Fiscal Year 2025 Medicare Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS) and Quality Reporting (IPFQR) Updates Final Rule (CMS 1806 F)

On July 31, 2024, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update Medicare payment policies and rates for the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS) for fiscal year (FY) 2025. CMS is publishing this final rule consistent with the legal requirements to update Medicare payment policies for IPFs on an annual basis.

Policies included in this final rule support the provision of high-quality behavioral health treatment in inpatient psychiatric facilities, consistent with the Biden-Harris Administration's Unity Agendaand focus on addressing the mental health crisis. This fact sheet discusses the major provisions of the final rule, including annual updates to the prospective payment rates, the outlier threshold, and the wage index. The rule finalizes CMS' proposal to revise patient-level adjustment factors and to increase the per-treatment amount for Electroconvulsive Therapy (ECT). Additionally, the rule finalizes the proposal to update the wage index using the latest Core-Based Statistical Area (CBSA) Labor Market Areas from the Office of Management and Budget (OMB). CMS believes these policies will improve or maintain individual access to high-quality care by ensuring that payment rates reflect the best available data on the resources involved in inpatient psychiatric care and the costs of these resources.

In addition, this rule includes a clarification of the eligibility criteria for IPFs to elect to file an all-inclusive cost report. CMS will issue revised cost reporting guidance and make operational changes to improve the quality of ancillary charge data on IPF claims by enforcing these eligibility criteria, resulting in the appropriate collection of more cost data from IPFs erroneously filing an "all-inclusive" rate cost report. CMS believes these operational changes will support its ongoing efforts to analyze variation in costs between patients with different characteristics and will increase the accuracy of future payment refinements to the IPF PPS while also aligning with the President's Executive Order on Promoting Competition in the American Economy by facilitating accurate payment, cost efficiency, and transparency.[1]

This final rule also includes summaries of comments received in response to two requests for information on future revisions to the IPF PPS facility-level adjustment factors and development of the new standardized IPF Patient Assessment Instrument (IPF-PAI), required by the Consolidated Appropriations Act, 2023 (CAA, 2023), which IPFs participating in the IPF Quality Reporting (IPFQR) Program will be required to report beginning with Rate Year 2028.

For the IPFQR Program, CMS is finalizing adoption of the 30-Day Risk-Standardized All-Cause Emergency Department Visit Following an Inpatient Psychiatric Facility Discharge measure. CMS is not finalizing its proposal to require IPFs to submit data on a quarterly basis for patient-level measures; data reporting for these measures will remain annual.

Changes to Payments Under the IPF PPS

Updates to IPF Payment Rates

For FY 2025, CMS is updating the IPF PPS payment rates by 2.8%, based on the 2021-based IPF market basket increase of 3.3%, reduced by a 0.5 percentage point productivity adjustment. Additionally, CMS is updating the outlier threshold so that estimated outlier payments remain at 2.0% of total payments. CMS estimates that updating the outlier threshold will result in a 0.3% decrease in aggregate payments. Total estimated payments to IPFs are estimated to increase by 2.5%, or $65 million, in FY 2025 relative to IPF payments in FY 2024.

Revisions to IPF PPS Patient-Level Adjustment Factors and Request for Information

The CAA, 2023, requires CMS to revise the IPF PPS methodology for determining payment rates for FY 2025 and subsequent years. CMS is finalizing revisions to the methodology for determining the payment rates under the IPF PPS for psychiatric hospitals and psychiatric units based on a review of the data and information collected in prior years in accordance with section 1886(s)(5)(A) of the Social Security Act, as added by the CAA, 2023. CMS is finalizing revisions to the IPF PPS patient-level adjustment factors. The patient-level adjustments include Medicare Severity Diagnosis Related Groups (MS-DRGs) assignment of the patient's principal diagnosis, selected comorbidities, patient age, and a variable per diem adjustment.

Historically, the IPF PPS used the patient and facility-level adjustment factors derived from the regression model implemented in 2005. In this final rule, we have updated the regression model used to determine IPF PPS payment adjustments to reflect costs and claims data for CY 2019, 2020, and 2021. Based on our analysis of the more recent claims and costs data, as well as public comments received in the FY 2022 and FY 2023 IPF PPS rules, we are finalizing changes to the patient-level adjustments for which we adjust payment. We are finalizing these revisions in a budget-neutral manner (that is, estimated payments to IPFs for FY 2025 would be the same with or without the finalized revisions).

In addition to these updates for FY 2025, CMS sought input on potential future revisions to the IPF PPS facility-level adjustments based on the results of more recent IPF cost and claim analysis. An analysis of 2019 through 2021 IPF claims and costs data identified potential changes in the regression factors for IPFs with a rural location and teaching status and suggested there may be value in including a new facility-level variable for the safety net patient population. We also analyzed a potential adjustment based on the Medicare Safety Net Index (MSNI), developed by MedPAC as a recommended alternative to the current statutorily required methodology for disproportionate share payments to IPPS hospitals. In the proposed rule, we discussed considerations related to applicability and modeling that demonstrate the effect of revising the rural and teaching status adjustment factors, as well as the inclusion of a new facility-level variable for safety net patient populations. In future rulemaking, updating these facility-level adjustment factors could more accurately pay for care, support psychiatry residency training, and support IPFs in rural and underserved areas. Commenters offered various suggestions of facility-level characteristics and factors we could consider for analysis. CMS will take these comments into consideration for future rulemaking.

