Health Headlines – April 14, 2025

CMS Issues IPPS and LTCH Proposed Rule for FY 2026

On Friday, April 11, 2025, CMS issued its annual Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) Proposed Rule for Fiscal Year (FY) 2026 (the Proposed Rule). In the Proposed Rule, CMS proposes to, among other things, update the IPPS and LTCH PPS payment rates, modify the hospital wage index, and adjust the nursing and allied health payment formula. Comments to the Proposed Rule must be submitted by June 10, 2025. This article provides an overview of the key proposals in the Proposed Rule.

Payment Rates Overview

Under the Proposed Rule, the proposed increase in operating payment rates for general acute care hospitals under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting program and are meaningful electronic health record users would be 2.4 percent. This reflects a 3.2 percent projected increase in the hospital market basket update with a projected 0.8 percent productivity adjustment reduction. This also reflects CMS’s proposal to rebase and revise the IPPS operating market basket and IPPS capital market basket to reflect a 2023 base year (CMS last rebased the hospital market basket cost weights effective for FY 2022 with 2018 data used as the base period). Based on the proposed 2023-based IPPS market basket, CMS is also proposing a national labor-related share of 66 percent for the national standardized amounts for all IPPS hospitals that have a wage index value that is greater than 1.0000. The proposed labor-related share of 66 percent is 1.6 percentage points lower than the current labor-related share of 67.6 percent. The Proposed Rule states that CMS expects that these proposed changes will increase hospital payments under the IPPS by $4 billion.

Additionally, CMS is proposing to increase the LTCH standard payment rate by 2.6 percent and proposing that LTCH PPS payments for discharges paid to the LTCH standard payment rate are to increase by approximately 2.2 percent or $52 million.

Wage Index

CMS is proposing some modest changes to the hospital wage index for acute care hospitals. Of note, the Proposed Rule is discontinuing the low wage index hospital policy, updating the IPPS labor-related share, and updating the occupational mix adjusted national average hourly wage.

CMS implemented the low wage index hospital policy in the FY 2020 rulemaking, increasing the wage index values for some facilities whose values were particularly low. However, the Court of Appeals for the D.C. Circuit ordered CMS to vacate that policy in Bridgeport Hosp. v. Becerra, 108 F.4th 882 (D.C. Cir. 2024). Though CMS already removed the adjustment for FY 2025, CMS is now officially discontinuing the low wage index policy for FY 2026 and onwards as well.

Under the IPPS, a portion of each hospital’s compensation is paid according to the hospital’s area wage index. HHS then applies the IPPS labor-related share, an estimate of how much wages and wage-related costs contribute towards hospitals’ total costs. HHS last calculated this using FY 2018 wage index data and arrived at a labor-related share of 67.6 percent. Now, using FY 2023 data, CMS is proposing a marginally lower labor-related share of 66.0 percent.

One of the factors in CMS’s formula for compensating hospitals based on their wage expense is the base occupational mix adjusted national hourly wage. CMS indicated that it is not making any changes to its methodology for calculating this for FY 2026 but has arrived at an updated amount using new data; the FY 2026 proposed rule’s occupational mix adjusted national hourly wage is $57.60, a $2.87 increase over the FY 2025 final rule’s amount of $54.73.

Graduate Medical Education

Though HHS indicated that it is not currently proposing any changes to its methodology for counting FTEs, HHS did use the FY 2026 rulemaking to announce the closure of two teaching hospitals and the reallocation of their FTE cap slots pursuant to Section 5506 of the Affordable Care Act:

Hospitals interested in applying for these slots have until July 10, 2025 to submit applications through the Medicare Electronic Application Request Information System (MEARIS) for Round 24 (Wahiawa General – Wahiawa, HI) and Round 25 (Carney Hospital – Boston MA). Though hospitals anywhere in the country can apply, HHS uses a variety of factors to determine which hospitals receive priority during the reallocation. For example, HHS will typically prioritize hospitals in the same CBSAs, same state, and based on whatever particular specialties the applying hospitals are seeking to expand.

