CMS 2025 Updates – Inpatient and Outpatient
© 2024 HMP Global. All Rights Reserved.
Any views and opinions expressed are those of the author(s) and/or participants and do not necessarily reflect the views, policy, or position of Cath Lab Digest or HMP Global, their employees, and affiliates.
Jackie Shepard, Business Consultant, Corazon
The Centers for Medicare & Medicaid Services (CMS) recently released its 2025 updates, introducing significant changes to the Medicare payment systems that will impact healthcare providers nationwide. These updates, which include adjustments to the Inpatient Prospective Payment System (IPPS), Outpatient Prospective Payment System (OPPS), Ambulatory Surgery Centers (ASCs), and Physician Fee Schedule (PFS), are designed to address current challenges and trends within the healthcare landscape. As providers navigate these updates, understanding the detailed revisions and their implications will be essential for strategic planning and operational efficiency in the year ahead.
To frame these updates, Medicare’s payment systems function under distinct reimbursement models:
• IPPS for inpatient services uses Diagnosis-Related Groups (DRGs);
• OPPS and ASCs operate with Ambulatory Payment Classifications (APCs); and
• PFS relies on Current Procedural Terminology (CPT) codes.
Updates to the Inpatient Prospective Payment System (IPPS)
The IPPS for acute care hospitals has undergone notable changes. Starting with the market basket update, for fiscal year 2025, acute care hospitals that report quality data and meet electronic health record meaningful use standards will see a 2.9% increase in Medicare operating rates. This figure accounts for a projected market basket update of 3.4%, offset by a 0.5% productivity adjustment.1
Additional factors affect each hospital’s specific Medicare base payment rate. CMS continues applying a permanent 5% cap on wage index decreases from the prior year. There were changes to the Disproportionate Share Hospital (DSH) payments in FY 2025, while the Indirect Medical Education (IME) formula remains the same.1 CMS has also introduced a 10% cap on annual decreases in DRG relative weights, and made key DRG additions and deletions, particularly within Major Diagnostic Categories (MDCs) 5 and 8. This year also brings 252 new ICD-10 codes, along with 13 deletions and 36 revisions, shaping reimbursement rates for many procedures.1
Quality Standards and Performance-Based Programs
CMS maintains its budget-neutral structure for the Value-Based Purchasing (VBP) program, reducing hospitals’ DRG payments by 2% each fiscal year and redistributing the total as incentive payments.1 CMS has also added seven new quality measures, removed five, and made two modifications for fiscal year 2025, setting the stage for updates to the HCAHPS Survey (Hospital Consumer Assessment of Healthcare Providers and Systems), anticipated in fiscal year 2030. For hospital-acquired conditions, the 1% payment reduction for hospitals in the worst-performing quartile remains unchanged, as does the structure for the Hospital Readmissions Reduction Program.1
New Technology Add-On Payment (NTAP) and Transforming Episode Accountability Model (TEAM) Updates
The NTAP program encourages the adoption of advanced medical technologies by providing extra payments for high-cost, innovative treatments that meet specific criteria. For 2025, CMS has increased the NTAP reimbursement rate from 65% to 75% for certain gene therapies, particularly for sickle cell disease, helping offset high treatment costs.1 CMS has also refined the “newness” period for NTAP eligibility, which will now align with the fiscal year starting October 1, 2026, for added predictability.1 Technologies placed on “hold” status will remain eligible for NTAP, though withdrawn applications will still be ineligible. For 2025, CMS approved NTAPs for 5 new technologies, with additional support for 11 breakthrough devices, underscoring its commitment to promoting clinically valuable innovations.1
Launching in January 2026, TEAM is a mandatory episode-based payment model targeting specific high-cost surgical procedures, including coronary artery bypass grafts. The model introduces bundled payments with target prices for all services within a surgical episode, incentivizing hospitals to manage total costs efficiently. Hospitals in selected geographic regions will participate, with three risk/reward tracks designed to balance incentives and financial responsibility.1 Providers who keep costs below target may receive bonuses, while those who exceed target costs could owe repayments. TEAM promotes coordinated, value-based care for complex surgeries, aiming to enhance both quality and cost-effectiveness in Medicare’s approach to reimbursement.
