CMS has been releasing its annual Medicare payment updates. Take time to understand the changes affecting your strategies, financials, and delivery of care.
The Centers for Medicare & Medicaid Services (CMS) has been busy over the past few months releasing its annual slate of Medicare payment updates. These rules not only include proposed payment updates for the coming year, but also include policy and programmatic changes.
Every year we summarize key changes in both the proposed and final Medicare rules for physicians, hospitals, nursing homes, home health agencies, and hospice providers. We do so because these rules are the bread and butter for how health care and life sciences are paid for treating and caring for some 66 million Medicare beneficiaries. In other words, these payment and policy changes matter — to your bottom line, for setting strategic direction, understanding what’s required of your organization, and delivering better care.
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In other words, these payment and policy changes matter — to your bottom line, to setting strategic direction, understanding what’s required of your organization, and delivering better care. |
Review key points on each of the proposed 2025 Medicare rules — and read our full summaries for more details and reach out if CLA can assist.
Skilled nursing facility (SNF) prospective payment (CLA SNF proposed rule summary)
The rule proposes a net 4.1% positive update. This is based on a 2.8% market basket update, minus 0.4% productivity adjustment plus a 1.7% forecasting error increase. In addition, civil monetary penalty assessments related to per day or per instance noncompliance are increased, including the numbers of instances of noncompliance and the penalty.
Hospital inpatient, outpatient prospective payment systems (CLA inpatient hospital proposed rule summary)
Both the proposed inpatient and outpatient hospital prospective payment systems rules include a net 2.6% increase. This comes from a proposed 3% market basket update minus a mandatory 0.4% productivity adjustment. In addition, the inpatient rule includes a new, mandatory episode-based model called TEAM — Transforming Episodic Accountability Model. (For more details on model, review our Top 7 Questions blog). As for the outpatient rule, CMS proposes changes to the conditions of participation to require new obstetrics care standards.
Hospice (CLA hospice proposed rule summary)
The proposed hospice rule includes a 3% market basket update minus required productivity adjustment of 0.4% for a net 2.6% update. It would also implement the previously finalizing Hospice Outcomes and Patient Evaluation (HOPE) tool. The HOPE tool use would be required for collection of standardized patient level data by October 1, 2025.
Physician fee schedule (PFS)
The proposed PFS includes a 2.8% cut to physician payments. This comes from the statutorily required 0% update, the expiration of the temporary increases Congress provided last year, and a small positive adjustment. The conversion factor would, therefore, go from the CY 2024 rate of $33.29 to the proposed estimated CY 2025 conversion factor rate of $32.36, a decrease of $0.93 (or 2.80%). For rural health clinics (RHC), the PFS rule includes a proposal to remove existing RHC productivity standards.
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Annual Medicare Payment Updates |
| CMS releases both calendar year and federal fiscal year rules, depending on the payment system. Some rules are proposed in the spring and finalized in summer while others are proposed in summer and finalized in late fall. |
| To make sure you don’t miss any of our summaries (or other thought leadership) check back frequently to CLAconnect.com. |
Home health agencies
The home health proposed rule includes a 1.7% net reduction compared to 2024. This stems from a 3% market basket update minus a 0.5% productivity adjustment. Then an additional 4% permanent behavioral adjustment cut is added. The behavioral offset is to account for the differences between the actual and assumed behavior changes resulting from the implementation of the Patient-Driven Groupings Model (PDGM) implemented by CMS several years ago. Finally, CMS proposes in these rules adopting the Office of Management & Budget’s 2023 core-base statistical area delineations (CBSAs). Doing so will impact various providers’ wage indexes depending on their CBSA.
How we can help
It may not be typical for a professional services firm like ours to focus on Medicare reimbursement rules so heavily, but it’s part of what sets us apart…deep industry knowledge and specialization. Doing so allows us to help you with:
- Understanding and modeling out revenue impacts — from payment models like the PDGM to the proposed removal of RHC’s productivity standard.
- Surfacing insights on emerging areas of focus. For example, movements by CMS related to shifting sites of services.
- Analyzing and preparing for regulatory changes on any number of issues, such as cost reports or the nursing home staffing mandate.
- Synthesizing CMS initiatives on value, innovation. Think value-based care models and new payments and policies for drugs or device discoveries.
- Pinpointing areas of compliance concerns. A few examples are ongoing attention to hospice providers and hospital price transparency.
Each of these changes and more impact business decisions. CLA can help with:
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