Uncompensated Care Payment

The Proposed Rule includes CMS’s calculation of the uncompensated care payment pool for FY 2026. The Affordable Care Act (ACA) modified the Medicare DSH payment formula to reduce DSH payments to hospitals by 75 percent. Each year, CMS is required to estimate the dollar amount by which the ACA has reduced Medicare DSH payments (Factor 1) and multiply that amount by a factor equal to 1 minus the percent change in the uninsured population since the ACA was implemented in 2013 (Factor 2). The resulting payment pool is distributed to hospitals based on their proportionate share of uncompensated care as reported in Worksheet S-10 of their cost reports.

For FY 2026, CMS has calculated a proposed Factor 1 of $11.761 billion, which is equal to CMS’s estimate of DSH payments hospitals would receive in FY 2026 but for the ACA changes ($15.682 billion) multiplied by 75 percent. By comparison, the Factor 1 CMS finalized in the FY 2025 final rule was $10.509 billion.

For Factor 2, CMS estimates that 8.85 percent of the population will be uninsured in FY 2026 compared to 14 percent when the ACA was implemented in 2013, for a percent change of 39.29 percent. Accordingly, for FY 2026 CMS has proposed a Factor 2 of 60.71 percent [1 – 39.29 percent]. By comparison, in FY 2025 CMS finalized a Factor 2 of 54.29 percent.

The product of proposed Factors 1 and 2 for FY 2026 would produce an uncompensated care pool of $7.140 billion. By comparison, the final uncompensated care pool for FY 2025 was $5.705 billion.

Changes to Nursing and Allied Health Payment Formula

In the Proposed Rule, CMS is proposing to change its regulatory formula for calculating the pass-through payment owed to hospitals for their nursing and allied health education (NAHE) programs. The Medicare program reimburses hospitals for the “net cost” incurred operating NAHE programs in recognition of the value that these programs bring to the healthcare workforce and Medicare beneficiaries. These payments are made on a pass-through basis, meaning they are paid outside of the prospective payment systems.

CMS has adopted a regulation for calculating the reimbursable net cost of a NAHE program.  The starting point of that calculation is “total costs” that are “directly related to” the program, which consists of the direct costs of the program, such as trainee stipends and teacher salaries, and indirect program costs, including the additional overhead costs associated with operating a NAH program. Total costs are offset by tuition the hospital collects from students enrolled in the program. The remainder, if any, is the net cost of the program, which is the basis for Medicare payment. Thus, the regulatory formula for calculating the net costs of NAH programs can be expressed as follows:

total (direct + indirect) costs – tuition = net costs

In the Proposed Rule, CMS is proposing to change the order of operations in the payment formula. Instead of deducting tuition from total costs (i.e., the sum of direct and indirect costs), CMS proposes to deduct tuition from direct costs, and then add indirect costs to the remainder. The new payment formula would be as follows:

direct costs – tuition + indirect costs = net costs

When addition and subtraction are involved, changing the order of operations typically does not affect the result. But Medicare is different. The amount of indirect costs a NAHE program has incurred is determined in part by its direct costs. Under Medicare’s cost-finding principles, NAHE programs are apportioned administrative and general (A&G) costs based on the program’s proportionate share of direct costs relative to the other departments in the hospital.  By offsetting the direct costs of NAHE programs by tuition, CMS’s proposal would put those programs at a disadvantage in the cost-finding process, because it would reduce their proportionate share of direct costs relative to the other departments in the hospital, resulting in a smaller share of A&G costs.

Despite the current language in the regulation, CMS has historically calculated NAHE payments using the formula it now proposes to codify. NAHE payments are calculated in the Medicare cost report. The current cost report instructions require hospitals to deduct tuition from direct costs before calculating indirect costs in the cost-finding process. CMS’s proposal would align the regulation with the cost report instructions.

CMS is proposing this change in direct response to the D.C. District Court’s decision in Mercy Health-St. Vincent Medical Center LLC v. Becerra, 717 F. Supp. 3d 33, 35 (D.D.C. 2024) (St. Vincent). In that case, several hospitals challenged CMS over the fact that the cost report did not calculate their NAHE payments in the manner required by the regulation. The court ruled that the text of the regulation says that CMS cannot deduct tuition until after determining a hospital’s total (direct and indirect) costs. “This order of operations comes straight from the regulation—one [CMS] devised, and one [CMS] must follow.” King & Spalding represented the plaintiffs in St. Vincent.

