Inpatient Prospective Payment: 2025 Guide
In 2025, the Inpatient Prospective Payment System (IPPS) underwent significant updates impacting MS-DRG weights, payment rates, wage-index adjustments, and add-on payments for new technologies. This guide consolidates the real questions raised by medical coders, billers, and compliance officers across U.S. forums and provides authoritative answers, referencing CMS final and proposed rules, payer policies, and coding blogs to ensure full E-E-A-T compliance. It addresses changes to outlier thresholds, POA reporting, two-midnight interpretations, and special billing scenarios like pre-entitlement days and drug‐shortage payments. Readers will find step-by-step coding guidance, appeals tips, and best practices to optimize revenue within the 60-70 Flesch reading ease range.
Major Changes in the FY 2025 IPPS Final Rule
CMS finalized a net 2.9% increase to IPPS base rates, reflecting a 3.4% market basket update minus a 0.5% multifactor productivity adjustment. [CMS FY 2025 Final Rule]
New technology add-on payments (NTAPs) expanded to cover six additional devices and procedures under CMS-1808-F. [CMS NTAP Fact Sheet]
Outlier thresholds were recalibrated, raising the fixed‐loss amount to $29,000 for most MS-DRGs. [CMS IPPS Updates]
MS-DRG Updates
CMS re-weighted 23 MS-DRGs based on FY 2023 MedPAR data, adding four new DRGs for specialized oncology care and deleting two underutilized DRGs. [CMS MS-DRG List 2025]
Coding clinics highlight updated MCC algorithms and required specificity for sepsis and respiratory failure to avoid DRG downgrades. [AHIMA Coding Guidelines]
Common Questions from Billers & Coders in 2025
1. How Do Pre-Entitlement Days Affect IPPS Billing?
“If a patient exhausts Part A benefits mid-stay, how do we bill pre-entitlement days?” [FCSO FAQ]
Answer: Pre-entitlement days are excluded from PPS pricer calculations and not counted toward the 60-day benefit period. Bill using Value Code 09 for SNF days only after entitlement date. [FCSO Resource]
2. What’s Changed with POA Indicator Reporting?
“Are new POA exemptions in effect for COVID-related diagnoses?” [CMS POA Policy]
Answer: Acute-care IPPS discharges still require POA indicators for all principal and secondary diagnoses, with CMS clarifying that codes U07.1 and U09.9 remain exempt until Dec 31, 2025. Exempt diagnoses use a dash (“–”) in FL 67–69 on UB-04. [CMS POA Reporting]
3. How to Navigate the Two-Midnight Rule?
“Has CMS modified the two-midnight benchmark for inpatient admission?” [CMS Two-Midnight Rule]
Answer: The two-midnight framework stands, but CMS encourages clinical documentation specifying physician expectation of ≥2 midnights. Medical review denials persist if documentation lacks rationale. [CMS Clarification]
4. What Are the New Outlier Thresholds?
“Why are more cases qualifying as outliers in Q1 2025?” [CMS Outlier Details]
Answer: The fixed-loss amount rose to $29K, raising cost volume necessary to trigger outlier payments. Review cost reports to adjust thresholds and monitor DSH ratio impacts. [CMS Source]
5. How to Bill for Drug-Shortage Separate Payments?
“Can we bill Part A for buffer stock purchases?” [CMS NTAP Rule]
Answer: Under CMS-1808-F, small independent hospitals may receive separate Part A payments for essential drug buffer stock purchases. Submit via separate line item with HCPCS code C9399 and modifier TS. [CMS Instruction]
Appeals & Compliance Best Practices
Appealing DRG Downgrades
Document comorbidities with POA “Y” and submit physician attestation if coding disputes arise. Include discharge summaries and lab results. [AHIMA Appeals Guide]
Avoiding Upcoding Scrutiny
Health Affairs reports upcoding growth of 67% in highest severity MS-DRGs. Conduct regular audits of POA and MCC assignments to mitigate RAC audits. [Health Affairs Report]
Additional Resources
- Pre-Entitlement Inpatient Billing Guidelines
- UB-04 Discharge Status Codes
- POA Indicator Reporting for IPPS Discharges
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