2025 Medicare IPPS and OPPS trend summary
Version 2025.3
CMS Final Rule and Proposed Rule updates
In August 2024, the Centers for Medicare and Medicaid Services (CMS) released the fiscal year (FY) 2025 Inpatient Prospective Payment System (IPPS) Final Rule and the 2025 Outpatient Prospective Payment System (OPPS) Proposed Rule. This paper outlines the key pricing factors released by CMS in the 2025 IPPS Final Rule, IPPS Interim Final Action with Comment Period (IFC), and OPPS Proposed Rule.
Included in the FY2025 IPPS Final Rule and IPPS IFC:
- Final Wage Index
- Final National Adjusted Operating Standardized Amounts
- Final Capital Standard Federal Payment Rate
- Final Uncompensated Care Payment (UCP)
- Final Diagnosis-Related Group (DRG) Recalibration Factor
Not included in the August 2024 release of the FY2025 IPPS Final Rule or IPPS IFC:
- Disproportionate Share Hospital (DSH)
- Low-Volume Adjustment
- Sole Community Hospital (SCH)/Medicare-Dependent Hospital (MDH) Hospital-Specific Report (HSR) Rate
- SCH/MDH Adjustment Factor
- Hospital-Acquired Condition (HAC) Adjustment
Additionally, updates to the Indirect Medical Education (IME) are not included. However, we do not include Operating IME in the unit price trend estimates presented here, because they are intended for Medicare Advantage plans.
Included in the OPPS Proposed Rule:
- Proposed calendar year (CY) 2025 Nationwide Conversion Factor
The final 2025 inpatient wage indices are assumed to be used in the OPPS 2025 unit-cost trend estimates.
Over the coming months, CMS will release the provider-specific pricing factors associated with the FY2025 IPPS Final Rule and the OPPS Final Rule (expected in October 2024).
IPPS and OPPS unit cost trend estimates 2023 to 2025
Estimated national IPPS and OPPS unit cost trends from 2023 to 2025 are 6.2% for IPPS and 6.1% for OPPS. See the table in Figure 1 for details.
Figure 1: Nationwide unit cost trends, 2023-2025
| 2023 to 2024 | 2024 to 2025 | 2023 to 2025 | |
|---|---|---|---|
| IPPS | 3.3% | 2.7% | 6.2% |
| OPPS | 3.3% | 2.8% | 6.1% |
Notable changes impacting Medicare reimbursement
Updated labor market areas
For 2025, CMS updated labor market areas using 2020 census data. It includes core-based statistical area (CBSA) delineations (changed names, split apart or merged with other areas), counties converted between rural and urban, etc. This significantly changed the wage index for some facilities.
Outpatient radiopharmaceuticals
For 2025, CMS proposed to refine its existing packaging policy by paying separately for any diagnostic radiopharmaceutical with a per day cost greater than $6301 and removing these costs when developing the payment amounts for nuclear medicine tests. For facilities performing significant nuclear medicine, this could raise or lower the payment levels depending on each facility’s usage of radiopharmaceuticals.
Major trend drivers
The major drivers of our IPPS and OPPS trend estimates are the changes to the national payment amounts and the wage index. The hospital wage index underlying the IPPS and OPPS rates is finalized by CMS as part of the IPPS IFC. Previously, in the FY2024 IPPS Final Rule, CMS made changes to the rural wage index calculation methodology as discussed below.
In the final rule, CMS stated: “CMS is finalizing the proposal to interpret section 1886(d)(8)(E) of the Social Security Act as treating rural reclassified hospitals the same as geographically rural hospitals for purposes of calculating the wage index. Specifically, we will include hospitals with §412.103 reclassification along with geographically rural hospitals in rural wage index calculations beginning with FY 2024. Under Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105–33), the area wage index applicable for any hospital that is located in an urban area of a state may not be less than the area wage index applicable to hospitals located in rural areas in that state. This provision is referred to as the rural floor.”2
Including hospitals that are reclassified as rural, along with geographically rural hospitals, being in the “rural floor” affects IPPS and OPPS reimbursement for all hospitals, due to the budget neutrality requirements. However, eliminating the “rural floor” has significant impacts to the low-wage areas.
The final CY 2025 OPPS conversion factor is projected by adjusting the proposed conversion factor by changes to the market basket trends and assumes wage index reclassification factor impacts from the FY2025 IPPS IFC.