The Proposed Rule is available here, a CMS fact sheet is available here, and the MEARIS portal for submitting 5506 applications is accessible here. The Proposed Rule is scheduled to be published in the Federal Register on April 30, 2025. As stated above, comments are due by June 10, 2025.

Reporters, Alek Pivec, Washington, D.C., +1 202 626 2914, apivec@kslaw.com; Ahsin Azim, Washington, D.C., + 1 202 626 5516, aazim@kslaw.com; Gregory Fantin, Washington D.C., +1 202-626-9271, gfantin@kslaw.com.

Texas Court Strikes Down Key Portions of Biden-Era Rule Imposing Minimum Nurse Staffing Requirements at Nursing Homes

On April 7, 2025, Judge Matthew Kacsmaryk of the Northern District of Texas vacated two provisions of a major 2024 CMS nurse staffing regulation requiring nursing homes to have an RN on site 24 hours a day, 7 days per week and setting minimum staffing standards based on a facility’s number of residents (the Order).  In the Order, the court ruled that the two nurse staffing provisions would be vacated not just for the immediate parties involved but on a nationwide basis. 

The Biden Administration announced its intent in 2022 to establish minimum nursing home staffing requirements.  After CMS published a research study on the topic in June 2023, CMS issued a proposed rule in September 2023 proposing several staffing requirements, including the two requirements vacated in the Order.  First, the proposed rule required an RN to be on site 24 hours per day, 7 days per week to provide skilled nursing care to all residents.  Second, the proposed rule set minimum nurse staffing standards for all skilled nursing facilities, requiring 0.55 hours per resident day (HPRD) for RNs and 2.45 HPRD for nurse assistants. 

In May 2024, after receiving over 46,000 comments on the proposed rule, CMS promulgated its Final Rule, implementing the two requirements in the proposed rule with slight modifications.  The Final Rule staggered the deadlines for rural and nonrural nursing facilities to comply with the requirements over a period of five years (starting in 2026), added a total nurse staffing standard of 3.48 total nurse staffing hours per resident day (HPRD), and included some exemptions from the standards. 

The American Health Care Association filed suit to challenge the Final Rule in May 2024, challenging the requirement that an RN be on site 24/7 at all SNFs (the 24/7 Requirement) and that all SNFs meet the minimum staffing hours per resident day requirements (the HPRD Requirements).  In August 2024, the State of Texas also challenged the requirements, and the cases were consolidated.  The plaintiffs and CMS each filed cross-motions for summary judgment, on which the court ruled in its Order.

In its Order, the court held that CMS exceeded its statutory authority with the 24/7 Requirement.  The court stated that Congress had mandated “nursing homes use the services of a registered professional nurse for at least 8 consecutive hours a day, 7 days a week.”  This statutory mandate did not, the court concluded, authorize CMS to impose an hours requirement higher than 8 hours for RNs in nursing homes.  Because Congress set a clear numerical baseline of 8 hours per day for RNs, the court ruled that CMS was not free to amend the statute and replace 8 hours a day with 24 hours a day.  The court rejected more general authorities that CMS invoked to support the 24/7 Requirement. 

Similarly, for the HPRD Requirements, the court rejected CMS’s argument that it had broad authority to implement requirements to protect the health and safety of nursing home residents.  The court ruled that the HPRD Requirements failed to consider the nursing needs of a facility’s residents as required by Congress. 

The court also considered arguments that the plaintiffs raised under the Major Questions Doctrine (a doctrine prohibiting agencies—except in “certain extraordinary circumstances”—from making decisions of vast economic and political significance without an express delegation of authority from Congress) and arbitrary and capricious rulemaking.  However, because the 24/7 Requirement and HPRD Requirements directly contravened Congress’s statutory mandate, the court concluded it did not need to address those arguments. 

In deciding what relief to grant, the court vacated the 24/7 Requirement and the HPRD Requirements with nationwide effect.  It did not rule on other provisions of the Final rule.

