Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 80405 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 412 

[CMS–1808–IFC] 

RIN 0938–AV34 

Medicare Program; Changes to the 

Fiscal Year 2025 Hospital Inpatient 

Prospective Payment System (IPPS) 

Rates Due to Court Decision 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Interim final action with 

comment period. 

SUMMARY: This interim final action with 

comment period (IFC) implements 

revised Medicare wage index values for 

FY 2025, establishes a transitional 

payment exception for low wage 

hospitals significantly impacted by 

those revisions, and makes conforming 

changes to the hospital Inpatient 

Prospective Payment System (IPPS) 

payment rates for FY 2025. These 

changes reflect the removal of the low 

wage index hospital policy following 

the appellate court decision in 

Bridgeport Hosp. v. Becerra. This rule 

also makes conforming changes to IPPS 

rates and factors used to determine 

certain payments under the Long-Term 

Care Hospital Prospective Payment 

System (LTCH PPS). 

DATES: 

Effective date: This action is effective 

on September 30, 2024. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, by November 29, 2024. 

ADDRESSES: In commenting, please refer 

to file code CMS–1808–IFC. 

Comments, including mass comment 

submissions, must be submitted in one 

of the following three ways (please 

choose only one of the ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address only: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1808–IFC, P.O. Box 8013, 

Baltimore, MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1808–IFC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Donald Thompson and Michele 

Hudson, (410) 786–4487 or DAC@

cms.hhs.gov. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following 

website as soon as possible after they 

have been received: http://

www.regulations.gov. Follow the search 

instructions on that website to view 

public comments. CMS will not post on 

Regulations.gov public comments that 

make threats to individuals or 

institutions or suggest that the 

commenter will take actions to harm an 

individual. CMS continues to encourage 

individuals not to submit duplicative 

comments. We will post acceptable 

comments from multiple unique 

commenters even if the content is 

identical or nearly identical to other 

comments. 

I. Background 

A. Scope and Authority 

1. Acute Care Hospital Inpatient 

Prospective Payment System (IPPS) 

Section 1886(d) of the Social Security 

Act (the Act) sets forth a system of 

payment for the operating costs of acute 

care hospital inpatient stays under 

Medicare Part A (Hospital Insurance) 

based on prospectively set rates. Section 

1886(g) of the Act requires the Secretary 

to use a prospective payment system 

(PPS) to pay for the capital-related costs 

of inpatient hospital services for these 

‘‘subsection (d) hospitals.’’ Under these 

PPSs, Medicare payment for hospital 

inpatient operating and capital-related 

costs is made at predetermined, specific 

rates for each hospital discharge. 

Discharges are classified according to a 

list of diagnosis-related groups (DRGs). 

The base payment rate is comprised of 

a standardized amount that is divided 

into a labor-related share and a 

nonlabor-related share. The laborrelated share is adjusted by the wage 

index applicable to the area where the 

hospital is located. If the hospital is 

located in Alaska or Hawaii, the 

nonlabor-related share is adjusted by a 

cost-of-living adjustment factor. This 

base payment rate is multiplied by the 

DRG relative weight. 

If the hospital treats a high percentage 

of certain low-income patients, it 

receives a percentage add-on payment 

applied to the DRG-adjusted base 

payment rate. This add-on payment, 

known as the disproportionate share 

hospital (DSH) adjustment, provides for 

a percentage increase in Medicare 

payments to hospitals that qualify under 

either of two statutory formulas 

designed to identify hospitals that serve 

a disproportionate share of low-income 

patients. For qualifying hospitals, the 

amount of this adjustment varies based 

on the outcome of the statutory 

calculations. The Affordable Care Act 

revised the Medicare DSH payment 

methodology and provides for an 

additional Medicare payment beginning 

on October 1, 2013, that considers the 

amount of uncompensated care 

furnished by the hospital relative to all 

other qualifying hospitals. 

If the hospital is training residents in 

an approved residency program(s), it 

receives a percentage add-on payment 

for each case paid under the IPPS, 

known as the indirect medical 

education (IME) adjustment. This 

percentage varies, depending on the 

ratio of residents to beds. 

Additional payments may be made for 

cases that involve new technologies or 

medical services that have been 

approved for special add-on payments. 

In general, to qualify, a new technology 

or medical service must demonstrate 

that it is a substantial clinical 

improvement over technologies or 

services otherwise available, and that, 

absent an add-on payment, it would be 

inadequately paid under the regular 

DRG payment. In addition, certain 

transformative new devices and certain 

antimicrobial products may qualify 

under an alternative inpatient new 

technology add-on payment pathway by 

demonstrating that, absent an add-on 

payment, they would be inadequately 

paid under the regular DRG payment. 

The costs incurred by the hospital for 

a case are evaluated to determine 

whether the hospital is eligible for an 

additional payment as an outlier case. 

This additional payment is designed to 

protect the hospital from large financial 

losses due to unusually expensive cases. 

Any eligible outlier payment is added to 

the DRG-adjusted base payment rate, 

plus any DSH, IME, and new technology 

or medical service add-on adjustments 

and, beginning in FY 2023 for Indian 

Health Service (IHS) and Tribal 


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hospitals and hospitals located in 

Puerto Rico, the new supplemental 

payment. 

Although payments to most hospitals 

under the IPPS are made on the basis of 

the standardized amounts, some 

categories of hospitals are paid in whole 

or in part based on their hospitalspecific rate, which is determined from 

their costs in a base year. For example, 

sole community hospitals (SCHs) 

receive the higher of a hospital-specific 

rate based on their costs in a base year 

(the highest of FY 1982, FY 1987, FY 

1996, or FY 2006) or the IPPS Federal 

rate based on the standardized amount. 

SCHs are the sole source of care in their 

areas. Specifically, section 

1886(d)(5)(D)(iii) of the Act defines an 

SCH as a hospital that is located more 

than 35 road miles from another 

hospital or that, by reason of factors 

such as an isolated location, weather 

conditions, travel conditions, or absence 

of other like hospitals (as determined by 

the Secretary), is the sole source of 

hospital inpatient services reasonably 

available to Medicare beneficiaries. In 

addition, certain rural hospitals 

previously designated by the Secretary 

as essential access community hospitals 

are considered SCHs. 

With the enactment of section 307 of 

the Consolidated Appropriations Act, 

2024 (CAA, 2024) (Pub. L. 118–42), 

under current law, the Medicaredependent, small rural hospital (MDH) 

program is effective through December 

31, 2024. For discharges occurring on or 

after October 1, 2007, but before January 

1, 2025, an MDH receives the higher of 

the Federal rate or the Federal rate plus 

75 percent of the amount by which the 

Federal rate is exceeded by the highest 

of its FY 1982, FY 1987, or FY 2002 

hospital-specific rate. MDHs are a major 

source of care for Medicare beneficiaries 

in their areas. Section 1886(d)(5)(G)(iv) 

of the Act defines an MDH as a hospital 

that is located in a rural area (or, as 

amended by the Bipartisan Budget Act 

of 2018, a hospital located in a State 

with no rural area that meets certain 

statutory criteria), has not more than 

100 beds, is not an SCH, and has a high 

percentage of Medicare discharges (not 

less than 60 percent of its inpatient days 

or discharges in its cost reporting year 

beginning in FY 1987 or in two of its 

three most recently settled Medicare 

cost reporting years). As section 307 of 

the CAA, 2024, extended the MDH 

program through the first quarter of FY 

2025 only, beginning on January 1, 

2025, the MDH program will no longer 

be in effect absent a change in law. 

Because the MDH program is not 

authorized by statute beyond December 

31, 2024, beginning January 1, 2025, all 

hospitals that previously qualified for 

MDH status under section 1886(d)(5)(G) 

of the Act will no longer have MDH 

status and will be paid based on the 

IPPS Federal rate. 

Section 1886(g) of the Act requires the 

Secretary to pay for the capital-related 

costs of inpatient hospital services in 

accordance with a prospective payment 

system established by the Secretary. The 

basic methodology for determining 

capital prospective payments is set forth 

in our regulations at 42 CFR 412.308 

and 412.312. Under the capital IPPS, 

payments are adjusted by the same DRG 

for the case as they are under the 

operating IPPS. Capital IPPS payments 

are also adjusted for IME and DSH, 

similar to the adjustments made under 

the operating IPPS. In addition, 

hospitals may receive outlier payments 

for those cases that have unusually high 

costs. 

The existing regulations governing 

payments to hospitals under the IPPS 

are located in 42 CFR part 412, subparts 

A through M. 

2. Long-Term Care Hospital Prospective 

Payment System (LTCH PPS) 

The Medicare prospective payment 

system (PPS) for LTCHs applies to 

hospitals described in section 

1886(d)(1)(B)(iv) of the Act, effective for 

cost reporting periods beginning on or 

after October 1, 2002. The LTCH PPS 

was established under the authority of 

section 123 of the Medicare, Medicaid, 

and SCHIP Balanced Budget Refinement 

Act of 1999 and section 307(b) of the 

Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection 

Act of 2000 (as codified under section 

1886(m)(1) of the Act). Section 1206(a) 

of the Pathway for SGR Reform Act of 

2013 (Pub. L. 113–67) established the 

site neutral payment rate under the 

LTCH PPS, which made the LTCH PPS 

a dual rate payment system. Under this 

statute, effective for LTCH cost reporting 

periods beginning in FY 2016, LTCHs 

are generally paid for discharges at the 

site neutral payment rate unless the 

discharge meets the patient criteria for 

payment at the LTCH PPS standard 

Federal payment rate. The existing 

regulations governing payment under 

the LTCH PPS are located in 42 CFR 

part 412, subpart O. Beginning October 

1, 2009, we issue the annual updates to 

the LTCH PPS in the same documents 

that update the IPPS. 

B. Wage Index for Acute Care Hospitals 

Paid Under the Hospital Inpatient 

Prospective Payment System (IPPS) 

Section 1886(d)(3)(E) of the Act 

requires that, as part of the methodology 

for determining prospective payments to 

hospitals, the Secretary adjust the 

standardized amounts for area 

differences in hospital wage levels by a 

factor (established by the Secretary) 

reflecting the relative hospital wage 

level in the geographic area of the 

hospital compared to the national 

average hospital wage level. We 

currently define hospital labor market 

areas based on the delineations of 

statistical areas established by the Office 

of Management and Budget (OMB). A 

discussion of the FY 2025 hospital wage 

index based on the statistical areas can 

be found in section III.B. of the 

preamble of the FY 2025 IPPS/LTCH 

PPS final rule (89 FR 69252). 

Section 1886(d)(3)(E) of the Act 

requires the Secretary to update the 

wage index annually and to base the 

update on a survey of wages and wagerelated costs of short-term, acute care 

hospitals. CMS collects these data on 

the Medicare cost report, CMS Form 

2552–10, Worksheet S–3, Parts II, III, IV. 

The OMB control number for this 

information collection request is 0938– 

0050, which expires on September 30, 

2025. Section 1886(d)(3)(E) of the Act 

also requires that any updates or 

adjustments to the wage index be made 

in a manner that ensures that aggregate 

payments to hospitals are not affected 

by the change in the wage index. 

We also take into account the 

geographic reclassification of hospitals 

in accordance with sections 

1886(d)(8)(B) and 1886(d)(10) of the Act 

when calculating IPPS payment 

amounts. Under section 1886(d)(8)(D) of 

the Act, the Secretary is required to 

adjust the standardized amounts so as to 

ensure that aggregate payments under 

the IPPS after implementation of the 

provisions of sections 1886(d)(8)(B), 

1886(d)(8)(C), and 1886(d)(10) of the Act 

are equal to the aggregate prospective 

payments that would have been made 

absent these provisions. 

II. Provisions of the Interim Final 

Action With Comment Period 

A. General 

In the FY 2020 IPPS/LTCH PPS final 

rule (84 FR 42325 through 42339), we 

finalized a policy to address increasing 

of wage index disparities, based in part 

on comments we received in response to 

our request for information included in 

our FY 2019 IPPS/LTCH PPS proposed 

rule (83 FR 20372 through 20377). In the 

FY 2020 IPPS/LTCH PPS final rule, 

based on those public comments and 

the growing disparities between wage 

index values for high- and low-wageindex hospitals, we explained that those 

growing disparities are likely caused, at 

least in part, by the use of historical 


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1 In the FY 2020 IPPS/LTCH PPS proposed rule, 

we agreed with respondents to a previous request 

for information who indicated that some current 

wage index policies create barriers to hospitals with 

low wage index values from being able to increase 

employee compensation due to the lag between 

when hospitals increase the compensation and 

when those increases are reflected in the 

calculation of the wage index. We noted that this 

lag results from the fact that the wage index 

calculations rely on historical data. We also agreed 

that addressing this systemic issue did not need to 

wait for comprehensive wage index reform given 

the growing disparities between low and high wage 

index hospitals, including rural hospitals that may 

be in financial distress and facing potential closure 

(84 FR 19394 and 19395). 

