A s healthcare leaders navigate a landscape defined by rising costs, workforce shortages, and tightening margins, regulatory updates can quickly shift financial strategies. One policy development that is trending now is the finalized FY 2025 Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) PPS rule, released by HHS and CMS.
While headlines focus on a 2.9% increase in Medicare inpatient operating payment rates, hospital finance teams—especially those in rural and underserved communities—know the full picture is far more complex. For many facilities, this rule represents both opportunity and continued financial strain.
At MEDTEAM, our revenue cycle experts are breaking down what this means for your bottom line and how your teams can proactively respond.
Hospitals will see a 2.9% increase in operating payment rates in FY 2025 if they meet quality and EHR reporting requirements. For compliant hospitals, this equates to an additional $2.9 billion nationally.
However, industry groups like the AHA argue that inflation, labor costs, and rising supply expenses outpace this increase, challenging hospitals already operating with thin margins.
Long-Term Care Hospitals will see a 2.0% gain—approximately $45 million in additional reimbursements. Still, high-cost outlier thresholds continue to rise, pushing more financial liability back onto LTCHs caring for medically complex patients.
These changes highlight CMS’ intention to redistribute funds toward targeted care areas while tightening broader supplemental payment categories.
CMS also finalized several updates aimed at improving equity and access:
A new IPPS payment category will help build “buffer stock” for essential medications—especially important for small and rural facilities that struggle during national shortages.
Seven diagnosis codes related to housing instability have been upgraded to complication/comorbidity status, reflecting increased resource use and supporting more accurate reimbursement.
Hospitals will see new requirements tied to:
These quality expectations tie directly to payment incentives and future financial risk.
Even with payment rate increases, rural and community hospitals continue to cite unsustainable margins. Financial leaders are right to push for a pragmatic approach that maximizes reimbursement accuracy and protects revenue integrity.
This is where best practices in revenue cycle management become essential.
Hospitals must increasingly rely on:
The trend toward data-first financial strategy is accelerating—and many organizations are using analytics platforms like Snowflake and Alteryx to operationalize those insights. While these tools are often discussed in the context of IT modernization, they are rapidly becoming indispensable to RCM teams seeking to optimize reimbursement models.
Many finance leaders are requesting a guide to help operationalize these tools or align them with CMS policy changes, underscoring the growing need for integrated data, automation, and performance visibility.
MEDTEAM partners with hospitals and health systems to strengthen revenue cycles during regulatory shifts like the FY 2025 IPPS update. Our experts help organizations:
Whether you're navigating policy volatility, preparing for the TEAM model, or working to protect every dollar of reimbursement, MEDTEAM helps ensure you aren't facing these challenges alone.
“When we call MEDTEAM, it is great that they are always on board working to help us, whatever the need is.” - Chief Nursing Officer
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