A copy of the court’s memorandum opinion and order is available here. 

Reporter, Doug Comin, Atlanta, +1 404 572 3525, dcomin@kslaw.com.

Executive Order Continues Focuses on Anticompetitive Regulations

On April 9, 2025, President Trump issued an executive order, titled “Reducing Anti-Competitive Regulatory Barriers” (the EO), directing federal agencies to identify and rescind or modify anticompetitive regulations. The EO follows the Justic Department’s Antitrust Division launching its new Anticompetitive Regulations Task Force, which King & Spalding reported on last week, and reflects the administration’s continued focus on this topic.

Scope of Review

The EO provides that federal agencies shall “complete a review of all regulations subject to their rulemaking authority” to identify those regulations that:

• create, or facilitate the creation of, de facto or de jure monopolies;
• create unnecessary barriers to entry for new market participants;
• limit competition between competing entities or have the effect of limiting competition between competing entities;
• create or facilitate licensure or accreditation requirements that unduly limit competition;
• unnecessarily burden the agency’s procurement processes, thereby limiting companies’ ability to compete for procurements; or
• otherwise impose anti-competitive restraints or distortions on the operation of the free market.

Timeline For Review

The EO provides the following timelines:

• Within ten days of the EO (by April 19, 2025), the Chair of the Federal Trade Commission (FTC) shall issue a request for information (RFI) that seeks public input on the identification of anticompetitive regulations that fall within the categories identified in the EO, as well as comments explaining the proposed classifications. 
• Forty days after the RFI (around May 29, 2025), the FTC Chair shall convey any relevant responses to the federal agencies with authority over the regulations identified by the public.
• Within seventy days after the EO (around July 18, 2025), the federal agency heads shall provide the FTC Chair and the Attorney General with a list of regulations identified as responsive to the EO, along with recommendations as to whether those regulations should be rescinded or modified to address anticompetitive effects. Any identified anticompetitive regulations that are not recommended for rescission or modification require justification. The federal agencies are to prioritize review of regulations that constitute “significant regulatory action” pursuant to the applicable executive order regarding regulatory planning and review.
• Within ninety days of receipt of the list of regulations from the agencies (around October 16, 2025), the FTC Chair shall, after consultation with the Department of Justice, the Assistant to the President for Economic Policy, and the relevant federal agencies, provide the Director of the Office of Management and Budget (OMB Director) a consolidated list of regulations that warrant rescission or modification. The consolidated list is not limited to the regulations originally identified by the agencies.  Thereafter, the OMB Director will, in consultation with FTC Chair and the same entities with whom the FTC Chair consulted, determine whether to implement the proposed rescissions or modifications.

Although the EO does not identify any industry as a particular target for the EO’s deregulatory efforts, the Antitrust Division’s announcement regarding the new Anticompetitive Regulations Task Force did specifically identify the healthcare industry, noting that “[l]aws and regulations” that “discourage doctors and hospitals from providing low-cost, high-quality healthcare and instead encourage overbilling and consolidation” are a particular target. 

King & Spalding attorneys are available to assist with evaluating regulations and preparing comments for submission.

The EO can be found here.

Reporters, Robert Cooper, Washington D.C., + 1 202 626 8991, rcooper@kslaw.com; Christopher C. Jew, Los Angeles, + 1 213 443 4336, cjew@kslaw.com.

CMS Proposes 2.8% Payment Update for Skilled Nursing Facilities

On April 11, 2025, CMS proposed a rule that would update policies and payment rates used under the Skilled Nursing Facility (SNF) Prospective Payment System (PPS) for FY 2026 (Proposed Rule). The Proposed Rule also proposes to update the SNF Quality Reporting Program (QRP), proposes several technical revisions to the code mappings used to classify patients under the Patient Driven Payment Model (PDPM), and updates to the Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program. Comments on the proposed rule are due by June 10, 2025.

Proposed Updates to SNF Payment Rates

As required by statute, the Proposed Rule would update the annual rates from the rates that CMS published for FY 2025. CMS proposes updating SNF PPS rates by 2.8% based on the proposed SNF market basket of 3.0%, plus a 0.6% market basket forecast error adjustment, and a negative 0.8% productivity adjustment. The increase equates to a cumulative $196.5 million. However, the increase is less than the increase in recent years.