2For example, CMS has stated in the past that it 

would exercise its discretion under section 

Continued 

wage data to prospectively set hospitals’ 

wage indexes. That lag between when 

hospitals increase wages and when 

those wage increases are reflected in the 

historical data creates barriers to 

hospitals with low wage index values 

being able to increase employee 

compensation, because those hospitals 

will not receive corresponding increases 

in their Medicare payment for several 

years (84 FR 42327). Accordingly, we 

finalized a policy that provided certain 

low wage index hospitals with an 

opportunity to increase employee 

compensation without the usual lag in 

those increases being reflected in the 

calculation of the wage index (as they 

would expect to do if not for the lag).1

We accomplished this by temporarily 

increasing the wage index values for 

certain hospitals with low wage index 

values and doing so in a budget neutral 

manner through an adjustment applied 

to the standardized amounts for all 

hospitals. We increased the wage index 

for hospitals with a wage index value 

below the 25th percentile wage index 

value for a fiscal year by half the 

difference between the otherwise 

applicable final wage index value for a 

year for that hospital and the 25th 

percentile wage index value for that 

year across all hospitals (the low wage 

index hospital policy). As explained in 

the FY 2020 IPPS/LTCH PPS proposed 

rule (84 FR 19396) and final rule (84 FR 

42329), we indicated that the Secretary 

has authority to implement the low 

wage index hospital policy proposal 

under both section 1886(d)(3)(E) of the 

Act and section 1886(d)(5)(I) of the Act. 

When we adopted the low wage index 

hospital policy in the FY 2020 IPPS/ 

LTCH PPS final rule (84 FR 42326 

through 42328), we stated our intention 

that this policy would be effective for at 

least 4 years, beginning in FY 2020, to 

allow employee compensation increases 

implemented by these hospitals 

sufficient time to be reflected in the 

wage index calculation. We also stated 

we intended to revisit the issue of the 

duration of this policy in future 

rulemaking as we gained experience 

under the policy. For FY 2024, we 

continued to apply the low wage index 

hospital policy and the related budget 

neutrality adjustment (88 FR 58977 

through 58980). In the FY 2025 IPPS/ 

LTCH PPS final rule (89 FR 69301 

through 69308), we adopted an 

extension of the low wage index 

hospital policy and the related budget 

neutrality adjustment effective for at 

least three more years, beginning in FY 

2025, in order for sufficient wage data 

from after the end of the COVID–19 

Public Health Emergency to become 

available. 

In that same FY 2025 IPPS/LTCH PPS 

final rule (89 FR 69302), we also noted 

that the FY 2020 low wage index 

hospital policy and the related budget 

neutrality adjustment are the subject of 

pending litigation in multiple courts, 

and that on July 23, 2024, the Court of 

Appeals for the D.C. Circuit held that 

the Secretary lacked authority under 

section 1886(d)(3)(E) of the Act or under 

the ‘‘adjustments’’ language of section 

1886(d)(5)(I)(i) of the Act to adopt the 

low wage index hospital policy for FY 

2020, and that the policy and related 

budget neutrality adjustment must be 

vacated. Bridgeport Hosp. v. Becerra, 

108 F.4th 882, 887–91 & n.6 (D.C. Cir. 

2024). We also stated that as of the date 

of that final rule’s publication, the time 

to seek further review of the D.C. 

Circuit’s decision in Bridgeport Hospital 

had not expired (see Fed. R. App. P. 

40(a)(1)) and the government was 

evaluating the decision and considering 

options for next steps. 

Although we respectfully disagree 

with the D.C. Circuit’s decision in 

Bridgeport Hosp. v. Becerra and 

continue to believe that the low wage 

index hospital policy and the related 

budget neutrality adjustment should be 

effective for at least three more years for 

the reasons stated in the FY 2025 IPPS 

rulemaking, after considering the D.C. 

Circuit’s decision in Bridgeport Hosp. v. 

Becerra, in this IFC we are recalculating 

the IPPS hospital wage index to remove 

the low wage index hospital policy for 

FY 2025. Because we are now no longer 

applying the low wage index hospital 

policy in FY 2025, we are also removing 

the low wage index budget neutrality 

factor from the FY 2025 standardized 

amounts. 

In the past, we have established 

temporary transition policies when 

there have been significant changes to 

payment policies, and we have limited 

the duration of each transition in order 

to phase in the effects of those payment 

policy changes. In taking this temporary 

approach in the past, we have sought to 

mitigate short-term instability and 

payment fluctuations that can 

negatively impact hospitals. For 

example, CMS has recognized that 

hospitals in certain areas may 

experience a negative impact on their 

IPPS payment due to the adoption of 

revised OMB delineations for wage 

index purposes and has finalized 

transition policies to mitigate negative 

financial impacts and provide stability 

to year-to-year wage index variations. 

We refer readers to the FY 2015 IPPS/ 

LTCH PPS final rule (79 FR 49956 

through 49962) for a discussion of the 

transition period finalized when CMS 

adopted revised OMB delineations after 

the 2010 decennial census. For FY 2025, 

consistent with our past practice, we 

believe it is appropriate to establish a 

transition policy for hospitals 

significantly impacted by the removal of 

the FY 2025 low wage index hospital 

policy using our authority under section 

1886(d)(5)(I) of the Act. 

We currently have a wage index cap 

policy at 42 CFR 412.64(h)(7), under 

which we apply a 5-percent cap on any 

decrease to a hospital’s wage index from 

its wage index in the prior FY in a 

budget neutral manner, regardless of the 

circumstances causing the decline, so 

that a hospital’s final wage index for the 

upcoming fiscal year will not be less 

than 95 percent of its final wage index 

from the prior fiscal year. In accordance 

with 42 CFR 412.64(e)(1)(ii), CMS 

applies a budget neutrality adjustment 

to offset the increase in total payments 

resulting from the application of that 

cap. 

Some hospitals that benefitted from 

the low wage index hospital policy 

previously will experience decreases of 

5 percent or more from their FY 2024 

wage index to the FY 2025 wage index 

established in this IFC. Similar to how 

42 CFR 412.64(h)(7) would operate, we 

are applying a one-time, transitional 

adjustment to create a narrow 

transitional exception to the calculation 

of FY 2025 payments. The wage index 

cap policy at 42 CFR 412.64(h)(7) would 

have mitigated these FY 2025 decreases 

but would have done so in a budget 

neutral manner under our current 

regulations. Because section 

1886(d)(5)(I) of the Act lacks any general 

budget neutrality requirement, we are 

not required by the statute to budget 

neutralize this transition policy. In some 

circumstances CMS has exercised 

discretion under section 1886(d)(5)(I) of 

the Act twice over—first to adopt an 

exception or adjustment, and then again 

to make that exception and adjustment 

budget neutral.2 However, under the 


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1886(d)(5)(I) of the Act to make the low wage index 

hospital policy budget neutral even if budget 

neutrality were not required by statute (88 FR 

58979). 

3We note that the scope and magnitude of the 

transitional policy implemented in this IFC are 

much smaller than the low wage index hospital 

policy. As discussed in section VI. of this IFC, we 

estimate only 113 hospitals out of the over 3,000 

hospitals paid under the IPPS would receive 

transitional exception payments, and the total 

payment impact of the transitional policy is 

approximately $41 million. 

4We note that because creating an exception to 

the calculation of the FY 2025 payments is in this 

circumstance functionally equivalent to adjusting 

the FY 2025 payments, the transitional exception 

can be alternatively considered a transitional 

adjustment. 

5We note that we are not changing the FY 2025 

wage index values under section 1886(d)(3)(E) for 

hospitals eligible for the transitional exception 

policy on the basis of the exception; the change is 

applied as a separate step only for purposes of 

determining the hospitals’ FY 2025 IPPS payments. 

unique circumstances and due to the 

timing of the appellate court’s decision 

so close to the beginning of FY 2025, we 

do not deem it appropriate to provide a 

second exception or adjustment that 

would budget neutralize the transition 

policy we are establishing in this IFC. 

Unlike most policies relevant to the 

calculation of the hospital wage index, 

the timing of the court’s decision shortly 

before the beginning of the fiscal year 

necessitated swift action by the agency 

via an IFC, rather than providing for 

prior notice and opportunity for 

comment. The agency’s action in this 

IFC is intended to promote certainty 

regarding FY 2025 IPPS payments in 

light of the reasoning of Bridgeport and 

its application to the low wage index 

hospital policy in FY 2025, which 

would create ongoing confusion for 

hospitals extending into FY 2025 about 

the amount of their IPPS payments and 

would constitute an inefficient use of 

agency resources. In this instance, the 

lack of an opportunity prior to the 

effective date for interested parties to 

comment on the transition policy 

weighs in favor of an approach that does 

not adversely affect the significant 

majority of hospitals. Because section 

1886(d)(5)(I) lacks any general budget 

neutrality requirement, we are not 

required by the statute to budget 

neutralize this transition policy. For 

these reasons, we decline to budget 

neutralize the transition policy in this 

case. 

Therefore, we are using our authority 

under section 1886(d)(5)(I)(i) of the Act 

to create a narrow transitional exception 

to the calculation of FY 2025 IPPS 

payments for low wage index hospitals 

significantly impacted by the removal of 

the low wage index hospital policy.3 4

The transitional exception policy we 

are establishing in this IFC applies to 

hospitals that benefitted from the FY 

2024 low wage index hospital policy. 

For those hospitals, we compare the 

hospital’s FY 2025 wage index 

established in this IFC to the hospital’s 

FY 2024 wage index. If the hospital is 

significantly impacted by the removal of 

the low wage index hospital policy, 

meaning the hospital’s FY 2025 wage 

index established in this IFC is 

decreasing by more than 5 percent from 

the hospital’s FY 2024 wage index, then 

the transitional payment exception for 

FY 2025 for that hospital is equal to the 

additional FY 2025 amount the hospital 

would be paid under the IPPS if its FY 

2025 wage index were equal to 95 

percent of its FY 2024 wage index.5

For example, assume the FY 2024 

wage index for a hospital that benefitted 

from the low wage index hospital policy 

is 0.7600, and the hospital’s FY 2025 

wage index established in this IFC is 

0.7100. The hospital’s FY 2025 wage 

index established in this IFC is 

decreasing by more than 5 percent from 

the hospital’s FY 2024 wage index [that 

is, 0.7100 < 0.7220 where 0.7220 = (0.95 

times .7600)]. The transitional payment 

exception for FY 2025 for this hospital 

is equal to the additional amount the 

hospital would be paid under the IPPS 

if its FY 2025 wage index were equal to 

0.7220, which is 95 percent of 0.7600, 

its FY 2024 wage index. 

Because the need to provide for 

payment stability and promote 

predictability is satisfied by the 

transitional payment exception under 

this IFC, we are using our authority 

under section 1886(d)(5)(I)(i) of the Act 

to except hospitals that are eligible for 

this transition policy for the removal of 

the FY 2025 low wage index hospital 

policy for FY 2025 from the application 

of the wage index cap policy at 42 CFR 

412.64(h)(7). 

Under the capital IPPS, the 

adjustment for local cost variation is 

based on the hospital wage index value 

that is applicable to the hospital under 

the operating IPPS. We adjust the 

capital standard Federal rate so that the 

effects of the annual changes in the 

geographic adjustment factor (GAF) are 

budget neutral. The low wage index 

hospital policy has been reflected in the 

capital IPPS GAFs since FY 2020 (84 FR 

42638). The removal of the low wage 

index hospital policy for FY 2025 also 

affects the FY 2025 GAFs. Because we 

are now no longer applying the low 

wage index hospital policy in FY 2025, 

we are also no longer making an 

adjustment to the FY 2025 capital 

standard Federal rate to ensure budget 

neutrality for the low wage index 

hospital policy. 

