On July 31, 2024, CMS published a final rule updating the Medicare rates and policies applicable to inpatient psychiatric facilities (IPFs) under the IPF Prospective Payment System (PPS) and the IPF Quality Reporting Program (QRP) for fiscal year (FY) 2025 (the Final Rule). A summary of the Final Rule is available below.
Updates to IPF Payment Rates
CMS finalized a 2.8% increase to the IRF PPS payment rate, reflecting a market basket increase of 3.3% less a 0.5 percentage point productivity adjustment. CMS also finalized updates to the outlier threshold to maintain outlier payments at 2.0% of total payments. CMS estimates total payments to IPFs will increase by $65 million.
Revisions to IPF PPS Patient-Level Adjustment Factors
The Consolidated Appropriations Act, 2023 requires CMS to revise the IPF PPS methodology for determining payment rates for FY 2025 and subsequent years. CMS revised the methodology for determining the payment rates under the IPF PPS for psychiatric hospitals and psychiatric units. CMS finalized revisions to the IPF PPS patient-level adjustment factors, including Medicare Severity Diagnosis Related Groups (MS–DRGs) assignment of the patient’s principal diagnosis, selected comorbidities, patient age, and a variable per diem adjustment.
CMS also updated the regression model used to determine IPF PPS payment adjustments to reflect costs and claims data from 2019-2021. Based on CMS’s analysis, CMS finalized changes to the patient-level adjustments in a budget-neutral manner. This means the estimated payments to IPFs for FY 2025 would be the same with or without the finalized revisions.
Increase to the Electroconvulsive Therapy Payment per Treatment
IPF PPS claims and cost data indicates that since 2005, ancillary costs for stays that include electroconvulsive therapy (ECT) treatments have increased more than the ECT per treatment payment. To address this discrepancy, the Final Rule increases the IPF PPS ECT per treatment amount to $661.52, up from the FY 2024 ECT payment per treatment of $385.58.
Wage Index Update
In the Final Rule, CMS adopted the CBSA Labor Market Areas for the IPF PPS wage index as defined in the OMB Bulletin 23-01. CMS also implemented a transition period for providers transitioning from rural to urban based on these CBSA revisions. The affected providers will receive two-thirds of the rural adjustment in FY 2025, one-third of the rural adjustment in FY 2026, and no rural adjustment in FY 2027.
Clarification of Requirements for Reporting Ancillary Charges and All-Inclusive Status Eligibility Under the IPF PPS
Currently, CMS expects IPFs with a charge structure to report ancillary costs and charges on cost reports. In contrast, IPFs without this cost structure have the option to use an alternative method of cost reporting by filing all-inclusive cost reports. In the Final Rule, CMS clarified the eligibility criteria for the option to file an all-inclusive cost report. Along with other operational changes, this clarification is meant to ensure that only government-owned, IHS, or tribally-owned IPF hospitals are permitted to file an all-inclusive cost report for cost reporting periods beginning on or after October 1, 2024.
Updates to the IPF QRP
CMS adopted a new measure, the 30-Day Risk-Standardized All-Cause Emergency Department Visit Following an Inpatient Psychiatric Facility Discharge measure (IPF ED Visit measure). The IPF ED Visit measure assesses the proportion of patients 18 and older with an emergency department visit, including observation stays, within 30 days of discharge from an IPF without subsequent admission. Patients subsequently admitted to an acute care hospital or IPF are represented under the Thirty-Day All-Cause Unplanned Readmission Following Psychiatric Hospitalization in an Inpatient Psychiatric Facility measure, which is already in the IPF QRP.
After considering public comments, CMS declined to finalize its proposal to require IPFs to submit patient-level quality data for certain measures on a quarterly basis, as opposed to the current annual basis. CMS determined that some IPFs may be unable to meet this requirement in the proposed timeframe. Therefore, CMS decided not to finalize this proposal and to maintain the current annual reporting for these measures.
The fact sheet for the IPF PPS and QRP Final Rule is available here. The Final Rule will be published in the Federal Register on August 7, 2024.
A copy of the Final Rule is available here.