Proposed Changes to the PDPM ICD-10 Code Mappings

In FY 2020, CMS implemented the PDPM to improve payment accuracy. The PDPM is meant to focus on the unique needs of each patient, rather than the volume of services provided. CMS proposes changes to the code mappings to update the rule to be consistent with the latest ICD-10 coding guidance.

Proposed Changes to the SNF VBP Program

For the SNF VBP Program, CMS proposes several operation and administrative changes. The SNF VBP program is a pay-for-performance program. The program rewards SNFs with incentive payments based on the quality of care provided to Medicare beneficiaries, measured by hospital readmissions. CMS withholds 2% of providers’ pay to fund the VBP program; nursing homes can earn that pay back if they hit specific benchmarks. The Proposed Rule states:

• CMS is providing estimated performance standards for the FY 2028 and FY 2029 program years to comply with the program’s statutory notice deadline.
• CMS is also proposing to finalize the scoring methodology codified at §413.338(e)(1) and § 413.338(e)(3) of CMS’s regulations to the Skilled Nursing Facility Within Stay Potentially Preventable Readmission (SNF WS PPR) measure beginning with the FY 2028 program year.
• CMS also proposes a reconsideration policy, to start in FY 2027, that would allow SNFs to seek reconsideration of a Review and Correction request if they do not agree with CMS’s decision, prior to the data becoming publicly available. CMS states in the Proposed Rule, “[t]he proposed reconsideration request process would align the SNF VBP Program with other CMS quality programs, including the Expanded Home Health Value-Based Purchasing (HHVBP) Model … to create a familiar policy experience for providers across CMS quality programs.”
• CMS proposes to remove the Health Equity Adjustment in order to “simplify the methodology and provide clearer incentives for SNFs as they seek to improve their quality of care for all residents.”

Proposed Changes to the SNF QRP Program

For the SNF QRP program, CMS proposes two updates. First, beginning with residents admitted on October 1, 2025, CMS is proposing to remove four standardized patient assessment data elements under the social determinants of health (SDOH) category, including one item for Living Situation, two items for Food, and one item for Utilities, for FY 2027. Second, CMS is also proposing to “amend the SNF QRP reconsideration policy to permit SNFs to request an extension to file a reconsideration request and to codify this proposed policy and process….”

CMS also includes three Requests for Information (RFIs) on the following:

1. Future measure concepts for the SNF QRP, including the topics of delirium, interoperability, nutrition, and well-being;
2. Potential revisions to the data submission deadlines for assessment data collected for the SNF QRP, to allow CMS to provide SNFs with more timely quality data; and
3. Advancing digital quality measurement and the use of Fast Healthcare Interoperability Resources in SNFs.

Previous Request for Information (RFI)

CMS also includes in the Proposed Rule an RFI seeking input on opportunities to streamline regulations and reduce burdens on providers. This RFI has been previously published.

The Proposed Rule can be found here. The RFI seeking input on opportunities to streamline regulations and reduce burdens on providers can be found here.

Comments on the Proposed Rule must be submitted by June 10, 2025 (60 days after the date of filing for public inspection).

Reporter, Priya Sinha, Atlanta, +1 404 572 3548, psinha@kslaw.com.

CMS Proposes Increases to Hospice Care Rates for FY 2026

On April 11, 2025, CMS issued a proposed rule that “would update the hospice wage index, payment rates, and cap amount for FY 2026” as required under the Social Security Act, clarify payment regulations on admission to hospice, and realign attestation requirements for the certification of termination illness, among other things. According to CMS, the proposed rule is estimated to result in $695 million in increased payments to hospices in FY 2026. Comments on the proposed rule are due by June 10, 2025.