As discussed previously, for FY 2025 

we believe it is appropriate to establish 

a transition policy for low wage 

hospitals significantly impacted by the 

removal of the low wage index hospital 

policy. Since FY 2023, the GAFs reflect 

the wage index cap policy that limits 

any decrease to a hospital’s wage index 

from its wage index in the prior FY, 

regardless of the circumstances causing 

the decline, to 95 percent of its prior 

year value (87 FR 49435). As described 

previously, some low wage index 

hospitals would experience decreases of 

5 percent or more in their FY 2025 wage 

index established in this IFC compared 

to their FY 2024 wage index. As such, 

we are establishing a transitional 

payment exception to the calculation of 

FY 2025 IPPS payments for low wage 

index hospitals impacted by the 

removal of the low wage index hospital 

policy. In this IFC, we are making a nonbudget neutral equivalent exception 

under the capital IPPS. 

B. Changes to Prospective Payment 

Rates for Hospital Inpatient Operating 

Costs for Acute Care Hospitals for FY 

2025 

1. Calculation of the Adjusted 

Standardized Amount for FY 2025 

The FY 2025 IPPS/LTCH PPS final 

rule appeared in the August 28, 2024, 

Federal Register (89 FR 68986), as 

corrected in a document scheduled for 

publication in the Federal Register on 

October 2, 2024 (hereinafter referred to 

as the FY 2025 IPPS/LTCH PPS final 

rule correction). In section II. of the 

Addendum of the FY 2025 IPPS/LTCH 

PPS final rule (89 FR 69938) as 

corrected in FY 2025 IPPS/LTCH PPS 

final rule correction, we set forth a 

description of the methods and data we 

used to determine the prospective 

payment rates for Medicare hospital 

inpatient operating costs for FY 2025 for 

acute care hospitals. 

Budget neutrality is determined by 

comparing aggregate IPPS payments 

before and after making changes that are 

required to be budget neutral (for 

example, changes to MS–DRG 

classifications, recalibration of the MS– 

DRG relative weights, updates to the 

wage index, and different geographic 

reclassifications). We include outlier 

payments in the simulations because 

they may be affected by changes in these 

parameters. In the FY 2025 IPPS/LTCH 

PPS final rule, as corrected, the budget 

neutrality factors were calculated in the 

order in which they are discussed in the 

Addendum and shown in the table 

‘‘Summary of FY 2025 Budget 

Neutrality Factors’’ (see 89 FR 69944 

through 69948) with the FY 2025 IPPS/ 


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LTCH PPS final rule correction. 

Specifically, in determining the 

prospective payment rates for FY 2025 

in that final rule, as corrected, the 

budget neutrality factors were 

calculated in the following order (after 

applying the applicable percentage 

increases): 

• Reclassification and Recalibration 

of MS–DRG Relative Weights Before Cap 

(MS–DRG Reclassification and 

Recalibration Budget Neutrality Factor). 

• Reclassification and Recalibration 

of MS DRG Relative Weights With Cap 

(Cap Policy MS–DRG Weights Budget 

Neutrality Factor). 

• Updated Wage Index (Wage Index 

Budget Neutrality Factor). 

• Reclassified Hospitals 

(Reclassification Budget Neutrality 

Factor). 

• Rural Floor (Rural Floor Budget 

Neutrality Factor). 

• Continuation of the Low Wage 

Index Hospital Policy (Low Wage Index 

Hospital Policy Budget Neutrality 

Factor). 

• Cap Policy for Wage Index (Cap 

Policy for Wage Index Budget Neutrality 

Factor). 

• Rural Community Hospital 

Demonstration Program (Rural 

Demonstration Budget Neutrality 

Factor). 

We note the Rural Floor Budget 

Neutrality Factor is applied to the 

national wage indexes while the rest of 

the budget neutrality adjustments are 

applied to the standardized amounts. 

Based on the order of our budget 

neutrality calculations, the removal of 

the low wage index hospital policy and 

application of the transitional exception 

policy do not impact the calculation of 

the first five budget neutrality factors 

(that is, MS–DRG Reclassification and 

Recalibration Budget Neutrality Factor, 

Cap Policy MS–DRG Weights Budget 

Neutrality Factor, Wage Index Budget 

Neutrality Factor, Reclassification 

Budget Neutrality Factor, and the Rural 

Floor Budget Neutrality Factor). Under 

the provisions of this IFC, we are no 

longer making a budget neutrality 

adjustment to the standardized amount 

for the low wage index hospital policy. 

Accordingly, in this IFC we recalculated 

the cap policy for wage index budget 

neutrality factor and rural 

demonstration budget neutrality factor 

used for determining the standardized 

amounts for FY 2025. We also 

calculated the FY 2025 outlier threshold 

to reflect the provisions of this IFC 

along with changes to these budget 

neutrality factors. In addition, as 

described in section IV. of this IFC, we 

made updates to the calculation of 

Factor 3 of the uncompensated care 

payment methodology for all DSHeligible hospitals to reflect the updated 

information for the hospitals that are no 

longer projected to receive interim 

uncompensated care payments for FY 

2025. We also revised the amount of the 

total uncompensated care payment 

calculated for each DSH-eligible 

hospital, and we updated the list that 

we published for the FY 2025 IPPS/ 

LTCH PPS final rule, as corrected, of 

hospitals that we identified to be 

subsection (d) hospitals and subsection 

(d) Puerto Rico hospitals projected to be 

eligible to receive interim 

uncompensated care payments for FY 

2025. 

As discussed earlier, we are 

establishing a transitional exception 

policy for certain hospitals that 

benefitted from the low wage index 

hospital policy adjustment during FY 

2024. Because we are applying this 

transitional exception in a non-budget 

neutral manner, we first determined 

which hospitals would be eligible for 

this transition policy (that is, identified 

those that had received a higher wage 

index under the low wage index 

hospital policy in FY 2024). We then 

applied the transitional payment 

exception for eligible hospitals as 

described in section II. A of this IFC. As 

discussed earlier, hospitals that are 

eligible for the new transitional 

exception policy are excepted from the 

wage index cap policy at 42 CFR 

412.64(h)(7), which is budget neutral by 

design. 

The FY 2025 budget neutrality factors 

that we recalculated in this IFC were 

calculated using data described in the 

FY 2025 IPPS/LTCH PPS final rule (89 

FR 69941 through 69948), with the FY 

2025 IPPS/LTCH PPS final rule 

correction. The budget neutrality factor 

for the wage index cap policy at 42 CFR 

412.64(h)(7) was calculated in 

accordance with the existing 

methodology. As noted earlier, hospitals 

that are eligible for the transitional 

exception policy are excepted from the 

wage index cap policy at 42 CFR 

412.64(h)(7) in FY 2025. To calculate a 

wage index cap budget neutrality 

adjustment factor for FY 2025, we used 

FY 2023 discharge data to simulate 

payments and compared the following: 

• Aggregate payments without the 

wage index cap policy at 42 CFR 

412.64(h)(7) using the FY 2025 labor 

related share percentages, the new OMB 

labor market area delineations for FY 

2025, the FY 2025 relative weights, and 

applied the proxy FY 2025 hospital 

readmissions payment adjustments and 

the proxy FY 2025 hospital value-based 

purchasing (VBP) payment adjustments. 

• Aggregate payments with the wage 

index cap at 42 CFR 412.64(h)(7) using 

the FY 2025 labor related share 

percentages, the new OMB labor market 

area delineations for FY 2025, the FY 

2025 relative weights, and applied the 

same proxy FY 2025 hospital 

readmissions payment adjustments and 

the proxy FY 2025 hospital VBP 

payment adjustments applied 

previously. 

Cap Policy Wage Index Budget 

Neutrality Factor ........................ 0.999166 

The budget neutrality factor for the 

rural community hospital 

demonstration program was calculated 

using the methodology described in the 

FY 2025 IPPS/LTCH PPS final rule (89 

FR 69947 through 69948). We note, as 

mentioned earlier, that we recalculated 

the rural demonstration budget 

neutrality factor; however, when 

rounded to the sixth decimal, the factor 

(0.999811) did not change from the 

corrected factor as set forth in the FY 

2025 IPPS/LTCH PPS correction. 

The standardized amounts set forth in 

Tables 1A, 1B, and 1C for FY 2025 that 

are listed and published in section IV. 

of this IFC (and available via the 

internet on the CMS website) reflect 

these factors. 

2. Outlier Payments 

In the Addendum of the FY 2025 

IPPS/LTCH PPS final rule (89 FR 69948 

through 66962), with the FY 2025 IPPS/ 

LTCH PPS final rule correction, we 

discuss outlier payments for cases 

involving extraordinarily high costs and 

the methodology for determining the FY 

2025 outlier threshold. To calculate the 

FY 2025 outlier fixed-loss amount that 

reflects the provisions of this IFC, we 

used the methodology (data, factors, 

etc.) as described in the FY 2025 IPPS/ 

LTCH PPS final rule, as corrected, in 

conjunction with the wage index values, 

transitional payment exception policy 

for the removal of the low wage index 

hospital policy and other rates and 

factors established in this IFC (as 

described previously). For example, we 

used the following to calculate the FY 

2025 outlier fixed-loss amount in this 

IFC: 

• Targeted an outlier threshold at 

5.14 percent [5.1 percent ¥ (¥ 0.04 

percent)] as reflected in the FY 2025 

IPPS/LTCH PPS final rule. 

• Applied the charge inflation factor 

of 4.1 percent (1.04118) (or 8.4 percent 

(1.08406) over 2 years) as reflected in 

the FY 2025 IPPS/LTCH PPS final rule. 

• Applied the national average caseweighted operating and capital CCR 

adjustment factors of 1.015192 and 


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0.997234 respectively as reflected in the 

FY 2025 IPPS/LTCH PPS correction 

notice. 

• Used the estimated per-discharge 

uncompensated care payment and 

estimated per-discharge supplemental 

payment updated in this IFC. 

• Used the applicable standardized 

amounts in Tables 1A–1C of this IFC. 

• Used the FY 2025 wage index 

values established in this IFC. 

• Applied the transitional payment 

exception policy described in section 

II.A. of this IFC, where applicable. 

For FY 2025, we determined a 

threshold of $46,217 and calculated 

total outlier payments of $4,354,709,696 

and total operating Federal payments of 

$80,366,934,481. (We note that, if 

calculated without applying our 

methodology for incorporating an 

estimate of outlier reconciliation in the 

determination of the outlier threshold, 

the threshold would be $46,567.) For FY 

2025, the outlier fixed-loss cost 

threshold is equal to the prospective 

payment rate for the MS–DRG, plus any 

IME, empirically justified Medicare 

DSH payments, estimated 

uncompensated care payment, 

estimated supplemental payment for 

eligible Indian Health Service (IHS)/ 

Tribal hospitals and Puerto Rico 

hospitals, and any add on payments for 

new technology, plus $46,217. The 

outlier adjustment factor that is applied 

to the operating standardized amount 

based on the FY 2025 outlier threshold 

is 0.949 (as established in the FY 2025 

IPPS/LTCH PPS final rule (89 FR 

69961)). 

As discussed in the FY 2025 IPPS/ 

LTCH PPS final rule (89 FR 69961), we 

establish an outlier threshold that is 

applicable to both hospital inpatient 

operating costs and hospital inpatient 

capital-related costs. When we modeled 

the combined operating and capital 

outlier payments, we found that using a 

common threshold resulted in a higher 

percentage of outlier payments for 

capital-related costs than for operating 

costs. We project that the threshold for 

FY 2025 (which reflects our 

methodology to incorporate an estimate 

of operating outlier reconciliation (see 

89 FR 69948 through 69953) would 

result in outlier payments that would 

equal 5.1 percent of operating DRG 

payments and we estimate that capital 

outlier payments would equal 4.23 

percent of capital payments based on 

the capital Federal rate established in 

section II.C. of this IFC (and which 

reflects our methodology to incorporate 

an estimate of capital outlier 

reconciliation as discussed in the FY 

2025 IPPS/LTCH PPS final rule (see 89 

FR 69953 through 69955)). 

In accordance with section 

1886(d)(3)(B) of the Act, we reduce the 

FY 2025 standardized amount by 5.1 

percent to account for the projected 

proportion of payments paid as outliers. 

The outlier adjustment factors that 

would be applied to the operating 

standardized amount and capital 

Federal rate based on the FY 2025 

outlier threshold are as follows: 

Operating 

standardized 

amounts 

Capital 

federal rate * 

National ..... 0.949 0.957704 

* The adjustment factor for the capital Federal rate includes an adjustment to the estimated percentage of FY 2025 capital outlier 

payments for capital outlier reconciliation, as 

discussed in the FY 2025 IPPS/LTCH final 

rule. 

