On Sept. 30, 2024, the Centers for Medicare & Medicaid Services (CMS) issued an interim final rule that canceled the low wage index policy for the 2025 Inpatient Prospective Payment System (IPPS). Here’s what you need to know.
Background
- This decision came after the U.S. Court of Appeals for the District of Columbia Circuit ruled in July 2024 that CMS lacked the authority to adopt the policy.
- The court found that CMS couldn’t manipulate wage-index rates to pick winners and losers and that the agency’s wage-index redistribution policy was unlawful.
- The low wage index policy was intended to bridge the reporting lag between when hospitals increase wages and when those increases appear in the wage index. The policy increased the wage index for hospitals in the lowest quartile by the average of their actual value and the 25th-percentile value. This policy was in place since 2020.
- The rule is open for comment until Nov. 29, 2024.
Key changes
- Operating base rate adjustment:
- National operating standardized amounts (both labor and nonlabor) for all hospitals increased roughly 0.27%.
- Recalculated wage index factors:
- Wage index factors were revised for all hospitals in the bottom-quartile hospitals only.
- Review the updated impact files accompanying the correction notice to determine whether your hospital was affected by this update.
- CMS has indicated 113 hospitals paid under the IPPS will receive transitional exception payments, and the total payment impact of this transitional policy is roughly $41 million.
- Wage index factors were revised for all hospitals in the bottom-quartile hospitals only.
Impact
- CMS web pricer:
- Billing teams at many hospitals rely on the CMS web pricer to ensure that claims are billed at proper amounts.
- As a result of the interim final rule, CMS’ web pricer hasn’t yet been updated to reflect changes to wage index factor or operating base rates.
- Claims re-billing:
- Medicare and Medicare Advantage claims may need to be re-billed during October and November, coinciding with the comment period.
Future considerations
- Based on the Court of Appeals ruling, CMS is expected to “undo” the impact of the low wage policy, which has been in place since federal fiscal year 2020.
- Benefits received during federal fiscal years 2020–2024 may be reclaimed for bottom-quartile hospitals.
- Hospitals that weren’t in the bottom quartile may be subject to remedy payments.
Action required
Providers must be aware of these changes to ensure proper reimbursement, and potential implications for their facilities during federal fiscal years 2020–2024. For further details, please refer to the official CMS update.