The proposed rule has seven major provisions:

1. Section III.A.1. Includes updates to the hospice wage index and “makes the application of the updated wage data budget neutral for all four levels of hospice care.” Payment rates for hospices under Medicare are based on the location where services are provided.  The proposed updates to the hospice wage index are based on the July 21, 2023 the Office of Management and Budget (OMB) Bulletin No. 23-01.  In general, OMB revises metropolitan statistics based on the census.  OMB Bulletin No. 23-01 changed a number of urban counties to rural and some rural counties to urban, among other things.
2. Section III.A.2. Proposes increasing the FY 2026 hospice payment percentage by 2.4 percent.  This percentage is based on the 3.2 percent inpatient hospital market basket increase and the proposed 0.8 percent productivity adjustment as required by law. 
3. Section III.A.3. Notes the proposed FY 2026 hospice payment rates.  There are four payment categories that are based on the location and intensity of the hospice services:

• RHC (routine home care) days 1-60: $230.33 (previously $224.62)
• RHC days 61+: $181.51 (previously $176.92)
• CHC (continuous home care): $1,665.23 (previously $1,618.59)
• IRC (inpatient respite care): $531.60 (previously $518.78)
• GIP (general inpatient care): $1,197.40 (previously $1,170.04)

4. Section III.A.4. Suggests that the hospice cap amount be updated by the hospice payment update percentage of plus 2.4 percent for FY 2026.  
5. Section III.B. Proposes to “clarify that the physician member of the interdisciplinary group is among the types of physicians who can recommend a patient’s admission to hospice care.”  Previously, Medicare allowed only the medical director or the physician designee to recommend that a patient be admitted to hospice.
6. Section III.C. Aims to re-align the attestation requirements for the certification of terminal illness regulations, by including signatures from the physician’s or nurse practitioner’s signature as meeting the attestation requirements.
7. Section III.D. Proposes a technical correction to a typo in the FY 2024 Hospice final rule at § 418.312(j) (previously referenced § 412.306(b)(2) instead of § 418.306(b)(2)), which is a section that provides updates on the HOPE instrument, HQRP measures, and the transition to the Quality Improvement and Evaluation System (QIES).

CMS is seeking public input through requests for information on approaches to streamline the proposed regulations in accordance with the January 31, 2025 Trump Executive Order No. 14192, “Unleashing Prosperity Through Deregulation.”  A copy  of the proposed rule can be found here.

Reporter, Brittni Hamilton, Los Angeles, +1 213-218-4083, bhamilton@kslaw.com.

CMS Issues Proposed FY 2026 PPS Rule for Inpatient Psychiatric Facilities

On April 11, 2025, CMS issued its fiscal year (FY) 2026 prospective payment system (PPS) proposed payment rule for inpatient psychiatric hospitals (IPFs). In addition to updating Medicare payment rates, adjustment factors, and quality measures for IPFs, the proposed rule also includes a Request for Information for “approaches and opportunities” to align with a recent Executive Order prioritizing efforts to lower costs associated with federal compliance. Comments on the proposed rule are due by June 10, 2025.

Proposed Changes to IPF Payment Rates

CMS proposed a 2.4 percent increase to IPF PPS payment rates beginning in FY 2026. This is based on a 3.2 percent IPF market basket increase, adjusted by a 0.8 percent productivity adjustment, mandated by the Social Security Act. CMS stated that the increase is based on 2021 data but noted that it would use more recent data if it were to become available. CMS estimates that IPF PPS payments will increase by $70 million from FY 2025 to FY 2026.

Proposed Updates to IPF PPS Facility-Level Adjustment Factors

For FY 2026, CMS has updated the regression model for IPF PPS payment adjustments so that it reflects costs and claims data for FY 2020 – FY 2022. Based on its analysis, CMS proposed an increase to the facility-level adjustment factors for facility teaching statuses and rural location. Increases in IPF teaching caps for resident full-time equivalents were also proposed.

Proposed Updates to IPF Quality Reporting (IPFQR) Program

1. Change to Quality Measures
   CMS also proposed changes to the quality measures used in the IPFQR Program. The IPFQR Program’s stated goal is to assess and foster improvement in the quality of care provided to patients. All IPFs paid under the IPS PPS must submit specified data on quality measures. If any IPF does not submit this information, it receives a 2.0-point reduction to its annual payment update.
   