We are applying the outlier 

adjustment factors to the FY 2025 

payment rates after removing the effects 

of the FY 2024 outlier adjustment 

factors on the standardized amount. 

3. FY 2025 Standardized Amounts 

The adjusted standardized amount is 

divided into labor-related and nonlaborrelated portions. Tables 1A and 1B 

listed and published in section IV. of 

this IFC (and available via the internet 

on the CMS website) contain the 

national standardized amounts that we 

are applying to all hospitals, except 

hospitals located in Puerto Rico, for FY 

2025. The standardized amount for 

hospitals in Puerto Rico is shown in 

Table 1C listed and published in section 

IV. of this IFC (and available via the 

internet on the CMS website). 

The following table illustrates the 

changes from the FY 2024 national 

standardized amounts to the FY 2025 

national standardized amounts. The 

second through fifth columns display 

the changes from the FY 2024 

standardized amounts for each 

applicable FY 2025 standardized 

amount. The first row of the table shows 

the updated (through FY 2024) average 

standardized amount after restoring the 

FY 2024 offsets for outlier payments, 

geographic reclassification, rural 

demonstration, lowest quartile, and 

budget neutrality for the wage index cap 

policy at 42 CFR 412.64(h)(7). The MS– 

DRG reclassification and recalibration 

wage index, and stem cell acquisition 

budget neutrality factors are cumulative 

(that is, we have not restored the 

offsets). Accordingly, those FY 2024 

adjustment factors have not been 

removed from the base rate in the 

following table. 

CHANGES FROM FY 2024 STANDARDIZED AMOUNTS TO THE FY 2025 STANDARDIZED AMOUNTS

Hospital submitted quality data 

and is a 

meaningful EHR user 

Hospital submitted quality data 

and is not a 

meaningful EHR user 

Hospital did not submit quality 

data and is a 

meaningful EHR user 

Hospital did not submit quality 

data and is not a 

meaningful EHR user 

FY 2025 Base Rate after removing:.

1. FY 2024 Geographic Reclassification Budget Neutrality (0.971295).

2. FY 2024 Operating Outlier 

Offset (0.949).

3. FY 2024 Rural Demonstration Budget Neutrality Factor 

(0.999463).

4. FY 2024 Lowest Quartile 

Budget Neutrality Factor 

(0.997402).

5. FY 2024 Cap Policy Wage 

Index Budget Neutrality Factor (0.999645).

If Wage Index is Greater Than 

1.0000:.

Labor (67.6%): $4,782.01 ........

Nonlabor (32.4%): $2,291.97 ..

If Wage Index is less Than or 

Equal to 1.0000:.

Labor (62%): $4,385.87 ...........

Nonlabor (38%): $2,688.11 .....

If Wage Index is Greater Than 

1.0000:.

Labor (67.6%): $4,782.01 ........

Nonlabor (32.4%): $2,291.97 ..

If Wage Index is less Than or 

Equal to 1.0000:.

Labor (62%): $4,385.87 ...........

Nonlabor (38%): $2,688.11 .....

If Wage Index is Greater Than 

1.0000:.

Labor (67.6%): $4,782.01 ........

Nonlabor (32.4%): $2,291.97 ..

If Wage Index is less Than or 

Equal to 1.0000:.

Labor (62%): $4,385.87 ...........

Nonlabor (38%): $2,688.11 .....

If Wage Index is Greater Than 

1.0000: 

Labor (67.6%): $4,782.01. 

Nonlabor (32.4%): $2,291.97. 

If Wage Index is less Than or 

Equal to 1.0000: 

Labor (62%): $4,385.87. 

Nonlabor (38%): $2,688.11. 

* FY 2025 Update Factor ......... 1.029 ........................................ 1.0035 ...................................... 1.0205 ...................................... 0.995. 

* FY 2025 MS-DRG Reclassification and Recalibration 

Budget Neutrality Factor Before Cap.

0.997190 .................................. 0.997190 .................................. 0.997190 .................................. 0.997190. 


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CHANGES FROM FY 2024 STANDARDIZED AMOUNTS TO THE FY 2025 STANDARDIZED AMOUNTS—Continued 

Hospital submitted quality data 

and is a 

meaningful EHR user 

Hospital submitted quality data 

and is not a 

meaningful EHR user 

Hospital did not submit quality 

data and is a 

meaningful EHR user 

Hospital did not submit quality 

data and is not a 

meaningful EHR user 

* FY 2025 Cap Policy MS– 

DRG Weight Budget Neutrality Factor.

0.999874 .................................. 0.999874 .................................. 0.999874 .................................. 0.999874. 

* FY 2025 Wage Index Budget 

Neutrality Factor.

0.999981 .................................. 0.999981 .................................. 0.999981 .................................. 0.999981. 

* FY 2025 Reclassification 

Budget Neutrality Factor.

0.962786 .................................. 0.962786 .................................. 0.962786 .................................. 0.962786. 

FY 2025 Cap Policy Wage 

Index Budget Neutrality Factor.

0.999166 .................................. 0.999166 .................................. 0.999166 .................................. 0.999166. 

* FY 2025 RCH Demonstration 

Budget Neutrality Factor.

0.999811 .................................. 0.999811 .................................. 0.999811 .................................. 0.999811. 

* FY 2025 Operating Outlier 

Factor.

0.949 ........................................ 0.949 ........................................ 0.949 ........................................ 0.949. 

National Standardized Amount 

for FY 2025 if Wage Index is 

Greater Than 1.0000; Labor/ 

Non-Labor Share Percentage (67.6/32.4).

Labor: $4,478.09 ......................

Nonlabor: $2,146.30 ................

Labor: $4,367.12 ......................

Nonlabor: $2,093.11 ................

Labor: $4,441.10 ......................

Nonlabor: $2,128.57 ................

Labor: $4,330.13 

Nonlabor: $2,075.38. 

National Standardized Amount 

for FY 2025 if Wage Index is 

Less Than or Equal to 

1.0000; Labor/Non-Labor 

Share Percentage (62/38).

Labor: $4,107.12 ......................

Nonlabor: $2,517.27 ................

Labor: $4,005.34 ......................

Nonlabor: $2,454.89 ................

Labor: $4,073.20 ......................

Nonlabor: $2,496.47 ................

Labor: $3,971.42 

Nonlabor: $2,434.09. 

* This factor is not changing in this IFC. 

C. Payment Rates for Acute Care 

Hospital Inpatient Capital-Related Costs 

for FY 2025 

In section III. of the Addendum of the 

FY 2025 IPPS/LTCH PPS final rule (89 

FR 69966 through 69971) as corrected in 

the FY 2025 IPPS/LTCH PPS final rule 

correction, we set forth a description of 

the methods and data we used to 

determine the prospective payment 

rates for Medicare hospital inpatient 

capital-related costs for FY 2025 for 

acute care hospitals. In that final rule 

(89 FR 69966 through 69970) the FY 

2025 IPPS/LTCH PPS final rule 

correction, we discuss the factors we 

use for determining the capital Federal 

rate for FY 2025. Similar to the 

discussion of the operating IPPS 

payment rates previously, the removal 

of the low wage index hospital policy 

and the establishment of a transitional 

exception policy as discussed in section 

II.B. of this IFC impacts the calculation 

of certain budget neutrality adjustment 

factors used for determining the capital 

Federal rate for FY 2025. In addition, as 

discussed previously, we also calculated 

the FY 2025 outlier threshold to reflect 

the provisions of this IFC along with the 

corresponding changes to the IPPS 

payment rates. Accordingly, in this IFC 

we are establishing the following factors 

used for determining the capital Federal 

rate for FY 2025: 

• The outlier payment adjustment 

factor. 

• The portion of the budget neutrality 

adjustment factor for changes in the 

geographic adjustment factor (GAF) for 

the 5-percent cap on wage index 

decreases policy. (Under the provisions 

of this IFC, this factor would no longer 

reflect the low wage index hospital 

policy.) 

As we discuss in this section, in 

general, these factors were calculated 

using the data and calculation 

methodology described in the FY 2025 

IPPS/LTCH PPS final rule (89 FR 69968 

through 69971) with the FY 2025 IPPS/ 

LTCH PPS final rule correction, except 

for the methodology for calculating the 

GAF budget neutrality factor which we 

are modifying to reflect the provisions 

of this IFC. 

1. Outlier Payment Adjustment Factor 

As discussed previously, a shared 

threshold is used to identify outlier 

cases for both inpatient operating and 

inpatient capital-related payments. 

Based on the threshold discussed in 

section II.B. of this IFC, we estimate that 

prior to taking into account projected 

capital outlier reconciliation payments, 

outlier payments for capital-related 

costs will equal 4.26 percent of 

inpatient capital-related payments based 

on the capital Federal rate in FY 2025. 

As discussed in the FY 2025 IPPS/LTCH 

PPS final rule (89 FR 69968), we 

estimate that taking into account 

projected capital outlier reconciliation 

payments will decrease the estimated 

percentage of FY 2025 capital outlier 

payments by 0.03 percent. Therefore, 

accounting for estimated capital outlier 

reconciliation, the estimated outlier 

payments for capital-related PPS 

payments will equal 4.23 percent (4.26 

percent¥0.03 percent) of inpatient 

capital-related payments based on the 

capital Federal rate in FY 2025. 

Accordingly, we applied an outlier 

adjustment factor of 0.9577 in 

determining the capital Federal rate for 

FY 2025. As we noted in the final rule, 

the capital Federal rate is calculated 

using unrounded budget neutrality and 

outlier adjustment factors. The 

unrounded FY 2025 outlier adjustment 

factor was revised because of the 

removal of the low wage index hospital 

policy and transitional payment 

exception. However, after rounding this 

factor to 4 decimal places (as displayed 

in the final rule and this IFC), the 

rounded factor was unchanged from the 

final rule. 

2. Budget Neutrality Adjustment Factor 

for Changes in the GAF 

The capital Federal rate is adjusted so 

that aggregate payments for the fiscal 

year based on the capital Federal rate, 

after any changes resulting from the 

annual DRG reclassification and 

recalibration and changes in the GAF, 

are projected to equal aggregate 

payments that would have been made 

on the basis of the capital Federal rate 

without such changes. As discussed in 

the FY 2025 IPPS/LTCH PPS final rule 

(89 FR 69969 through 69970), for FY 

2025 we use a 2-step methodology for 

computing the budget neutrality factor 

for changes in the GAFs in light of the 

effect of wage index changes on the 

GAFs. In the first step, we first calculate 

a factor to ensure budget neutrality for 

changes to the GAFs due to the update 

to the wage data, wage index 


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reclassifications and redesignations, and 

application of the rural floor policy, 

consistent with our historical GAF 

budget neutrality factor methodology. In 

the FY 2025 IPPS/LTCH PPS final rule 

(89 FR 69969) with the FY 2025 IPPS/ 

LTCH PPS final rule correction, we 

calculated an incremental adjustment 

factor for changes in the GAFs for FY 

2025 due to the update to the wage data, 

wage index reclassifications and 

redesignations, and application of the 

rural floor policy of 0.9884. The 

provisions of this IFC do not impact this 

budget neutrality factor. Also in the FY 

2025 IPPS/LTCH PPS final rule (89 FR 

69969 through 69970), as corrected with 

the FY 2025 IPPS/LTCH PPS final rule 

correction, we calculated an 

incremental adjustment factor for the FY 

2025 MS–DRG reclassification and 

recalibration and for changes in the FY 

2025 GAFs due to the update to the 

wage data, wage index reclassifications 

and redesignations, and application of 

the rural floor policy of 0.9854 (0.9969 

× 0.9884). This incremental adjustment 

factor is not impacted by the provisions 

of this IFC. 