The table in Figure 2 shows our estimate of the top 10 and bottom five states or territories based on 2023 to 2025 trends. The table in Figure 3 shows the top 15 and bottom five CBSAs.
Figure 2: Top 10 and bottom 5 states/territories based on 2023-2025 unit cost trend
| State/Territory Name |
IPPS | OPPS | ||||
|---|---|---|---|---|---|---|
| 2023 to 2024 | 2024 to 2025 | 2023 to 2025 | 2023 to 2024 | 2024 to 2025 | 2023 to 2025 | |
| Top 10 highest trend states/territories | ||||||
| District of Columbia | 4.1% | 8.7% | 13.2% | 3.1% | 7.9% | 11.2% |
| Florida | 5.9% | 4.9% | 11.1% | 5.4% | 4.9% | 10.6% |
| Indiana | 2.9% | 8.2% | 11.4% | 1.7% | 8.0% | 9.9% |
| Oklahoma | 3.8% | 4.8% | 8.8% | 2.8% | 4.9% | 7.9% |
| Arizona | 3.6% | 4.2% | 8.0% | 3.5% | 3.9% | 7.5% |
| Illinois | 3.0% | 4.5% | 7.6% | 3.2% | 4.4% | 7.7% |
| New York | 4.1% | 1.9% | 6.1% | 6.3% | 2.4% | 8.8% |
| Nevada | 5.6% | 0.5% | 6.2% | 8.3% | 0.1% | 8.4% |
| Vermont | 6.3% | 3.0% | 9.4% | 2.7% | 1.6% | 4.3% |
| Georgia | 3.7% | 2.9% | 6.7% | 4.1% | 2.3% | 6.5% |
| Bottom 5 lowest trend states/territories | ||||||
| Puerto Rico | 3.0% | 0.1% | 3.1% | 2.5% | 0.6% | 3.1% |
| Maine | 0.5% | 1.2% | 1.8% | 1.7% | 2.2% | 4.0% |
| Utah | 0.2% | 2.3% | 2.5% | 0.5% | 2.5% | 3.0% |
| Wisconsin | 0.7% | 1.5% | 2.2% | 1.6% | 1.5% | 3.0% |
| Alaska | 1.8% | 1.3% | 3.1% | 1.5% | 0.0% | 1.5% |
Figure 3: Top 15 and bottom 5 CBSAs based on 2023-2025 unit cost trend
| CBSA Name | IPPS | OPPS | ||||
|---|---|---|---|---|---|---|
| 2023 to 2024 | 2024 to 2025 | 2023 to 2025 | 2023 to 2024 | 2024 to 2025 | 2023 to 2025 | |
| Top 15 highest trend CBSAs | ||||||
| Albany-Schenectady-Troy, NY | 21.6% | 6.1% | 29.0% | 18.7% | 5.6% | 25.3% |
| Glens Falls, NY | 19.4% | 5.7% | 26.2% | 17.9% | 5.6% | 24.5% |
| Binghamton, NY | 18.8% | 6.1% | 26.0% | 17.6% | 5.6% | 24.1% |
| Utica-Rome, NY | 17.6% | 6.2% | 24.8% | 16.0% | 5.6% | 22.4% |
| Elmira, NY | 18.5% | 6.5% | 26.2% | 14.4% | 5.6% | 20.8% |
| Rochester, NY | 15.6% | 6.1% | 22.7% | 13.6% | 5.6% | 19.9% |
| Syracuse, NY | 14.6% | 5.9% | 21.4% | 12.9% | 5.6% | 19.2% |
| Tuscaloosa, AL | 11.2% | 12.7% | 25.3% | 4.2% | 9.7% | 14.3% |
| Erie, PA | 18.7% | 0.2% | 18.9% | 18.6% | 0.3% | 18.9% |
| Fort Smith, AR-OK | 14.4% | 10.9% | 26.9% | 3.7% | 5.5% | 9.4% |
| Non-MSA Area, NY | 8.3% | 5.1% | 13.9% | 15.8% | 5.6% | 22.4% |
| Buffalo-Cheektowaga, NY | 11.5% | 6.0% | 18.2% | 10.6% | 5.6% | 16.8% |
| Springfield, IL | 10.0% | 7.1% | 17.8% | 8.4% | 6.2% | 15.2% |
| Louisville/Jefferson County, KY-IN | 6.5% | 10.4% | 17.6% | 5.1% | 8.9% | 14.5% |
| Davenport-Moline-Rock Island, IA-IL | 9.4% | 6.9% | 17.0% | 7.7% | 6.2% | 14.4% |
| Bottom 5 lowest trend CBSAs | ||||||
| Santa Rosa-Petaluma, CA | -0.8% | -0.4% | -1.2% | 1.2% | -0.2% | 1.0% |
| San Rafael, CA | -0.2% | -1.1% | -1.4% | 1.7% | -0.7% | 1.0% |
| Madison, WI | -0.9% | -0.3% | -1.2% | 0.3% | 0.0% | 0.3% |
| Guayama, PR | -3.5% | -1.1% | -4.6% | 2.2% | 0.6% | 2.8% |
| Santa Cruz-Watsonville, CA | -1.9% | -0.5% | -2.4% | -0.4% | -0.7% | -1.1% |
*Sorted by the 2023-2025 average unit cost trend, combining IP and OP, in descending order
CMS releases Fact Sheets
For additional information about the FY2025 IPPS Final Rule and 2025 OPPS Proposed Rule, please see:
