Medical Billing Trends: The CMS Reimbursement Proposal for FY 2025

Revenue Cycle Management

Medical Billing Trends: The CMS Reimbursement Proposal for FY 2025

Janet Scott

July 19, 2023

Last updated on:

August 19, 2025

Read time: 4 mins

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In keeping with the practice of updating Medicare payment policies for IPPS hospitals and LTCHs on an annual basis, the CMS has unveiled a proposed rule for fiscal year (FY) 2024. The proposed rule for 2024 introduces changes to payment rates under both IPPS (Inpatient Prospective Payment System) and LTCH PPS (Long-Term Care Hospital Prospective Payment System) along with changes to Social Determinants of Health Diagnosis (SDOH) Codes, New COVID-19 Treatments Add-on Payment (NCTAP) etc.

This blog delves into the key changes as introduced in the CMS reimbursement proposal.

IPPS offers predetermined payment rates based on diagnosis-related groups(DRS) — Image 1 - IPPS and LTCHs Perspectives

Understanding CMS Reimbursement in Healthcare

CMS (Centers for Medicare & Medicaid Services) reimbursement refers to the process by which healthcare providers are paid for services rendered to Medicare and Medicaid beneficiaries. These are government-funded programs that provide health insurance to specific groups, such as the elderly, low-income individuals, and people with disabilities.

Reimbursement from CMS includes a range of services, including hospital stays, doctor visits, surgeries, and prescription medications. The amount paid is determined by CMS through a variety of payment models, which can include:

Fee-for-Service (FFS): Providers are paid a set fee for each service or procedure performed.
Prospective Payment Systems (PPS): Payments are predetermined based on factors like the diagnosis or procedure rather than the actual cost incurred.
Value-Based Care: Payments are tied to the quality of care provided, incentivizing healthcare providers to focus on improving patient outcomes.

CMS reimbursement is a crucial component of the healthcare system in the U.S., ensuring that providers are compensated for delivering care to those covered by Medicare and Medicaid. The reimbursement rates and policies can vary depending on factors such as the type of care provided, the geographic location, and changes in CMS regulations.

Medical Billing Trends: Proposed CMS Reimbursement Rules for FY 2024

Increase in Payment Rates under IPPS

The proposed increase for general acute care hospitals under IPPS, participating in the Hospital Inpatient Quality Reporting (IQR) and EHR use, stands at 2.8%
The increase applies to hospitals in the Hospital IQR program and effective meaningful EHR use.
Such a proposal looks forward to incentivizing quality reporting and EHR utilization for fair reimbursement.
The payment adjustments incentivize better patient outcomes and care quality.
CMS aligns payment with performance for patient safety and efficiency priorities.
The proposed change to increase hospital payments by $3.3 billion in FY 2024.
Medicare DSH and uncompensated care payments are projected to decrease by $115 million in FY 2024.

Inpatient Quality Reporting (IQR) Program

The IQR Program is a CMS initiative that requires participating hospitals to report data on various quality measures related to patient care.

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Payment Adjustment Under Inpatient Prospective Payment System (IPPS):

Payment reduction for readmissions under the Hospital Readmissions Reduction Program (HRRP).
1% reduction for hospitals in the worst-performing quartile under the Hospital Acquired Condition (HAC) Reduction Program.
Hospitals are subject to upward or downward payment adjustments based on performance under the Hospital Value-Based Purchasing (VBP) Program.

CMS Initiatives — Image 2 - CMS Health Plan Innovation Initiatives

Changes to Payment Rates under LTCH PPS

CMS projects a 2.9% increment in the standard payment rate for LTCHs in FY 2024.
LTCH PPS payments for standard rate discharges to go down by 2.5% or $59 million.
Reduction attributed to a projected 4.7% decrease in high-cost outlier payments as a percentage of total LTCH PPS standard Federal payments.

Image 3 - Long-Term Care Hospitals Vs. Long-Term Care Hospital Prospective Payment System

Medical Billing Trends: Changes to the New COVID-19 Treatments Add-on Payment (NCTAP)

CMS introduced NCTAP during the PHE.
NCTAP supports eligible discharges, ensuring continued treatment support.
To minimize payment disruptions post-PHE, NCTAP extended until PHE's fiscal year-end.
If PHE ends in May 2023, NCTAP eligibility till September 30, 2023 (end of FY 2023).
NCTAP expires after FY 2023; no payments from FY 2024 (starting October 1, 2023, discharges).

The New COVID-19 Treatments Add-on Payment (NCTAP)
Established by CMS in response to the COVID-19 Public Health Emergency (PHE), this policy provides additional payments for eligible discharges involving new COVID-19 treatments. The policy aims to mitigate potential financial disincentives for hospitals to provide these treatments and support continued patient access during the PHE.

Public Health Emergency (PHE)
It refers to a situation declared by the government or health authorities, in which there is an impending threat to public health due to infectious diseases, natural disasters, or other health-related emergencies.

Conclusion

The new proposed rules by the CMS for FY 2024 hold significant implications for the healthcare industry. The proposed increment in payment rates for healthcare organizations under IPPS will enhance the quality of care, reporting, use of EHRs and ensure equitable reimbursement. At Invensis, we closely monitor medical billing trends, proposed rules and align these with our medical billing services to help practices meet CMS’s vision for FY 2024.

Frequently Asked Questions

What does CMS reimbursement mean?

CMS reimbursement is the payment made by the Centers for Medicare & Medicaid Services (CMS) to healthcare providers for services rendered to Medicare and Medicaid beneficiaries. Reimbursement rates are determined based on CMS fee schedules and guidelines for covered medical procedures and services.

What does CMS stand for?

CMS stands for the Centers for Medicare & Medicaid Services. It is a federal agency within the U.S. Department of Health and Human Services responsible for administering Medicare, Medicaid, the Children's Health Insurance Program (CHIP), and the Health Insurance Marketplace. CMS oversees healthcare coverage and payment programs nationwide.

How do providers get reimbursed by Medicare?

Healthcare service Providers get reimbursed by Medicare through a process that involves submitting claims for services rendered to Medicare beneficiaries. Medicare reviews these claims, verifies eligibility, applies reimbursement rates based on fee schedules, and processes payments directly to healthcare providers or through intermediaries like Medicare Administrative Contractors (MACs).

Janet Scott

Janet is a seasoned professional in the medical billing industry, with extensive knowledge and expertise that enhances her writing. With years of experience, she adeptly handles the complexities of healthcare reimbursement processes. Janet's proficiency spans various medical specialties, consistently delivering valuable insights and implementing effective revenue cycle solutions. She excels in coding compliance, claims submission, and denial management. As a prominent writer in the medical billing space, Janet provides concise and actionable advice, empowering healthcare providers to optimize their financial performance with confidence.