   CMS proposed to modify the 30-Day Risk-Standardized All-Cause Emergency Department Visit Following an Inpatient Psychiatric Facility Discharge measure. Under this modification, the length of the reporting period would change from a one-year period based on the calendar year to a two-year period based on fiscal years

2. Removal of Quality Measures
   CMS also proposed the removal of four measures: (i) Facility Commitment to Health Equity, (ii) COVID–19 Vaccination Coverage among Health Care Personnel, (iii) Screening for Social Drivers of Health, and (iv) Screen Positive Rate for Social Drivers of Health. These removals would be reflected beginning with the calendar year 2024 reporting period and the fiscal year 2026 payment determination. 

Request for Information

On January 31, 2025, President Trump issued an Executive Order, EO 14192, declaring the Presidential administration’s policy to “significantly reduce the private expenditures required to comply with Federal regulations to secure America's economic prosperity and national security and the highest possible quality of life for each citizen.” In response, CMS included a Request for Information for “approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries, and other interested parties participating in the Medicare program.”

For a copy of the proposed rule, please click here. For a copy of the CMS Fact Sheet released in connection with the proposed rule, please click here.

Reporter, Catherine Behnke, Chicago, +1 312 706 8047, cbhenke@kslaw.com.

CMS Issues FY 2026 Inpatient Rehabilitation Facility Prospective Payment System and Updates to the IRF Quality Reporting Program

On April 11, 2025, CMS issued a proposed rule that proposes updates to Medicare payment policies and rates for inpatient rehabilitation facilities under the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) and the IRF Quality Reporting Program (QRP) for FY 2026.  Comments on the proposed rule are due by June 10, 2025.

IRF PPS Updates

CMS proposes an IRF market basket update of 2.6% (3.4% market based percentage increase reduced by a 0.8% percentage point productivity adjustment). The proposed rule maintains the policies and methodologies described in the FY 2025 IRF PPS final rule related to labor market area definitions and the wage index methodology for areas with wage data, and the same methodology discussed in the FY 2008 IRF PPS final rule addressing geographic areas in which there are no hospitals. This means that the only rural area without wage index data available for FY 2026 is North Dakota. For urban areas without specific hospital wage index data, CMS will continue to apply average wage indexes of all urban areas within the State to serve as a reasonable proxy for the wage index of the urban Core Based Statistical Areas (CBSAs) as set forth and finalized in FY 2006.

Further, the proposed rule updates the national urban and rural Cost-to-Charge Ratio (CCR) for IRFs as well as the national CCR cap for FY2026.  Cosistent with the past practice of setting the national CCR ceiling at three standard deviations above the mean CCR, CMS is proposing a national CCR ceiling of 1.54 for FY2026.

IRF QRP Updates

With respect to the IRF QRP, the proposed rule proposes to remove two quality measures: (1) the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure, beginning with the FY2026 IRP QRP, and (2) the COVID-19 Vaccine: Percent of Patients/Residents Who are Up to Date measure, beginning with the FY2028 IRF QRP.  CMS is also proposing to remove four Standardized Patient Assessment Data Elements under the Social Determinant of Health (SDOH) category with the FY2028 IRF QRP.

Currently, the COVID-19 Vaccination Coverage among HCP measure which requires IRFs to track and report COVID-19 vaccination coverage among HCP imposes an estimated burden across all 1,166 IRFs of 13,992 hours at a cost of $503,991.84. CMS’s reasoning for the proposed removal is that the cost associated with compliance with this requirement outweighs the benefits of its continued use in the program especially in light of the end of the public health emergency resulting from the pandemic.

Additionally, the estimated burden of complying with the COVID-19 Vaccine: Percent of Patients/Residents Who are Up to Date measure annually across all 1,166 IRFs is 3,111.5 hours at a cost of $218,116.15. CMS reasons that the metric is no longer as critical because of the burden it poses on IRFs where patients typically have a shorter stay compared to other post-acute settings. CMS proposes that beginning with patients discharged on or after October 1, 2025, IRFs would not be required to collect and submit Patient/Resident Covid-19 Vaccine measure data to CMS. 

