Hospitals Payers,

Why Hospitals Are Condemning CMS’ Proposed Inpatient Payment Rule

CMS released a proposed rule this week that would boost hospitals’ inpatient payment rates by 2.6%. Hospitals groups have swiftly denounced this plan, arguing that this payment update is insufficient and will jeopardize hospitals’ financial stability.

The Centers for Medicare & Medicaid Services released a proposed rule this week that would boost hospitals’ inpatient payment rates by 2.6%. Hospitals groups have swiftly voiced their opposition to this plan, arguing that this payment update will jeopardize hospitals’ financial stability.

Under the proposed rule, hospitals that participate in CMS’ Hospital Inpatient Quality Reporting (IQR) program and are meaningful EHR users will receive a 2.6% increase to their inpatient payments for the fiscal year 2025, which starts in October.

This rate adjustment is based on a projected hospital market basket update of 3% for the fiscal year 2025, which is reduced by a 0.4 percentage point productivity adjustment, according to CMS. The agency predicted that the change will increase total hospital payments by $3.2 billion. 

For long-term care hospitals, CMS is proposing a 2.8% payment boost. This represents an payment increase of $41 million over the current fiscal year, CMS said.

Hospital groups don’t believe these proposals are sufficient.

CMS’ proposed inpatient payment update is “woefully inadequate,” especially given the context of ongoing inflation and rising costs for hospitals, said Ashley Thompson, senior vice president of public policy analysis and development at the American Hospital Association, in a statement.

“Many hospitals across the country, especially those in rural and underserved communities, continue to operate under unsustainable negative or break-even margins. We urge CMS to reconsider their policy in the final rule so that all hospitals can provide high-quality, around the clock, essential care to their communities,” Thompson stated.

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Soumi Saha, senior vice president of government affairs at Premier, expressed similar sentiments to Thompson. In a statement, she said her organization is “profoundly disappointed” that CMS is “once again proposing an update for hospital inpatient services that is dismally deficient given the current fiscal challenges hospitals continue to face.” 

The proposed 2.6% payment increase will not be able to stand up to the “stark realities” of higher costs, widespread labor shortages and an aging patient population, Saha added. If the proposed rule becomes finalized, the U.S. healthcare system’s sustainability will be jeopardized, according to her statement.

“Payment policies should empower hospitals to deliver exceptional, patient-centric care, but the proposed update falls short on this objective. CMS can course correct by implementing more robust methodologies and incorporating new data sources to accurately gauge hospitals’ true costs, including comprehensive labor expenses,” Saha stated.

CMS is accepting comments on the proposed rule through June 10.

Photo: claudenakagawa, Getty Images