Proposed Modifications to the Criteria for New Residency Programs and Requests for Information (RFI) – p. 1024

Because there was no consensus, CMS did not finalize the change to the criteria that determine whether a residency program qualifies as "new" for hospitals to receive extra slots for said program. The agency is releasing another RFI seeking comment on the appropriate criterion for newness of residents and suggests that commenters review the agency’s statutory authority, the agency’s prior rulemaking on this issue, and the public comments it received on this topic as outlined in the final rule.

 

Hospital Inpatient Prospective Payment System FY 2025 Final Rule

 ASH Comments  Final Rule Provision
ASH thanked the agency for creating and implementing new ICD-10-CM Z codes to describe Duffy null status. The new codes, requested by ASH, were created to ensure that the people who have lower absolute neutrophil count (ANC) due to Duffy phenotype are accurately documented within the medical record and are not considered to have “abnormal” ANC levels. This final rule implemented the ICD-10-CM codes for Duffy null status, which ASH worked to create. The agency recognized ASH’s comments in support of this policy and is finalizing these new codes. These codes will be available for billing on October 1, 2024.
ASH supported the agency’s proposal to move seven ICD-10-CM Z codes that describe inadequate housing and housing instability from a non-complication or comorbidity (NonCC) classification to a complication or comorbidity (CC) classification. CMS is finalizing the proposal to change the severity designation of the seven ICD-10-CM diagnosis codes that describe inadequate housing and housing instability from NonCC to CC, based on the higher average resource costs of cases with these diagnosis codes compared to similar cases without these codes.
This IPPS rulemaking was the first released after the approval for the two gene therapies for sickle cell disease (SCD), and ASH’s comments focused on ensuring appropriate access for patients. CMS proposed to increase the New Technology Add-On Payment (NTAP) for gene therapies indicated for SCD from 65% to 75%. While ASH appreciated the agency’s intention to provide additional support for these therapies, we urged the agency to rethink their proposal and implement NTAP at 100%. Despite our comments, CMS finalized this policy as proposed and the NTAP for gene therapies for SCD will be 75%. At this time, they will not be making any structural changes to the payment system to pay for these gene therapies.
ASH supported NTAP designations as proposed for Casgevy and Lysfgenia. CMS determined that Casgevy and Lysfgenia meet the criteria for approval for NTAP for their SCD indications. The agency did not approve the NTAP for Casgevy’s transfusion-dependent β-thalassemia indication.
 ASH continued to express support for CMS’ policy to exclude clinical trial cases, which do not include the cost of the CAR T-cell product itself, from the calculation of the relative weight from MS-DRG 018. CMS finalized its policy to continue to exclude clinical trial cases when calculating the weight of the MS-DRG cases for CAR T-cell therapy. Because the CAR-T product is provided at no cost in clinical trial cases, the inclusion of these cases in the MS-DRG calculations would skew its weight.
In response to CMS' proposal to distribute new Medicare graduate medical education (GME) slots for FY 2026, as required under the Consolidated Appropriations Act of 2023, ASH expressed concerns with the distribution of slots being prioritized by Health Professional Services Area (HPSA) scores.  CMS finalized a policy to distribute additional residency positions to hospitals. CMS will distribute 200 FTE cap slots in FY 2026, and at least 100 of those FTE cap slots are reserved for programs in psychiatry and its subspecialities. If any slots remain after that initial allocation, the distribution of the remainder will be prioritized by HPSA scores.
ASH provided feedback to CMS in response to its Medicare GME request for information (RFI) to solicit comments about how the agency should identify "new" programs.

CMS did not finalize any policy related to this RFI because they “received many wide-ranging comments and commenters did not arrive at a consensus on the best approach to this issue.” CMS has initiated a second RFI and will carefully consider comments received and will take them into account for future rulemaking.