Increase to the Electroconvulsive Therapy Payment per Treatment

In addition, an analysis of the latest IPF PPS claims and cost data found that ancillary costs for stays that include electroconvulsive therapy (ECT) treatments have increased more than the ECT per treatment payment has since 2005. To remedy this, we are increasing the IPF PPS ECT per treatment amount. For FY 2025, the ECT payment per treatment will be $661.52, an increase from the FY 2024 ECT payment per treatment of $385.58. We believe this increase will help ensure that the patients who need ECT are more able to access it.

FY 2025 Wage Index Update for Revised Census Data

IPF PPS regulations require CMS to use the best Medicare data available to estimate the average inpatient operating and capital-related costs per day, including an appropriate wage index to adjust for wage differences. We update the wage index annually based on the most recent available acute care hospital wage index, without any floors or reclassifications applicable under the Medicare Inpatient Prospective Payment System. Historically, we have also updated the Core-Based Statistical Area (CBSA) delineations in accordance with the latest available Office of Management and Budget (OMB) Bulletin. For FY 2025, we are adopting the CBSA Labor Market Areas for the IPF PPS wage index as defined in the OMB Bulletin 23-01. We are also implementing 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. This approach is consistent with how we have implemented this policy in previous years and will help affected providers adjust to the loss of the payment adjustment for rural locations over time.

Clarification of Requirements for Reporting Ancillary Charges and All-Inclusive Status Eligibility Under the IPF PPS

The CAA, 2023, requires the collection of data and information, such as charges related to ancillary services, to revise 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. All-inclusive cost reporting accommodates these hospitals' inability to allocate costs to charges and allows them to use an alternative cost allocation method. Historically, there have been a small number of hospitals that file all-inclusive cost reports, which consistently do not include or have very minimal ancillary cost data. These have mostly included Indian Health Service (IHS) hospitals, tribally owned and government-owned psychiatric, and acute care hospitals. However, CMS has observed a notable increase in the number of IPFs erroneously filing all-inclusive cost reports.

CMS is clarifying the eligibility criteria for the option to elect to file an all-inclusive cost report and is making operational changes 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. By improving the reporting of ancillary costs and charges, CMS will be able to increase accuracy of future payment refinements to the IPF PPS, which will further advance behavioral health treatment and support IPFs that provide care to people with more complex and costlier conditions.

Request for Information (RFI) about IPF PPS Patient Assessment Instrument (IPF-PAI) Required by the Consolidated Appropriations Act, 2023 (CAA, 2023)

The CAA, 2023, requires IPFs to collect and submit standardized patient assessment data on specified categories. This data will enable CMS to propose future revisions to the IPF PPS that would more accurately pay for care, monitor quality, and assess for disparities in behavioral health care. Therefore, CMS included an RFI in the proposed rule to solicit comments with the goal of engaging the public to identify meaningful data elements for collection that are appropriate for the acute inpatient psychiatric care setting and potential criteria for the development and implementation of the instrument. In addition, we sought to understand the burden on IPFs that this additional data collection would impose and solicited comment on ways we might minimize this burden by evaluating whether any data that is currently collected through one or more existing assessment instruments in other settings or collected as part of IPFs' existing processes, could be collected as standardized patient assessment data elements for the IPF-PAI. We summarized the comments we received on this RFI in this final rule. CMS will take these comments into consideration for development of the IPF-PAI and in future rulemaking.

Updates to the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program

The IPFQR Program requires that all IPFs paid under the IPF PPS submit certain specified quality data to CMS in a form and manner and within the timeframes that CMS prescribes. IPFs that do not submit the specified data on quality measures as required by the IPFQR Program receive a 2.0 percentage point reduction to their annual payment update. The IPFQR Program aims to assess and foster improvement in the quality of care provided to patients in IPFs. By requiring IPFs to submit quality data to CMS and by CMS publicly reporting these data under the IPFQR Program, CMS ensures that patients can make more informed decisions about their health care options.

In this final rule, CMS is finalizing its proposal to adopt one new measure, the 30-Day Risk-Standardized All-Cause Emergency Department Visit Following an Inpatient Psychiatric Facility Discharge measure (also referred to as the IPF ED Visit measure). This claims-based measure will assess 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 IPFQR Program. By adopting the IPF ED Visit measure, the IPFQR Program will provide a more complete assessment of post-discharge acute care and encourage improvements in discharge planning and care coordination.

Additionally, CMS is not finalizing 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 proposed this update to align the IPFQR Program with other quality reporting programs that require patient-level data submission on a quarterly basis and to reduce data strains on IPF systems. However, after reviewing public comment on this proposal, 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.

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