- IPPS: https://www.cms.gov/newsroom/fact-sheets/fy-2025-hospital-inpatient-prospective-payment-system-ipps-and-long-term-care-hospital-prospective-0.
- OPPS: https://www.cms.gov/newsroom/fact-sheets/cy-2025-medicare-hospital-outpatient-prospective-payment-system-and-ambulatory-surgical-center.
Trend estimate considerations
- Unit price trends only: The calculated trend estimates presented here are unit price trend estimates only. Intensity/mix trend and utilization trend are not included.
- Sequestration: The trends reflect allowed payment rate trends before the impact of sequestration. The impact of sequestration should be accounted for separately.
- IPPS trends: Only hospitals paid under Medicare's Acute IPPS fee schedule are included. Acute IPPS is used for about 87% of Medicare fee-for-service (FFS) inpatient payments, excluding skilled nursing facilities (SNFs) and Maryland waiver hospitals. Prospective payment system (PPS) facilities paid under the following are excluded from the trend estimates: Inpatient Psychiatric Facility PPS, Inpatient Rehabilitation Facility PPS, Long-Term Care Hospital PPS, Hospice PPS, and Skilled Nursing Facility PPS fee schedules. Additionally, hospitals paid outside of a PPS are excluded from the trend estimates, including critical access hospitals (interim payments are on a per diem basis), cancer hospitals (paid based on historical costs), children's hospitals (paid based on cost), and Maryland waiver hospitals (paid based on a discount from approved charges).
- OPPS trends: Trends are for outpatient facility charges paid using Medicare's hospital OPPS fee schedule. Trends do not reflect physical therapy—paid under resource-based relative value scale (RBRVS)—lab, durable medical equipment (DME), and ambulatory surgical center (ASC) services. Additionally, the trends exclude providers paid outside of OPPS: critical access hospitals (paid based on cost), cancer hospitals (paid based on cost), children's hospitals (paid based on cost), and Maryland waiver hospitals (paid based on a discount from approved charges, excluding ambulance and lab, which are paid using the Medicare fee schedules).
- Prospective trends: All amounts reflect prospective amounts based on information available at the start of 2023, 2024, and 2025. Any settlements with CMS are not reflected. Additionally, midyear provider payment rate changes are not reflected in the trend estimates, in order to create a consistent basis for the numerator (2025) and denominator (2023).
1 Separately payable drugs are identified based on average per day cost. See: CMS (July 22, 2024). CY2025 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule – 2024-15087. Retrieved October 30, 2024, from https://www.federalregister.gov/documents/2024/07/22/2024-15087/medicare-and-medicaid-programs-hospital-outpatient-prospective-payment-and-ambulatory-surgical.
2 CMS (August 1, 2023). FY2024 Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS) Final Rule – CMS-1785-F and CMS-1788-F. Fact Sheet. Retrieved October 30, 2024, from https://www.cms.gov/newsroom/fact-sheets/fy-2024-hospital-inpatient-prospective-payment-system-ipps-and-long-term-care-hospital-prospective-0.