Psych hospitals get Medicare rate bump: Business as usual
Published Date: 4/30/2025
Proposed Rule
Summary
Starting October 1, 2025, Medicare is updating how it pays inpatient psychiatric hospitals and units, including changes to rates, wage adjustments, and special payments for teaching and rural facilities. These updates affect hospitals that care for patients with mental health needs and aim to improve payment fairness and quality reporting. Plus, Medicare is tweaking quality rules and asking for ideas to make the program even better!
Analyzed Economic Effects
5 provisions identified: 1 benefits, 0 costs, 4 mixed.
IPF Prospective Payment Rate Update
Starting October 1, 2025 and through September 30, 2026, Medicare proposes to update the prospective payment rates for Inpatient Psychiatric Facilities (IPFs). If you run or manage an IPF, this rule would change how much Medicare pays for inpatient psychiatric hospital services during that fiscal year.
Outlier Threshold Adjustment for IPFs
For discharges between October 1, 2025 and September 30, 2026, Medicare proposes to update the outlier threshold used for payments to Inpatient Psychiatric Facilities. This would change when an IPF qualifies for additional outlier payments for unusually costly cases during that fiscal year.
IPF Wage Index Update
Medicare proposes updates to the wage index for Inpatient Psychiatric Facilities for discharges occurring October 1, 2025 through September 30, 2026. If you operate an IPF, the wage index change would alter geographic adjustments to Medicare payments that reflect local labor cost differences.
Teaching & Rural IPF Payment Adjustments
The proposal would revise payment adjustment factors for IPFs with teaching status and for IPFs located in rural areas for discharges from October 1, 2025 through September 30, 2026. If your facility is a teaching hospital or located in a rural area, these changes would alter the adjustment applied to your Medicare payments during that fiscal year.
IPF Quality Reporting Changes & Exceptions
For the FY 2026 period (October 1, 2025 through September 30, 2026), Medicare proposes changes to measures used in the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program, proposes to codify the Extraordinary Circumstances Exception policy, and requests information to get feedback on future IPFQR changes. If you report IPF quality data, these changes could affect which measures you must report and how exceptions are handled.
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