Due to the removal of the low wage 

index hospital policy (discussed 

previously in section II.B. of this IFC 

and also referred as the lowest quartile 

hospital wage index adjustment in the 

discussion of the 2-step methodology in 

the FY 2025 IPPS/LTCH PPS final rule), 

we are modifying the second step of our 

2-step methodology for computing the 

budget neutrality factor for changes in 

the GAFs in light of the effect of wage 

index changes on the GAFs. In the FY 

2025 IPPS/LTCH PPS final rule (89 FR 

69968 through 69970) we calculated a 

factor in the second step of our 

methodology that ensured budget 

neutrality for changes to the GAFs due 

to the lowest quartile hospital wage 

index adjustment and the 5-percent cap 

on wage index decreases policy (our 

policy to place a 5 percent cap on any 

decrease in a hospital’s wage index from 

the hospital’s final wage index in the 

prior fiscal year under 42 CFR 

412.64(h)(7)). In this IFC, we are 

modifying this budget neutrality factor 

to now ensure budget neutrality for 

changes to the GAFs due only to the 5- 

percent cap on wage index decreases 

policy. As discussed previously in 

section II.B. of this IFC, we are 

establishing a non-budget neutral 

transitional exception policy for 

hospitals that benefitted from the low 

wage index hospital policy during FY 

2024. Hospitals that are eligible for the 

transitional exception policy are 

excepted from the wage index cap 

policy for FY 2025 under this IFC. 

Therefore, under the provisions of this 

IFC, the second step of our calculation 

of the budget neutrality factor for 

changes in the GAFs in light of the 

effect of wage index changes on the 

GAFs only accounts for the application 

of the 5-percent cap on wage index 

decreases for hospitals that did not 

receive the low wage index hospital 

policy adjustment in FY 2024. For this 

IFC, we compared estimated aggregate 

capital Federal rate payments based on 

the FY 2025 GAFs with and without the 

5-percent cap on wage index decreases 

policy (which was applied only to 

hospitals that are not eligible for the 

transitional exception policy). For this 

calculation, estimated aggregate capital 

Federal rate payments were calculated 

using the FY 2025 MS–DRG 

classifications and relative weights 

(after application of the 10-percent cap) 

and the GAFs included the imputed 

floor, out-migration, and Frontier state 

adjustments. To achieve budget 

neutrality for the effects of the 5-percent 

cap on wage index decreases policy we 

calculated an incremental GAF budget 

neutrality adjustment factor of 0.9992. 

3. Capital Federal Rate for FY 2025 

As a result of factors established in 

the FY 2025 IPPS/LTCH PPS final rule 

(89 FR 69971) with the FY 2025 IPPS/ 

LTCH PPS final rule correction and the 

outlier adjustment factor and the budget 

neutrality factor for the effects of the 5- 

percent cap on wage index decreases 

established in this IFC (as discussed 

previously), we are establishing a 

national capital Federal rate of $512.14 

for FY 2025. The national capital 

Federal rate for FY 2025 was calculated 

as shown in the following table. The 

combined effect of all the changes will 

increase the national capital Federal rate 

by approximately 1.65 percent, 

compared to the FY 2024 national 

capital Federal rate. 

COMPARISON OF FACTORS AND ADJUSTMENTS: FY 2024 CAPITAL FEDERAL RATE AND THE FY 2025 CAPITAL FEDERAL

RATE

FY 2024 FY 2025 Change Percent 

change 

Update Factor 1 ................................................................................................ 1.0380 1.0310 1.0310 3.10 

GAF/DRG Adjustment Factor 1 ........................................................................ 0.9885 0.9854 0.9854 ¥1.46 

Cap Adjustment Factor 2 .................................................................................. 0.9964 0.9992 1.0028 0.28 

Outlier Adjustment Factor 3 .............................................................................. 0.9598 0.9577 0.9978 ¥0.22 

Capital Federal Rate ........................................................................................ $503.83 $512.14 1.0165 4 1.65 

1The update factor and the GAF/DRG budget neutrality adjustment factors are built permanently into the capital Federal rate. Thus, for example, the incremental change from FY 2024 to FY 2025 resulting from the application of the 0.9854 GAF/DRG budget neutrality adjustment factor 

for FY 2025 is a net change of 0.9854 (or ¥1.46 percent). 2The cap budget neutrality adjustment factor is not built permanently into the capital Federal rate; that is, the factor is not applied cumulatively 

in determining the capital Federal rate. Thus, for example, the net change resulting from the application of the FY 2025 cap budget neutrality adjustment factor is 0.9992/0.9964 or 1.0028 (or 0.28 percent). 3The outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is not applied cumulatively in determining 

the capital Federal rate. Thus, for example, the net change resulting from the application of the FY 2025 outlier adjustment factor is 0.9577/ 

0.9598 or 0.9978 (or ¥0.22 percent). 4Percent change may not sum due to rounding. 

D. High-Cost Outlier (HCO) Threshold 

for Site Neutral Payment Rate Cases 

Under the LTCH PPS for FY 2025 

In the FY 2025 IPPS/LTCH PPS final 

rule (89 FR 69987), we established that 

the applicable HCO threshold for site 

neutral payment rate cases for FY 2025 

is the sum of the site neutral payment 

rate for the case and the IPPS fixed-loss 

amount. As discussed previously in 

section II.B.2. of this IFC, the provisions 

of this IFC result in the recalculation of 

the IPPS fixed-loss amount for FY 2025. 

Therefore, in this IFC, for FY 2025 we 

are establishing a fixed-loss amount for 

site neutral payment rate cases of 

$46,217, which is the same as the FY 

2025 IPPS fixed-loss amount discussed 

in section II.B.2. of this IFC. 

Accordingly, under this policy, for FY 

2025, we will calculate an HCO 


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payment for site neutral payment rate 

cases with costs that exceed the HCO 

threshold amount that is equal to 80 

percent of the difference between the 

estimated cost of the case and the 

outlier threshold (the sum of the site 

neutral payment rate payment and the 

fixed-loss amount for site neutral 

payment rate cases of $46,217). 

III. Waiver of Proposed Rulemaking 

and Delay in Effective Date 

Under 5 U.S.C. 553(b) of the 

Administrative Procedure Act (APA), 

the agency is required to publish a 

notice of the proposed rulemaking in 

the Federal Register before the 

provisions of a rule take effect. 

Similarly, section 1871(b)(1) of the Act 

requires the Secretary to provide for 

notice of the proposed rulemaking in 

the Federal Register and provide a 

period of not less than 60 days for 

public comment. In addition, section 

553(d) of the APA, and section 

1871(e)(1)(B)(i) of the Act mandate a 30- 

day delay in effective date after issuance 

or publication of a rule. Sections 

553(b)(B) and 553(d)(3) of the APA 

provide for exceptions from the notice 

and comment and delay in effective date 

APA requirements; in cases in which 

these exceptions apply, sections 

1871(b)(2)(C) and 1871(e)(1)(B)(ii) of the 

Act provide exceptions from the notice 

and 60-day comment period and delay 

in effective date requirements of the Act 

as well. Section 553(b)(B) of the APA 

and section 1871(b)(2)(C) of the Act 

authorize an agency to dispense with 

normal rulemaking requirements for 

good cause if the agency makes a 

finding that the notice and comment 

process are impracticable, unnecessary, 

or contrary to the public interest. In 

addition, both section 553(d)(3) of the 

APA and section 1871(e)(1)(B)(ii) of the 

Act allow the agency to avoid the 30- 

day delay in effective date where such 

delay is contrary to the public interest 

and an agency includes a statement of 

support. 

As discussed earlier, in the FY 2025 

IPPS/LTCH PPS final rule (89 FR 

69302), we noted that the FY 2020 low 

wage index hospital policy and the 

related budget neutrality adjustment 

were the subject of pending litigation in 

multiple courts, and that on July 23, 

2024, the Court of Appeals for the D.C. 

Circuit held that the Secretary lacked 

authority under section 1886(d)(3)(E) of 

the Act or under the ‘‘adjustments’’ 

language of section 1886(d)(5)(I)(i) of the 

Act to adopt the low wage index 

hospital policy for FY 2020, and that the 

policy and related budget neutrality 

adjustment must be vacated. Bridgeport 

Hosp. v. Becerra, 108 F.4th 882, 887–91 

& n.6 (D.C. Cir. 2024). We also stated 

that as of the date of that final rule’s 

publication, the time to seek further 

review of the D.C. Circuit’s decision in 

Bridgeport Hospital had not expired (see 

Fed. R. App. P. 40(a)(1)) and the 

government was evaluating the decision 

and considering options for next steps. 

There was a limited amount of time 

between July 23, 2024, and the 

beginning of FY 2025 on October 1, 

2024, to consider options for the low 

wage index hospital policy for FY 2025 

in the context of the D.C. Circuit’s 

reasoning in Bridgeport Hospital. If the 

FY 2025 IPPS (and certain LTCH PPS) 

payment rates including the FY 2025 

low wage index hospital policy were to 

go into effect on October 1, 2024, it is 

possible given the D.C. Circuit’s 

decision regarding the FY 2020 low 

wage index hospital policy and 

potential further litigation 

developments that those FY 2025 

payments would need to be revised, 

creating the potential need to reprocess 

significant numbers of FY 2025 claims 

and unnecessarily change FY 2025 

payments retroactively for all IPPS and 

LTCH PPS hospitals. This would 

constitute an inefficient use of limited 

agency resources. It would also create 

legal uncertainty for the public and 

ongoing confusion for hospitals 

extending into FY 2025 about the 

amount of their IPPS and LTCH PPS 

payments, which runs counter to the 

prospective nature of these payment 

systems. Removing the FY 2025 low 

wage index hospital policy and 

associated budget neutrality adjustment 

through an IFC rather than through the 

notice and comment rulemaking cycle 

and waiving the delay of the effective 

date will allow these changes to be 

applied to FY 2025 IPPS payment rates 

(and certain LTCH PPS rates) at the 

beginning of the fiscal year on October 

1, 2025, avoiding these issues. 

Therefore, we find good cause to waive 

the notice of proposed rulemaking 

requirements as well as the delay of the 

effective date and to issue this final rule 

on an interim basis. Even though we are 

waiving notice of proposed rulemaking 

requirements and are issuing these 

provisions on an interim final basis, we 

are providing a 60-day public comment 

period. 

IV. Tables Referenced in This Interim 

Final Rule With Comment Period 

This section lists the tables referred to 

throughout this IFC. As stated in the FY 

2025 IPPS/LTCH PPS final rule (89 FR 

69989), for the FY 2025 rulemaking 

cycle, the IPPS and LTCH PPS tables 

will not be published in the Federal 

Register in the annual IPPS/LTCH PPS 

proposed and final rules and will be on 

the CMS website. Specifically, all IPPS 

tables listed in this IFC, with the 

exception of IPPS Tables 1A, 1B, 1C, 

and 1D, will generally be available on 

the CMS website. IPPS Tables 1A, 1B, 

1C, and 1D are displayed at the end of 

this section. 

Readers who experience any problems 

accessing any of the tables that are 

posted on the CMS websites identified 

in this IFC should contact Michael 

Treitel at (410) 786–4552. 

The following IPPS tables for this IFC 

are generally available on the CMS 

website at https://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/ 

index.html. Click on the link on the left 

side of the screen titled ‘‘FY 2025 IPPS 

Final Rule Home Page’’ or ‘‘Acute 

Inpatient-Files-for Download.’’ 

Table 2.—Final Case-Mix Index and 

Wage Index Table by CCN—FY 2025 

Interim Final Rule With Comment 

Period 

Table 3.—Final Wage Index Table by 

CBSA—FY 2025 Interim Final Rule 

With Comment Period 

Table 18.—FY 2025 Interim Final 

Rule with Comment Period Medicare 

DSH Uncompensated Care Payment 

Factor 3. We note that we made updates 

to the calculation of Factor 3 of the 

uncompensated care payment 

methodology for all DSH-eligible 

hospitals to reflect the updated 

information for the hospitals that are no 

longer projected to receive interim 

uncompensated care payments for FY 

2025. More specifically, because the 

Factor 3 calculated for each hospital 

reflects that hospital’s uncompensated 

care amount relative to the 

uncompensated care amount for all 

subsection (d) hospitals that receive a 

DSH payment for the fiscal year, we 

recalculated Factor 3 for all DSHeligible hospitals. The hospital-specific 

Factor 3 determines the total amount of 

the uncompensated care payment a 

hospital is eligible to receive for the 

fiscal year. Accordingly, we also 

recalculated the total uncompensated 

care amount for all DSH-eligible 

hospitals to reflect these updates. Each 

hospital’s total uncompensated care 

payment amount is then used to 

calculate the amount of the interim 

uncompensated care payments a 

hospital receives per discharge. Given 

the very narrowly targeted update to the 

information used in the calculation of 

Factor 3, the change to the previously 

calculated Factor 3 is of limited 

magnitude for the majority of hospitals. 


ddrumheller on DSK120RN23PROD with RULES1
80414 Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 

For the FY 2025 IPPS/LTCH PPS final 

rule, as corrected, we published a list of 

hospitals that we identified to be 

subsection (d) hospitals and subsection 

(d) Puerto Rico hospitals projected to be 

eligible to receive interim 

uncompensated care payments for FY 

2025. We are updating this list and the 

calculations of Factor 3 of the 

uncompensated care payment 

methodology to reflect our updated 

interim uncompensated care eligibility 

projections. As noted earlier in this 

section, we are revising Factor 3 for all 

DSH-eligible hospitals to reflect these 

updates, and we are revising the amount 

of the total uncompensated care 

payment calculated for each DSHeligible hospital. 

