On November 1, 2024, Centers for Medicare & Medicaid Services (CMS) released the CY 2025 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Center (ASC) Payment System policy changes and payment rates final rule. In the CY 2024 OPPS/ASC final ruling, CMS finalized its proposal to continue aligning the ASC payment system using the hospital market basket update, rather than the Consumer Price Index for All Urban Consumers (CPI-U) for an additional two calendar years (CY) through 2025. Accordingly, the 2025 Medicare OPPS final rule resulted in overall expected growth in payments equal to 2.9% in CY 2025. This increase is determined based on the projected hospital market basket percentage increase of 3.4%, less the multifactor productivity (MFP) reduction of (0.5%) mandated by the ACA. This is an increase of 0.3% from the proposed rule. In an official American Hospital Association (AHA) statement on the CY 2025 OPPS final rule, Ashley Thompson, Senior Vice President of Public Policy Analysis and Development for AHA, commented:
“Medicare’s sustained and substantial underpayment of hospitals has stretched for almost two decades, and today’s final outpatient rule only worsens this chronic problem. The agency’s final increase of less than 3% for outpatient hospital services will make the provision of care, investments in the health care workforce, and addressing new challenges, such as cybersecurity threats, more difficult. These inadequate payments will have a negative impact on patient access to care, especially in rural and underserved communities nationwide.”
The chart below presents a summary of the historical net inflation adjustments for CY 2016 through CY 2025. The annual inflation adjustments are presented net of additional adjustments, such as the MFP reduction, outlined in the final rule for the respective CY. The CY 2025 inflation adjustment is slightly lower than the increase we observed last year, following a declining trend since 2023 despite inflationary increases, continued rise in labor and supply cost pressures, and recent increases in anesthesia costs.
CMS noted in their fact sheet that, “in addition to finalizing payment rates, this year’s rule includes policies that align with several key goals of the Biden-Harris Administration, including responding to the maternal health crisis, addressing health disparities, expanding access to behavioral health care, improving transparency in the health system, and promoting safe, effective, and patient-centered care. The final rule advances the agency’s commitment to strengthening Medicare and uses the lessons learned from the COVID-19 public health emergency (PHE) to inform the approach to quality measurement, focusing on changes that would help address health inequities.”
CMS has approved 21 medical and dental surgical procedures to be added to the ASC CPL for CY 2025, outlined in the table below. These include 16 dental and two regenerative cell therapy codes that were included in the proposed rule, and three dental codes that were recommended during the comment period. These codes correspond to procedures that have few to no inpatient admissions and are widely performed in outpatient settings.
CMS has projected total ASC payments in 2025 to increase approximately $308 million from 2024 payments, to be approximately $7.4 billion. The source of the increase in payments is a combination of enrollment, case-mix, and utilization changes.
In conclusion, we continue to see the trend of rising labor and supply costs play out through 2024 and into the finalization of the CY 2025 payment system. CMS continues to show stability on the annual inflation adjustment, using the hospital market basket to update rates by extending the five-year interim period; however, ASCA CEO Bill Prentice echoes AHA’s commentary:
“This final rule is a step sideways in a time when millions of Medicare beneficiaries need CMS to advance policies that expand access to the safe, convenient and efficient care that surgery centers provide… CMS must recognize the enormous impact of rising employment and anesthesia costs, and reform outdated budget policies that shortchange ASC reimbursements so that surgery centers can better serve Medicare patients in their communities.”
The costs of providing care continue to rise rapidly, directly impacting health systems’ margins and ability to provide effective care. Although CMS finalized the addition of 21 procedures to the ASC CPL for CY 2024, none of them were surgical procedures. The focus continues to be CMS’ ability to combat rising costs with their annual payment updates, and a two–year decline in payment rates from 2023 has industry leaders voicing concerns.