Key DRG Changes in Major Diagnostic Categories 5 and 8
In the 2025 updates, CMS introduced a new Diagnosis-Related Group, DRG 317, specifically designed for cases involving the combined procedures of left atrial appendage closure (LAAC) and cardiac ablation. This new DRG addresses the unique clinical and resource needs associated with performing these two procedures together, as they require specialized equipment, highly skilled staff, and extended procedural time.1 CMS also modified the DRG 276 description to account for neuromodulation devices for heart failure.
Surgical and Interventional Reimbursement Changes
Neurosurgery (Table 1) has seen reimbursement reductions ranging from 3% to 28% for procedures involving intracranial hemorrhage. Open heart surgery DRGs mostly increased slightly, though transcatheter aortic valve replacement (TAVR) saw a decrease of 2%.1
For interventional procedures (Table 2), CMS approved a 2% increase for thrombectomy and craniotomy procedures, while diagnostic catheterizations rose by 4.4% and 2.4%. Percutaneous coronary interventions (PCI) procedures also saw reimbursement increases, as did peripheral vascular procedures, with some inpatient reimbursement rates increasing up to 14%.1
Outpatient Prospective Payment System (OPPS) Updates
The calendar year 2025 OPPS updates include a market basket increase of 2.9%, bringing the conversion factor to $89.169. This is 0.3% higher than last year’s update, reflecting a projected increase of 3.4% offset by a 0.5% productivity adjustment. APC assignments will influence outpatient procedure reimbursement rates.2
CMS also finalized a separate reimbursement for diagnostic radiopharmaceuticals with a per-day cost exceeding $630, a move intended to account for high costs.
Quality Reporting and Equity Measures
For 2025, CMS introduced several important changes to the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Center (ASC) Quality Reporting Programs, with a strong focus on advancing health equity and improving data transparency.
In alignment with its broader commitment to health equity, CMS has added new measures related to social determinants of health (SDOH). These measures allow facilities to report on key factors such as patient demographics, access to care, and social challenges that might impact health outcomes.2 For 2025, reporting on these measures will be voluntary, giving providers time to adjust and collect data, with mandatory reporting set to begin in 2028. Additionally, CMS is implementing the Screen Positive Rate for SDOH measure, initially voluntary in 2025, but becoming mandatory in 2026 to guide future health policy.2
CMS is introducing a Patient-Reported Outcome-Based Performance Measure for the Outpatient Quality Reporting (OQR) program. This measure, focused on collecting direct patient feedback on outcomes, will begin as voluntary in 2026, transitioning to mandatory in 2027. By including patient-reported data, CMS aims to gain deeper insights into quality and satisfaction, helping hospitals and ASCs better address patient needs and experiences.2,3
CMS has modified its policy for measure removal, shifting to a “measure suspension” policy in the OQR and ASC Quality Reporting (ASCQR) programs. This change is designed to improve transparency in the process of removing or modifying quality measures, allowing hospitals and ASCs greater insight into decision-making around quality metrics.2,3
CMS continues to enforce payment reductions for facilities that do not meet quality reporting requirements, applying a 2% reduction to payments for those who fall short. This policy underscores CMS’s emphasis on quality compliance, encouraging facilities to maintain reporting standards and work towards continuous improvement.2,3
These quality reporting updates mark a step toward more comprehensive and equitable patient care, with a particular focus on health equity, patient-centered outcomes, and transparency in quality measurement across outpatient and ASC settings.