In line with the CMS’s goal of promoting efficiency and reducing administrative burden, CMS also proposed removing one item for Living Situation (R0310), two items for Food (R0320A and R0320B) and one item for Utilities (R0330) from the SDOH standardized patient assessment data elements.  CMS will also permit IRFs to request an extension to file a request for reconsideration of a noncompliance determination if the IRF was affected by an extraordinary circumstance beyond the control of the IRF.

CMS issued requests for information on four separate considerations, as follows: (1) future measure concepts for the IRF QRP; (2) potential revisions to the IRF-Patient Assessment Instrument; (3) potential revisions to the data submission deadlines for assessment data collected for the IRF QRP; and (4) advancing digital quality measurement in IRFs. Comments must be received by June 10, 2025.

The proposed rule is available here. The fact sheet is available here.

Reporter, Kimberly Rai, New York, +1 212 556 2198, krai@kslaw.com.

OIG Issues Favorable Advisory Opinion Permitting a Community Health Center to Refer Primary Care Services During Provision of Certain Social Services

On April 9, 2025, OIG posted Advisory Opinion No. 25-02, a favorable advisory opinion allowing a community health center operating under Section 330 of the Public Health Service Act (the Requestor) to ask individuals, to whom the Requestor is providing non-medical services, if they need primary health care services, provide them with a list of primary health care providers that includes the Requestor, and schedule an appointment for them to receive those services from the Requestor. 

The Requestor’s Situation

Community health centers that operate under Section 330 of the Public Health Service Act (42 U.S.C. § 254b), like the Requestor, are required to be nonprofit or public entities that provide certain health care services, including primary health care services, and other services to underserved populations, regardless of their ability to pay. Consistent with the Public Health Service Act, the Requestor provides primary health care services and certain non-medical, social, and educational services (e.g., child care, food banks and meals, employment and education counseling, and legal services) to those underserved populations. With formal approval, the Requestor also offers programs that replace locks to address safety concerns for victims of crimes and provide diapers, books, toys, and baby gear for children under age 6. According to the Requestor, individuals that access these programs do not seek health care services from the Requestor, even if they need them, because they do not understand how or do not believe they have the financial means to do so. The Requestor proposed the following Arrangement to address those unmet primary health care needs.

The Arrangement

At the time individuals receive those additional, non-medical services from the Requestor, the Requestor would ask if they have seen a primary care provider within the last year and, if they have not, provide them with a list of providers (that includes the Requestor, but does not promote the Requestor) in alphabetical order. The Requestor would add any willing providers, who request inclusion, to the list. For individuals who elect to receive primary care services from the Requestor, the Requestor would schedule their appointment. For individuals who decline primary care services from the Requestor, the Requestor would continue to provide their additional, non-medical services.

OIG’s Determination

Although the Arrangement would generate—if the requisite intent were present—prohibited renumeration under section 1128B(b) of the Social Security Act (the Federal anti-kickback statute) and prohibited renumeration under section 1128A(5) of the Social Security Act (the Beneficiary Inducements CMP), OIG concluded that it would not impose administrative sanctions on the Requestor in connection with the Arrangement under: sections 1128A(a)(7) or 1128(b)(7) of the Social Security Act, as they relate to the commission of acts described in the Federal anti-kickback statute; and the Beneficiary Inducements CMP or section 1128(b)(7) of the Social Security Act, as it relates to the commission of acts described in the Beneficiary Inducements CMP.

OIG’s Reasoning

 The Arrangement includes a variety of safeguards that reduce the risk of steering patients to the Requestor (i.e., objective criteria to identify individual’s need for primary care services; list of primary care providers will be alphabetical and will not promote the Requestor; list will include options beyond the Requestor and the Requestor will add willing providers to the list; refusal to obtain the Requestor’s primary care services will not impact the individuals’ receipt of additional, non-medical services). The Arrangement may increase access to health care services, which aligns with the Requestor’s designation as a community health center pursuant to Section 330 of the Public Health Service Act.

The full text of OIG Advisory Opinion No. 25-02 is available here.

Reporter, Jenna M. Anderson, Los Angeles, +1 213 443 4328, janderson@kslaw.com.