As previously reported for the proposed ruling, it was confirmed in the 2025 Inpatient Prospective Payment System (IPPS) Final Rule that the Centers for Medicare & Medicaid Services (CMS) is changing the severity level designation for the social determinants of health (SDoH) diagnosis codes denoting inadequate housing and housing instability, from non-complications or comorbidities (non-CCs) to CCs for the 2025 fiscal year (FY).
Consistent with the annual updates to account for changes in resource consumption, treatment patterns, and the clinical characteristics of patients, CMS will now reimburse for inadequate housing and housing instability as indicators of increased resource utilization in the acute inpatient hospital setting.
Inadequate housing is defined as an occupied housing unit that has moderate or severe physical problems, such as plumbing, heating, electricity, or upkeep issues. CMS describes concerns with patients living in inadequate housing by noting that they may be exposed to health and safety risks that impact healthcare services, such as vermin, mold, water leaks, and inadequate heating or cooling systems (see page 250).
The relevant codes include the following:
Please see my prior article on the rationale for this decision. I will also mention that the final rule does express notable interest in food insecurity, Z59.41, as a potential conversion to a CC; however, there was not enough data provided on this Z code to justify the conversion.
Instead of repeating that information, I would like to focus on some of the comments that were released in the final rule.
Generally, the public comments were widely supportive for the proposal to change the severity level designation for several ICD-10-CM diagnosis codes related to inadequate housing and housing instability from non-CCs to CCs for FY 2025. This change was seen as crucial for increasing healthcare access for underserved communities and recognizing the interconnectedness of health and social needs. CMS expects that the movement of these codes to CCs will improve data quality by encouraging providers to ask more detailed questions about patients’ housing status.
Despite the support, there were some continued issues raised regarding operational concerns, particularly the current limitation of only 25 diagnoses being captured on electronic claim forms and 19 on paper bills, which I believe was also mentioned in the FY 2024 Final Rule.
The known concern is that documenting SDoH Z codes could lead to overcrowding of other necessary diagnosis codes, potentially impacting payment and quality measures. Suggestions included expanding the number of diagnosis codes that can be reported or creating a separate reporting method for SDoH Z codes. CMS reminded us all again that these comments must be submitted to the National Uniform Billing Committee (NUBC), which maintains the Uniform Billing (UB) 04 data set and form.
Finally, some commenters expressed concern over CMS’s focus on SDoH Z codes, urging a comprehensive analysis of all diagnosis codes in the ICD-10-CM classification to ensure that MS-DRG payments align with the costs of patient care. They encouraged examining other SDoH Z codes related to food insecurity, extreme poverty, and other social factors to determine hospital resource utilization. Concerns were also raised about the challenges in documenting SDoH, including the lack of standard definitions, the need for training, and potential underreporting due to the sensitivity of the information.
CMS has confirmed that if SDoH Z codes are consistently reported on inpatient claims, the impact on resource use data may more adequately reflect what additional resources were expended to address these SDoH circumstances, in terms of requiring clinical evaluation, extended length of hospital stay, increased nursing care or monitoring (or both), and comprehensive discharge planning. CMS went on to say that they will re-examine these severity designations in future rulemaking. Moving forward, continuous dialogue and adjustments will be essential to address the operational challenges and further enhancements needed to impact the burden of resources related to social circumstances in the acute-care setting.
The Centers for Medicare & Medicaid Services (CMS) continues to expand its focus on hospital readmissions in the FY 2027 IPPS (Inpatient Prospective Payment System)
There is a certain not-so-hidden gem ICD-10-PCS: the body-part key. PCS coding can be challenging, so it is vital to take advantage of all the
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