Reimbursement Changes: Outpatient Procedures
Within the outpatient setting, diagnostic catheterizations and PCI procedures both saw increases in APC rates (Table 3). Peripheral vascular procedures showed increases across all categories, while electrophysiology procedures saw nuanced adjustments, including a 2% increase for certain defibrillators and a 3% decrease in pacemakers at Level 1, balanced by slight increases in other levels.2
Ambulatory Surgical Center (ASC) Payment System Updates
ASCs saw an average rate increase of 2.9%, though their APC conversion factor is typically lower than hospitals. For certain cardiac CT codes, CMS reassigned these to higher-paying APCs to better reflect procedural costs.3 While CMS refrained from adding new surgical procedures to the Covered Procedures List (CPL), they left in place the addition of cardiac, vascular, and orthopedic procedures from recent years, allowing providers to keep pace with procedural shifts to ASCs.4
Table 4 illustrates the reimbursement differences for certain procedures when performed in a hospital outpatient setting versus an ASC. At first glance, it’s clear that reimbursement rates for categories like cath/PCI, devices, and vascular procedures are lower in the ASC setting compared to the hospital outpatient setting.3 However, this comparison does not account for the typically lower expenses associated with performing these procedures in an ASC, where costs can decrease by approximately 30%-40%, resulting in similar profit margins between ASCs and hospitals despite the lower reimbursement rates in ASCs.5
Physician Fee Schedule (PFS) Updates
The calendar year 2025 PFS brings a 2.8% conversion factor reduction to $32.35. CMS added six new Merit-Based Incentive Payment System (MIPS) metrics and refined telehealth service definitions, allowing coverage for two-way audio when video is unavailable.6 For telehealth providers, distant practitioners can now report enrolled practice locations rather than home addresses when delivering services remotely. CMS also introduced add-on payments for certain office and outpatient Evaluation and Management (E/M) visits.6
Conclusion
The CMS 2025 updates introduce substantial changes across Medicare’s payment systems, with a strong focus on incentivizing high-quality, efficient, and patient-centered care. From new technology add-on payments to mandatory episode-based payment models, these updates reflect CMS’s commitment to modernizing healthcare reimbursement and supporting innovative treatments that improve outcomes. Corazon strongly believes that all organizations must prepare for the future by allocating appropriate resources, scheduling necessary training, and keeping clinical and financial teams apprised of required policy and/or procedure changes. By understanding and adapting to these updates, healthcare providers can better align their services with CMS’s goals, navigating both inpatient and outpatient settings with an emphasis on cost-effectiveness and quality. As we move into 2025, these changes will be essential for providers aiming to optimize reimbursement, enhance patient care, and stay competitive in an evolving healthcare landscape.
References
1. Centers for Medicare & Medicaid Services. (2024). FY 2025 Inpatient Prospective Payment System (IPPS) Final Rule. U.S. Department of Health and Human Services. https://www.cms.gov. Accessed November 19, 2024.
2. Centers for Medicare & Medicaid Services. (2024). CY 2025 Outpatient Prospective Payment System (OPPS) Final Rule. U.S. Department of Health and Human Services. https://www.cms.gov. Accessed November 19, 2024.
3. Centers for Medicare & Medicaid Services. (2024). CY 2025 Ambulatory Surgical Center (ASC) Payment System Final Rule. U.S. Department of Health and Human Services. Retrieved from https://www.cms.gov. Accessed November 19, 2024.
4. American College of Cardiology. (2024, November 12). CV highlights from the 2025 hospital OPPS final rule. Retrieved from https://www.acc.org/latest-in-cardiology/articles/2024/11/12/20/41/cv-highlights-from-the-2025-hospital-opps-final-rule. Accessed November 19, 2024.
5. American Academy of Orthopaedic Surgeons. (2024). When considering all CPT codes together, procedures performed in ASCs result in 41 percent savings in patient payments compared with HOPDs. https://www.aaos.org/aaosnow/2024/aaos-now-daily-edition--wednesday/research/research06/#:~=When%20considering%20all%20CPT%20codes%20together%2C%20procedures%20performed,percent%20savings%20in%20patient%20payments%20compared%20with%20HOPDs. Accessed November 19, 2024.
6. Centers for Medicare & Medicaid Services. (2024). CY 2025 Physician Fee Schedule (PFS) Final Rule. U.S. Department of Health and Human Services. https://www.cms.gov. Accessed November 19, 2024.
Jackie Shepard is a Business Consultant at Corazon, offering program development for the Heart, Vascular, Neuroscience, and Surgical specialties, offering services in Consulting, Accreditation, Peer Review, Recruitment, and Interim Management. To learn more, visit www. corazoninc.com or call (412) 364-8200. To reach Jackie, email jackie.shepard@corazoninc.com.
Find More:
Cardiovascular Ambulatory Surgery Centers (ASCs) Topic Center
The Latest Clinical & Industry News
Grand Rounds With Morton Kern, MD