TABLE 1A—NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (67.6 PERCENT LABOR

SHARE/32.4 PERCENT NONLABOR SHARE IF WAGE INDEX IS GREATER THAN 1)—FY 2025 

Hospital submitted quality data and is a 

meaningful EHR user 

(update = 2.9 percent) 

Hospital submitted quality data and is 

not a meaningful EHR user 

(update = 0.35 percent) 

Hospital did not submit quality data and 

is a meaningful EHR user 

(update = 2.05 percent) 

Hospital did not submit quality data 

and is not a meaningful EHR user 

(update = ¥0.5 percent) 

Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor 

$4,478.09 $2,146.30 $4,367.12 $2,093.11 $4,441.10 $2,128.57 $4,330.13 $2,075.38 

TABLE 1B—NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS, LABOR/NONLABOR (62 PERCENT LABOR SHARE/ 

38 PERCENT NONLABOR SHARE IF WAGE INDEX IS LESS THAN OR EQUAL TO 1)—FY 2025 

Hospital submitted quality data and is a 

meaningful EHR user 

(update = 2.9 percent) 

Hospital submitted quality data and is 

not a meaningful EHR user 

(update = 0.35 percent) 

Hospital did not submit quality data and 

is a meaningful EHR user 

(update = 2.05 percent) 

Hospital did not submit quality data 

and is not a meaningful EHR user 

(update = ¥0.5 percent) 

Labor Nonlabor Labor Nonlabor Labor Nonlabor Labor Nonlabor 

$4,107.12 $2,517.27 $4,005.34 $2,454.89 $4,073.20 $2,496.47 $3,971.42 $2,434.09 

TABLE 1C—ADJUSTED OPERATING STANDARDIZED AMOUNTS FOR HOSPITALS IN PUERTO RICO, LABOR/NONLABOR (NATIONAL: 62 PERCENT LABOR SHARE/38 PERCENT NONLABOR SHARE BECAUSE WAGE INDEX IS LESS THAN OR

EQUAL TO 1)—FY 2025 

Rates if wage index greater than 1 Hospital is a meaningful EHR 

user and wage index less than 

or equal to 1 

(update = 2.9) 

Hospital is not a meaningful 

EHR user and wage index less 

than or equal to 1 

(update = 0.35) Labor Nonlabor 

Labor Nonlabor Labor Nonlabor 

National 1 ......................................................................... Not Applicable .... Not Applicable .... $4,107.12 $2,517.27 $4,005.34 $2,454.89 

1For FY 2025, there are no CBSAs in Puerto Rico with a national wage index greater than 1. 

TABLE 1D—CAPITAL STANDARD

FEDERAL PAYMENT RATE—FY 2025 

Rate 

National ................................. $512.14 

V. Collection of Information 

Requirements 

This document does not impose 

information collection requirements, 

that is, reporting, recordkeeping or 

third-party disclosure requirements. 

Consequently, there is no need for 

review by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). 

VI. Regulatory Impact Analysis 

We have examined the impacts of this 

IFC as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), Executive Order 14094 on 

Modernizing Regulatory Review (April 

6, 2023), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Act, section 

202 of the Unfunded Mandates Reform 

Act of 1995 (March 22, 1995; Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (CRA) (5 

U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 14094 amends 

section 3(f) of Executive Order 12866 to 

define a ‘‘significant regulatory action’’ 

as any regulatory action that is likely to 

result in a rule that may: (1) have an 

annual effect on the economy of $200 

million or more in any 1 year, or 

adversely affect in a material way the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local, territorial, or tribal 

governments or communities; (2) create 

a serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impacts of 

entitlement grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise legal or 

policy issues for which centralized 

review would meaningfully further the 

President’s priorities or the principles 

set forth in this Executive Order. 

A regulatory impact analysis (RIA) is 

prepared for a regulatory action to 

document the economic impact and 

determine if a regulatory action is 

significant under section 3(f)(1). Based 

on our estimates, OMB’S Office of 

Information and Regulatory Affairs 

(OIRA) has determined this rulemaking 

is not significant under section 3(f)(1) of 

E.O. 12866. Accordingly, we have 

prepared a regulatory impact analysis 

that to the best of our ability presents 

the costs and benefits of the rulemaking. 

Pursuant to Subtitle E of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (also known as the 

Congressional Review Act), OIRA has 

also determined that this rule meets the 


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I I I 

I I 

I I 
Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 80415 

criteria set forth in 5 U.S.C. OMB has 

reviewed this IFC, and the Departments 

have provided the following assessment 

of their impact. The analysis in this 

section, in conjunction with the 

remainder of this document, 

demonstrates that this IFC is consistent 

with the regulatory philosophy and 

principles identified in Executive 

Orders 12866 and 13563, the RFA, and 

section 1102(b) of the Act. This IFC 

would affect payments to a substantial 

number of small rural hospitals, as well 

as other classes of hospitals, and the 

effects on some hospitals may be 

significant. Finally, in accordance with 

the provisions of Executive Order 

12866, the Office of Management and 

Budget has reviewed this IFC. 

The following quantitative analysis 

presents the projected effects of the 

policy changes established in this IFC, 

as well as changes effective for FY 2025 

established in the FY 2025 IPPS/LTCH 

PPS final rule and correction notice, on 

various hospital groups. 

To illustrate the effects of the 

provisions of this IFC on hospitals’ FY 

2025 payments, this impact analysis 

was developed by comparing the total 

estimated change in payments under 

this FY 2025 IPPS/LTCH PPS IFC and 

the total estimated change in payments 

from the FY 2025 IPPS/LTCH PPS final 

rule (89 FR 69991) as corrected in the 

FY 2025 IPPS/LTCH PPS final rule 

correction. Specifically, our analysis 

shows the effects of the removal of the 

low wage index hospital policy and the 

application of the transition policy 

(discussed in sections II.A. and B. of 

this IFC) by comparing the following: 

• The total estimated change in 

payments based on FY 2025 policies 

relative to payments based on FY 2024 

policies as calculated in our impact 

analysis in the FY 2025 IPPS/LTCH PPS 

final rule (89 FR 69991) as corrected in 

FY 2025 IPPS/LTCH PPS final rule 

correction, which included the low 

wage index hospital policy. 

• The total estimated change in 

payments based on FY 2025 policies 

after removing the low wage index 

hospital policy and applying the 

transitional exception policy (discussed 

in sections II.A. and II.B. of this IFC) 

relative to payments based on FY 2024 

policies. 

A comparison of these two isolates 

the estimated impact of removing the 

low wage index hospital policy and the 

application of the transition policy on 

FY 2025 payments as discussed later in 

this section. 

Other than removing the low wage 

index hospital policy and applying the 

transitional exception policy, this 

impact analysis was developed using 

the same data and methodology 

described in the FY 2025 IPPS/LTCH 

PPS final rule and correction notice in 

conjunction with the rates and factors 

(for example, outlier threshold, interim 

uncompensated care per discharge 

payments amounts) established in this 

IFC, as discussed in sections II.A. and 

II.B. of this IFC. For ease of discussion, 

references to the removal of the low 

wage index hospital policy and the 

application of the transitional exception 

policy also include the conforming 

changes to the rates and factors 

established in this IFC (for example, 

outlier threshold, interim 

uncompensated care per discharge 

payments amounts). 

A. Analysis of Table I 

Table I displays the results of our 

analysis of the changes for FY 2025 

before and after the removal of the low 

wage index hospital policy and the 

application of the transitional exception 

policy, and then uses this information to 

isolate the impact of the provisions of 

this IFC. The table categorizes hospitals 

by various geographic and special 

payment consideration groups to 

illustrate the varying impacts on 

different types of hospitals, which are 

described in the FY 2025 IPPS/LTCH 

PPS final rule (89 FR 69996). 

TABLE 1—IMPACT ANALYSIS OF CHANGES TO THE IPPS FOR OPERATING COSTS FOR FY 2025 

Number of 

hospitals 

All FY 2025 

changes—final 

rule as 

corrected 1

(A) 

All FY 2025 

changes—IFC 1

(B) 

Overall impact of 

removing low wage 

index hospital 

policy with the 

transitional 

exception policy 

applied for 

FY 2025 2

(C) 

All Hospitals ................................................................................... 3,083 2.8 2.8 0.0 

By Geographic Location: 

Urban hospitals ....................................................................... 2,392 2.8 2.9 0.1 

Rural hospitals ........................................................................ 691 2.6 2.2 ¥0.4 

Bed Size (Urban): 

Q10–99 beds .......................................................................... 645 1.1 1.1 0.0 

100–199 beds ......................................................................... 682 2.6 2.6 0.0 

200–299 beds ......................................................................... 421 2.8 2.8 0.0 

300–499 beds ......................................................................... 394 2.7 2.8 0.1 

500 or more beds ................................................................... 248 3.2 3.2 0.0 

Bed Size (Rural): 

0–49 beds ............................................................................... 341 1.6 1.2 ¥0.4 

50–99 beds ............................................................................. 183 1.4 1.3 ¥0.1 

100–149 beds ......................................................................... 91 2.8 2.6 ¥0.2 

150–199 beds ......................................................................... 44 3.5 2.7 ¥0.8 

200 or more beds ................................................................... 32 3.8 3.7 ¥0.1 

Urban by Region: 

New England .......................................................................... 106 4.2 4.4 0.2 

Middle Atlantic ........................................................................ 280 1.1 1.3 0.2 

East North Central .................................................................. 367 4.6 4.8 0.2 

West North Central ................................................................. 156 2.7 2.6 ¥0.1 

South Atlantic ......................................................................... 396 4.4 4.4 0.0 

East South Central ................................................................. 142 4.7 3.3 ¥1.4 

West South Central ................................................................ 358 3.7 3.6 ¥0.1 

Mountain ................................................................................. 179 2.4 2.6 0.2 


ddrumheller on DSK120RN23PROD with RULES1
80416 Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 

TABLE 1—IMPACT ANALYSIS OF CHANGES TO THE IPPS FOR OPERATING COSTS FOR FY 2025—Continued 

Number of 

hospitals 

All FY 2025 

changes—final 

rule as 

corrected 1

(A) 

All FY 2025 

changes—IFC 1

(B) 

Overall impact of 

removing low wage 

index hospital 

policy with the 

transitional 

exception policy 

applied for 

FY 2025 2

(C) 

Pacific ..................................................................................... 356 0.1 0.3 0.2 

Rural by Region: 

New England .......................................................................... 21 2.2 2.4 0.2 

Middle Atlantic ........................................................................ 52 4.4 4.6 0.2 

East North Central .................................................................. 110 2.1 2.1 0.0 

West North Central ................................................................. 78 2.0 1.9 ¥0.1 

South Atlantic ......................................................................... 112 1.6 1.3 ¥0.3 

East South Central ................................................................. 132 3.6 1.8 ¥1.8 

West South Central ................................................................ 120 3.1 2.5 ¥0.6 

Mountain ................................................................................. 42 2.5 2.5 0.0 

Pacific ..................................................................................... 24 1.5 1.6 0.1 

Puerto Rico: 

Puerto Rico Hospitals ............................................................. 52 2.3 ¥0.5 ¥2.8 

By Payment Classification: 

Urban hospitals ....................................................................... 1,714 2.4 2.4 0.0 

Rural areas ............................................................................. 1,369 3.1 3.1 0.0 

Teaching Status: 

Nonteaching ............................................................................ 1,833 2.3 2.3 0.0 

Fewer than 100 residents ....................................................... 958 2.9 2.9 0.0 

100 or more residents ............................................................ 292 3.0 3.1 0.1 

Urban DSH: ................................................................................... ........................ 0.0 ............................ ..................................

