On April 9, 2025, the Centers for Medicare & Medicaid Services (CMS) released its final rule for Medicare psychiatric facility payments 2025 under the Medicare Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS) for fiscal year (FY) 2025. This annual rule sets payment rates and quality reporting requirements for freestanding psychiatric hospitals and psychiatric units in general hospitals that treat Medicare beneficiaries.
The finalized rule outlines a net 2.5% increase in payments, key updates to patient- and facility-level adjustment methodologies, a dramatic increase in reimbursement for electroconvulsive therapy (ECT), and important changes to the Inpatient Psychiatric Facilities Quality Reporting Program (IPFQR). The rule also signals CMS’s growing interest in expanding standardized data collection through a new request for information (RFI).
Here’s a comprehensive look at what’s changing, what it means, and how providers should prepare in relation to Medicare psychiatric facility payments 2025.
1. Payment Rate Changes: A Modest Net Increase, But With Nuance
CMS is finalizing a 2.5% net increase to the Medicare psychiatric facility payments 2025 payment rates. While the 2024 rates had a 2.8% increase, CMS has balanced this by adjusting downward for outlier payments, leading to a net 0.3% reduction in what would otherwise have been paid based on prior projections. Still, CMS estimates the finalized rule will result in a $65 million net increase in Medicare spending on inpatient psychiatric services across the country.
The payment methodology continues to rely on patient-level and facility-level adjustment factors, and for FY 2025, CMS has updated the patient-level data based on calendar years 2019 through 2021. These adjustments reflect changes in patient acuity, demographic trends, and treatment patterns—especially critical as providers continue to treat mental health conditions in a post-pandemic landscape.
CMS also reaffirmed its use of wage index-based adjustments linked to Core-Based Statistical Area (CBSA) Labor Market Areas. This change aims to more accurately reflect local labor costs in Medicare psychiatric facility payments 2025 and ensure equitable reimbursement for facilities operating in high-cost regions.
2. A Major Increase for Electroconvulsive Therapy (ECT)
One of the most notable changes in the FY 2025 final rule is the 72% increase in Medicare reimbursement for electroconvulsive therapy (ECT)—from $385.58 per treatment in FY 2024 to $661.52 in FY 2025.
This dramatic increase signals CMS’s recognition of ECT’s value and efficacy, particularly for patients with treatment-resistant depression, severe mood disorders, and suicidality. ECT is widely regarded by mental health professionals as a highly effective, often life-saving treatment—yet until now, reimbursement levels have not fully reflected its clinical importance.
This shift may encourage more facilities to invest in ECT infrastructure and training, potentially improving access for patients who need this critical intervention, and could greatly impact Medicare psychiatric facility payments 2025 for facilities offering this service.
3. Updates to the IPF Quality Reporting Program
CMS is also making targeted updates to the Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program, which ties facility payments to the collection and reporting of specific quality measures.
For FY 2025, CMS will now require facilities to report 30-day, all-cause emergency department (ED) visits following discharge from an inpatient psychiatric facility. This measure applies to adult patients only and is risk-adjusted to ensure facilities treating more complex populations aren’t unfairly penalized.
The new ED visit measure complements existing requirements for facilities to track 30-day hospital readmissions post-discharge and reflects CMS’s ongoing focus on care continuity and post-acute care outcomes.
However, in a win for providers, CMS has decided not to move forward with a previously proposed requirement for quarterly patient-level data reporting. This decision came after extensive stakeholder feedback citing administrative burden, data privacy concerns, and resource constraints.
This is an important factor in Medicare psychiatric facility payments 2025, as these reporting requirements could influence reimbursement rates for facilities based on their performance.
4. A Look Toward the Future: Standardized Assessments and Data Collection
Alongside the final rule, CMS also issued a Request for Information (RFI) seeking input from providers and industry stakeholders about the potential development of standardized patient assessments and ancillary data collection efforts.
This signals CMS’s interest in moving toward more consistent, interoperable data collection practices—an approach aligned with broader federal efforts to modernize behavioral health reporting and accountability. Feedback collected through this RFI could inform future rulemaking and possibly introduce new clinical quality measures or patient assessment tools in future years, further influencing Medicare psychiatric facility payments 2025.
Providers are encouraged to engage with the RFI process to help shape the evolution of data standards in psychiatric care and ensure that future requirements are both clinically relevant and operationally feasible.
What It All Means for Providers
The final 2025 IPF PPS rule is part of CMS’s ongoing effort to align psychiatric facility reimbursement with patient needs, cost trends, and quality care outcomes. Here are the key takeaways for providers:
- Payment rates are rising modestly, but facilities should prepare for small net reductions in certain areas due to outlier adjustments, impacting Medicare psychiatric facility payments 2025.
- Reimbursement for ECT has significantly increased, which could change how facilities offer and prioritize this treatment.
- Quality reporting is expanding, particularly around emergency department utilization, underscoring the need for stronger discharge planning and community coordination, impacting Medicare psychiatric facility payments 2025.
- Data collection may be evolving, and facilities should watch for future proposals around standardized assessments, which could alter Medicare psychiatric facility payments 2025 in the long run.
Bottom Line
As mental health continues to take center stage in national health policy conversations, CMS’s final 2025 IPF PPS rule reflects a broader push for data-informed, value-based psychiatric care. Facilities should begin preparing now—by reviewing their quality reporting infrastructure, reassessing ECT program strategies, and contributing feedback to CMS’s ongoing data collection RFI—to stay ahead of future requirements and position themselves for success in the evolving landscape of Medicare psychiatric facility payments 2025.