Non-DSH ................................................................................ 331 2.6 2.6 0.0 

100 or more beds ................................................................... 1,015 2.4 2.4 0.0 

Less than 100 beds ................................................................ 368 2.4 2.4 0.0 

Rural DSH: 

Non-DSH ................................................................................ 83 2.0 2.1 0.1 

SCH ........................................................................................ 243 2.9 2.8 ¥0.1 

RRC ........................................................................................ 791 3.2 3.2 0.0 

100 or more beds ................................................................... 39 4.0 4.1 0.1 

Less than 100 beds ................................................................ 213 ¥1.8 ¥2.6 ¥0.8 

Urban teaching and DSH: 

Both teaching and DSH .......................................................... 581 2.4 2.4 0.0 

Teaching and no DSH ............................................................ 52 2.1 2.2 0.1 

No teaching and DSH ............................................................ 802 2.4 2.4 0.0 

No teaching and no DSH ....................................................... 279 2.9 2.9 0.0 

Special Hospital Types: 

RRC ........................................................................................ 155 3.0 2.8 ¥0.2 

RRC with Section 401 Reclassification .................................. 579 3.3 3.3 0.0 

SCH ........................................................................................ 245 2.6 2.5 ¥0.1 

SCH with Section 401 Reclassification .................................. 34 3.1 3.1 0.0 

SCH and RRC ........................................................................ 119 2.8 2.6 ¥0.2 

SCH and RRC with Section 401 Reclassification .................. 46 2.7 2.7 0.0 

Type of Ownership: 

Voluntary ................................................................................. 1,907 2.7 2.8 0.1 

Proprietary .............................................................................. 755 3.2 3.3 0.1 

Government ............................................................................ 420 2.6 2.4 ¥0.2 

Medicare Utilization as a Percent of Inpatient Days: 

0–25 ........................................................................................ 1,362 2.9 3.0 0.1 

25–50 ...................................................................................... 1,616 2.7 2.7 0.0 

50–65 ...................................................................................... 65 1.1 1.2 0.1 

Over 65 ................................................................................... 16 0.0 ¥1.0 ¥1.0 

Medicaid Utilization as a Percent of Inpatient Days: 

0–25 ........................................................................................ 1,911 2.8 2.9 0.1 

25–50 ...................................................................................... 1,044 2.8 2.9 0.1 

50–65 ...................................................................................... 99 1.1 1.3 0.2 

Over 65 ................................................................................... 29 0.8 0.9 0.1 

FY 2025 Reclassifications: 

All Reclassified Hospitals ....................................................... 1,061 3.1 3.1 0.0 

Non-Reclassified Hospitals ..................................................... 2,022 2.5 2.5 0.0 

Urban Hospitals Reclassified .................................................. 902 3.1 3.1 0.0 

Urban Nonreclassified Hospitals ............................................ 1,501 2.4 2.5 0.1 

Rural Hospitals Reclassified Full Year ................................... 281 2.9 2.6 ¥0.3 

Rural Nonreclassified Hospitals Full Year .............................. 399 2.1 1.8 ¥0.3 

All Section 401 Reclassified Hospitals: .................................. 729 3.2 3.2 0.0 


ddrumheller on DSK120RN23PROD with RULES1
Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 80417 

TABLE 1—IMPACT ANALYSIS OF CHANGES TO THE IPPS FOR OPERATING COSTS FOR FY 2025—Continued 

Number of 

hospitals 

All FY 2025 

changes—final 

rule as 

corrected 1

(A) 

All FY 2025 

changes—IFC 1

(B) 

Overall impact of 

removing low wage 

index hospital 

policy with the 

transitional 

exception policy 

applied for 

FY 2025 2

(C) 

Other Reclassified Hospitals (Section 1886(d)(8)(B)) ............ 51 1.9 1.8 ¥0.1 

1Percent change in estimated payments from FY 2024 to FY 2025. 

2 Calculated as (1 plus (the Column B value/100)) divided by (1 plus the (Column A value/100)), minus 1, multiplied by 100. 

• Effects of All FY 2025 Changes—Final 

Rule, as Corrected (Column A) 

Column A shows our estimate of the 

change in payments per discharge from 

FY 2024 to FY 2025 resulting from all 

changes reflected in the FY 2025 IPPS/ 

LTCH PPS final rule, as corrected, 

including the estimated effects of the 

continuation of the low wage index 

hospital policy in FY 2025. For 

complete details refer to the FY 2025 

IPPS/LTCH PPS final rule (89 FR 69994 

through 70002) and FY 2025 IPPS/LTCH 

PPS final rule correction. 

• Effects of All FY 2025 IFC Changes 

(Column B) 

As in Column A, Column B also 

shows our estimate of the change in 

payments per discharge from FY 2024 to 

FY 2025 resulting from all changes 

reflected in the FY 2025 IPPS/LTCH 

PPS final rule, as corrected, except 

instead of including the estimated 

effects of the continuation of the low 

wage index hospital policy in FY 2025, 

it includes the estimated effects in FY 

2025 of removing the low wage index 

hospital policy and applying the 

transitional exception policy. 

• Overall Impact of Removing the Low 

Wage Index Hospital Policy with the 

Transitional Exception Policy 

Applied for FY 2025 (Column C) 

This column compares Column B, 

reflecting the removal of the low wage 

index hospital policy and the 

application of the transition policy in 

FY 2025, to Column A, reflecting the 

continuation of the low wage index 

hospital policy in FY 2025, to isolate the 

impact of removing the low wage index 

hospital policy and applying the 

transition policy. Specifically, it shows 

the changes in FY 2025 payments from 

the FY 2025 final rule, as corrected, to 

the FY 2025 payments under this IFC. 

These changes are entirely attributable 

to the effects of (1) the removal of the 

low wage index hospital policy and (2) 

the application of the transitional 

exception policy (as described in 

section II.B. of this IFC), because those 

are the only policy differences between 

the FY 2025 IPPS/LTCH PPS final rule 

as corrected, and this IFC. As noted 

earlier, other than those policy changes, 

this impact analysis was developed 

using the same data and methodology 

described in the FY 2025 IPPS/LTCH 

PPS final rule and the FY 2025 IPPS/ 

LTCH PPS final rule correction. 

The average change in FY 2025 

payments under the IPPS for all 

hospitals due to the provisions of this 

IFC is approximately 0.0 percent to the 

nearest tenth of a percent. Although the 

non-budget neutral transition policy is 

estimated to increase IPPS operating 

payments by approximately $37 million, 

this amount represents less than a tenth 

of a percent of IPPS payments. 

As a result of the provisions of this 

IFC, overall 768 hospitals will receive a 

lower wage index in FY 2025 than their 

FY 2025 wage index in the FY 2025 

IPPS/LTCH PPS final rule, as corrected, 

and 2,315 hospitals will experience no 

change in their FY 2025 wage index. 

Hospitals in urban areas will experience 

a 0.1 percent increase in their FY 2025 

estimated payments relative to the FY 

2025 estimated payments in the FY 

2025 IPPS/LTCH PPS final rule, as 

corrected. We estimate that 445 urban 

hospitals will receive a lower FY 2025 

wage index than their FY 2025 wage 

index in the FY 2025 IPPS/LTCH PPS 

final rule, as corrected, while 1,947 

urban hospitals will experience no 

change to their FY 2025 wage index. 

Hospitals in rural areas will experience 

a ¥0.4 percent decrease in their FY 

2025 estimated payments relative to the 

FY 2025 estimated payments in the FY 

2025 IPPS/LTCH PPS final rule, as 

corrected. We estimate that 323 rural 

hospitals will receive a lower FY 2025 

wage index than their FY 2025 wage 

index in the FY 2025 IPPS/LTCH PPS 

final rule, as corrected, while 368 rural 

hospitals will experience no change to 

their FY 2025 wage index. We estimate 

that 113 hospitals (85 urban and 28 

rural) will receive the transitional 

exception policy. 

The comparisons by region show that 

the change in payments for urban areas 

range from a 1.4 percent decrease for the 

East South Central urban region to a 0.2 

percent increase for New England, 

Middle Atlantic, East North Central, 

Mountain, and Pacific urban regions. 

Meanwhile, the change in payments for 

rural areas range from a 1.8 percent 

decrease for the East South Central rural 

region to increases of 0.2 percent for the 

New England and Middle Atlantic rural 

regions. IPPS payments to hospitals 

located in Puerto Rico are projected to 

decrease by 2.8 percent. These changes 

reflect the fact that different regions 

have different proportions of low wage 

hospitals, with the highest relative 

concentrations of low wage hospitals in 

Puerto Rico and the East South Central 

region. Regions that have relatively few 

low wage hospitals compared to nonlow wage hospitals are projected to 

experience payment increases due to the 

removal of the low wage index hospital 

budget neutrality adjustment. 

B. Effects of Changes on the Capital 

IPPS 

The approach for estimating the effect 

of the provisions of this IFC on capital 

IPPS payments parallels the approach 

taken for IPPS operating payments. 

Table II displays the results of our 

analysis of the changes for FY 2025 

before and after the removal of the low 

wage index hospital policy and the 

application of the transition policy, and 

then uses this information to isolate the 

impact of the provisions of this IFC. 

The average change in FY 2025 

capital IPPS payments per case for all 

hospitals due to the provisions of this 

IFC is approximately 0.1 percent to the 

nearest tenth of a percent. The nonbudget neutral transitional exception 

policy is estimated to increase capital 

IPPS payments by approximately $3 

million. (We note that the difference in 

the average change for all hospitals 

between operating and capital is 

primarily due to rounding.) Capital IPPS 

payments per case will increase by an 


ddrumheller on DSK120RN23PROD with RULES1
80418 Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 

estimated 0.1 percent for hospitals in 

urban areas compared to the FY 2025 

IPPS/LTCH PPS final rule as corrected 

while payments to hospitals in rural 

areas will decrease by 0.5 percent. 

The comparisons by region show that 

the change in capital payments per case 

for urban areas range from a 1.7 percent 

decrease for the East South Central 

urban region to a 0.3 percent increase 

for the New England, Middle Atlantic, 

and Pacific urban regions. Meanwhile, 

the change in capital payments per case 

for rural areas range from a 2.6 percent 

decrease for the East South Central rural 

region to a 0.4 percent increase for the 

New England, Middle Atlantic, and 

Pacific rural regions. Capital payments 

per case for hospitals located in Puerto 

Rico are projected to decrease by an 

estimated 3.6 percent. As with operating 

payments, these regional changes reflect 

the fact that different regions have 

different proportions of low wage 

hospitals, with the highest relative 

concentrations of low wage hospitals in 

Puerto Rico and the East South Central 

region. Regions that have relatively few 

low wage hospitals compared to nonlow wage hospitals are projected to 

experience payment increases due to the 

removal of the low wage index hospital 

budget neutrality adjustment. 

TABLE II—COMPARISON OF TOTAL CAPITAL PAYMENTS PER CASE

Number of 

hospitals 

All FY 2025 

changes—final 

rule as 

corrected 

(A) * 

All FY 2025 

changes—IFC 

(B) * 

Overall impact of 

removing low wage 

index hospital 

policy with the 

transitional 

exception policy 

applied for 

FY 2025 

(C) ** 

All Hospitals ................................................................................... 3,083 2.8 2.9 0.1 

By Geographic Location: 

Urban hospitals ....................................................................... 2,392 2.7 2.8 0.1 

Rural hospitals ........................................................................ 691 3.8 3.3 ¥0.5 

Bed Size (Urban): 

0–99 beds ............................................................................... 645 2.3 2.3 0.0 

100–199 beds ......................................................................... 682 2.6 2.7 0.1 

200–299 beds ......................................................................... 421 2.6 2.6 0.1 

300–499 beds ......................................................................... 394 2.5 2.6 0.1 

500 or more beds ................................................................... 248 2.8 2.9 0.1 

Bed Size (Rural): 

0–49 beds ............................................................................... 341 3.6 2.7 ¥0.9 

50–99 beds ............................................................................. 183 3.6 3.3 ¥0.3 

100–149 beds ......................................................................... 91 3.5 3.0 ¥0.5 

150–199 beds ......................................................................... 44 4.2 3.1 ¥1.0 

200 or more beds ................................................................... 32 4.0 3.7 ¥0.3 

Urban by Region: 

New England .......................................................................... 106 3.9 4.2 0.3 

Middle Atlantic ........................................................................ 280 0.8 1.1 0.3 

East North Central .................................................................. 367 5.0 5.1 0.1 

West North Central ................................................................. 156 2.1 2.1 0.0 

South Atlantic ......................................................................... 396 4.4 4.4 0.0 

East South Central ................................................................. 142 5.0 3.2 ¥1.7 

West South Central ................................................................ 358 3.6 3.6 0.0 

Mountain ................................................................................. 179 2.2 2.4 0.2 

Pacific ..................................................................................... 356 ¥0.1 0.2 0.3 

Rural by Region: 

New England .......................................................................... 21 3.5 3.9 0.4 

Middle Atlantic ........................................................................ 52 5.0 5.5 0.4 

East North Central .................................................................. 110 6.0 6.0 0.0 

West North Central ................................................................. 78 2.4 1.9 ¥0.5 

South Atlantic ......................................................................... 112 2.4 1.9 ¥0.5 

East South Central ................................................................. 132 5.0 2.2 ¥2.6 

West South Central ................................................................ 120 4.1 3.4 ¥0.7 

Mountain ................................................................................. 42 1.7 2.1 0.3 

Pacific ..................................................................................... 24 ¥0.4 0.0 0.4 

Puerto Rico: 

Puerto Rico Hospitals ............................................................. 52 2.1 ¥1.6 ¥3.6 

By Payment Classification: 

Urban hospitals ....................................................................... 1,714 2.3 2.4 0.1 

Rural areas ............................................................................. 1,369 3.2 3.2 0.0 

Teaching Status: 

Nonteaching ............................................................................ 1,833 2.6 2.6 0.0 

Fewer than 100 residents ....................................................... 958 2.9 2.9 0.0 

100 or more residents ............................................................ 292 2.6 2.7 0.1 

Urban DSH: 

Non-DSH ................................................................................ 331 2.5 2.5 0.0 

100 or more beds ................................................................... 1,015 2.3 2.4 0.1 

Less than 100 beds ................................................................ 368 2.3 2.3 0.0 

Rural DSH: 

Non-DSH ................................................................................ 83 3.5 3.8 0.3 

SCH ........................................................................................ 243 2.9 2.7 ¥0.2 


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Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 80419 

TABLE II—COMPARISON OF TOTAL CAPITAL PAYMENTS PER CASE—Continued 

Number of 

hospitals 

All FY 2025 

changes—final 

rule as 

corrected 

(A) * 

All FY 2025 

changes—IFC 

(B) * 

Overall impact of 

removing low wage 

index hospital 

policy with the 

transitional 

exception policy 

applied for 

FY 2025 

(C) ** 

RRC ........................................................................................ 791 3.1 3.1 0.0 

100 or more beds ................................................................... 39 4.3 4.3 0.1 

Less than 100 beds ................................................................ 213 4.2 3.2 ¥1.0 

Urban teaching and DSH: 

Both teaching and DSH .......................................................... 581 2.2 2.3 0.1 

Teaching and no DSH ............................................................ 52 2.1 2.2 0.1 

No teaching and DSH ............................................................ 802 2.3 2.3 0.0 

No teaching and no DSH ....................................................... 279 2.7 2.7 0.0 

Special Hospital Types: 

RRC ........................................................................................ 155 4.9 4.6 ¥0.3 

RRC with Section 401 Rural Reclassification ........................ 579 3.0 3.1 0.1 

SCH ........................................................................................ 245 3.4 3.0 ¥0.4 

SCH with Section 401 Rural Reclassification ........................ 34 2.6 2.9 0.3 

SCH and RRC ........................................................................ 119 4.2 3.7 ¥0.4 

SCH and RRC with Section 401 Rural Reclassification ........ 46 2.5 2.6 0.1 

Type of Ownership: 

Voluntary ................................................................................. 1,907 2.7 2.8 0.2 

Proprietary .............................................................................. 755 3.2 3.2 0.0 

Government ............................................................................ 420 2.3 2.1 ¥0.2 

Medicare Utilization as a Percent of Inpatient Days: 

0–25 ........................................................................................ 1,362 2.7 2.7 0.0 

25–50 ...................................................................................... 1,616 2.8 2.9 0.1 

50–65 ...................................................................................... 65 1.2 1.3 0.1 

Over 65 ................................................................................... 16 0.8 ¥0.7 ¥1.5 

Medicaid Utilization as a Percent of Inpatient Days: 

0–25 ........................................................................................ 1,911 2.9 3.0 0.1 

25–50 ...................................................................................... 1,044 2.6 2.6 0.0 

50–65 ...................................................................................... 99 0.9 1.1 0.3 

Over 65 ................................................................................... 29 0.4 0.5 0.1 

FY 2025 Reclassifications: 

All Reclassified Hospitals ....................................................... 1,061 3.1 3.1 0.0 

Non-Reclassified Hospitals ..................................................... 2,022 2.4 2.5 0.1 

Urban Hospitals Reclassified .................................................. 902 3.0 3.1 0.1 

Urban Non-Reclassified Hospitals .......................................... 1,501 2.3 2.3 0.1 

Rural Hospitals Reclassified Full Year ................................... 281 4.1 3.6 ¥0.5 

Rural Non-Reclassified Hospitals Full Year ........................... 399 3.3 2.6 ¥0.6 

All Section 401 Rural Reclassified Hospitals ......................... 729 3.0 3.1 0.1 

Other Reclassified Hospitals (Section 1886(d)(8)(B)) ............ 51 4.2 4.2 0.0 

* Percent change in estimated payments from FY 2024 to FY 2025. 

** Calculated as (1 plus (the Column B value/100)) divided by (1 plus the (Column A value/100)), minus 1, multiplied by 100. 

C. Overall Conclusion 

Acute care hospitals are estimated to 

experience an increase of approximately 

$41 million in FY 2025 due to the 

provisions of this IFC. This change is 

primarily due to the application of the 

non-budget neutral transitional payment 

exception policy. The estimated change 

in operating payments is approximately 

$37 million (discussed in section VI.A. 

of this IFC). The estimated change in 

capital payments is approximately $3 

million (discussed in section VI.B. of 

this IFC). The total differs from the sum 

of the components due to rounding. 

Table I of section VI.A. of this IFC and 

Table II of section VI.B. of this IFC 

demonstrate the estimated 

redistributional impacts of the 

provisions of this IFC. Discussions 

presented in the previous pages, in 

combination with the remainder of this 

IFC, constitute the regulatory impact 

analysis. 

D. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at https://

www.whitehouse.gov/wp-content/ 

uploads/legacy_drupal_files/omb/ 

circulars/A4/a-4.pdf), in Table V. of this 

IFC, we have prepared an accounting 

statement showing the classification of 

the expenditures associated with the 

provisions of this IFC as they relate to 

acute care hospitals. This table provides 

our best estimate of the change in 

Medicare payments to providers as a 

result of the changes to the IPPS 

presented in this IFC relative to the FY 

2025 IPPS/LTCH PPS final rule as 

corrected in the FY 2025 IPPS/LTCH 

PPS final rule correction. All 

expenditures are classified as transfers 

to Medicare providers. 

As shown in Table V., the net costs to 

the Federal Government associated with 

the policies in this IFC are estimated at 

$41 million. 


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80420 Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 

TABLE V—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES UNDER THE IPPS 

Category Transfers 

Annualized Monetized Transfers .............................................................. $41 million. 

From Whom to Whom .............................................................................. Federal Government to IPPS Medicare Providers. 

E. Regulatory Flexibility Act (RFA) 

Analysis 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

government jurisdictions. We estimate 

that most hospitals and most other 

providers and suppliers are small 

entities as that term is used in the RFA. 

The great majority of hospitals and most 

other health care providers and 

suppliers are small entities, either by 

being nonprofit organizations or by 

meeting the SBA definition of a small 

business (having revenues of less than 

$8.0 million to $41.5 million in any 1 

year). (For details on the latest standards 

for health care providers, we refer 

readers to page 38 of the Table of Small 

Business Size Standards for NAIC 622 

found on the SBA website at https://

www.sba.gov/sites/default/files/files/ 

Size_Standards_Table.pdf.) 

For purposes of the RFA, all hospitals 

and other providers and suppliers are 

considered to be small entities. Because 

all hospitals are considered to be small 

entities for purposes of the RFA, the 

hospital impacts described in this IFC 

are impacts on small entities. 

Individuals and States are not included 

in the definition of a small entity. MACs 

are not considered to be small entities 

because they do not meet the SBA 

definition of a small business. HHS’s 

practice in interpreting the RFA is to 

consider effects economically 

‘‘significant’’ if greater than 5 percent of 

providers reach a threshold of 3 to 5 

percent or more of total revenue or total 

costs. Although less than 5 percent of 

providers are estimated to reach a 

threshold of 3 to 5 percent of total 

revenue or total costs, the provisions of 

this IFC relating to IPPS hospitals would 

have an economically significant impact 

on many small entities as explained in 

this IFC. For example, as discussed in 

section VI.A. of this IFC, we estimate 

113 hospitals will receive the 

transitional exception policy due to 

being significantly impacted by the 

removal of the low wage index hospital 

policy. 

This IFC provides descriptions of the 

provisions that are addressed, identifies 

the finalized policies, and presents 

rationales for our decisions. The 

analyses discussed in this IFC 

constitutes our regulatory flexibility 

analysis. We solicit public comments on 

our estimates and analysis of the impact 

of our policies on small entities. 

F. Impact on Small Rural Hospitals 

Section 1102(b) of the Act requires us 

to prepare a regulatory impact analysis 

for any proposed or final rule that may 

have a significant impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 603 

of the RFA. With the exception of 

hospitals located in certain New 

England counties, for purposes of 

section 1102(b) of the Act, we define a 

small rural hospital as a hospital that is 

located outside of an urban area and has 

fewer than 100 beds. Section 601(g) of 

the Social Security Amendments of 

1983 (Pub. L. 98–21) designated 

hospitals in certain New England 

counties as belonging to the adjacent 

urban area. Thus, for purposes of the 

IPPS, we continue to classify these 

hospitals as urban hospitals. 

As shown in Table I. in section VI.A. 

of this IFC, rural IPPS hospitals with 0– 

49 beds (341 hospitals) are expected to 

experience a decrease in payments of 

¥0.4 percent, and rural IPPS hospitals 

with 50–99 beds (182 hospitals) are 

expected to experience a decrease in 

payments of ¥0.1 percent relative to the 

FY 2025 IPPS/LTCH PPS final rule as 

corrected by the FY 2025 IPPS/LTCH 

PPS final rule correction. These changes 

are due to the removal of the low wage 

index hospital policy in conjunction 

with the application of the transition 

policy. We refer readers to Table I. in 

section VI.A. of this IFC for additional 

information on the quantitative effects 

of the policy changes under the IPPS for 

operating costs. 

G. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4) also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2024, that 

threshold level is approximately $183 

million. This IFC would not mandate 

any requirements that meet the 

threshold for State, local, or tribal 

governments, nor would it affect private 

sector costs. 

H. Executive Order 13132 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a rule 

that imposes substantial direct 

requirement costs on state and local 

governments, preempts state law, or 

otherwise has federalism implications. 

This IFC would not have a substantial 

direct effect on state or local 

governments, preempt states, or 

otherwise have a federalism 

implication. 

I. Executive Order 13175 

Executive Order 13175 directs 

agencies to consult with Tribal officials 

prior to the formal promulgation of 

regulations having tribal implications. 

Section 1880(a) of the Act states that a 

hospital of the Indian Health Service, 

whether operated by such Service or by 

an Indian tribe or tribal organization, is 

eligible for Medicare payments so long 

as it meets all of the conditions and 

requirements for such payments which 

are applicable generally to hospitals. 

Consistent with section 1880(a) of the 

Act, this IFC contains general provisions 

also applicable to hospitals and 

facilities operated by the Indian Health 

Service or Tribes or Tribal organizations 

under the Indian Self-Determination 

and Education Assistance Act. We 

continue to engage in consultations with 

Tribal officials on IPPS issues of 

interest. We use input received from 

these consultations, as well as the 

comments on this IFC, to inform our 

rulemaking. 

J. Executive Order 12866 

In accordance with the provisions of 

Executive Order 12866, this IFC was 

reviewed by the Office of Management 

and Budget. 


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Federal Register / Vol. 89, No. 192 / Thursday, October 3, 2024 / Rules and Regulations 80421 

VII. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

Chiquita Brooks-LaSure, 

Administrator of the Centers for 

Medicare & Medicaid Services, 

approved this document on September 

26, 2024 

Xavier Becerra, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2024–22765 Filed 9–30–24; 4:15 pm] 

BILLING CODE 4120–01–P 


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