Why Hospitals Are Decrying CMS’ New Inpatient Payment Rule

CMS finalized a rule this week that will boost hospitals’ inpatient payment rates by 2.9%. Hospitals groups are unhappy with this payment update, arguing that it is insufficient and will exacerbate hospitals’ financial challenges.

By Katie Adams on August 02, 2024

On Thursday, the Centers for Medicare & Medicaid Services (CMS) issued its final rule for next year’s Medicare inpatient payment rate.

Under the new rule, hospitals that participate in CMS’ Hospital Inpatient Quality Reporting (IQR) program and are meaningful EHR users will receive a 2.9% increase to their inpatient payments for the fiscal year 2025, which starts in October. The new rate is slightly higher than the 2.6% hike CMS had initially proposed in April, but industry groups are still unhappy with the rate, arguing that it is an insufficient increase that will jeopardize hospitals’ financial stability.

CMS’ rule also finalizes a 3.4% increase to the market basket, a metric used to account for the increasing price of hospitals’ goods and services, reduced by a 0.5% productivity adjustment.

The agency predicted that the change will increase total hospital payments by $2.9 billion. 

For long-term care hospitals, CMS instated a 3% payment boost. This represents an payment increase of $45 million over the current fiscal year, CMS said.

Hospital groups don’t believe these payment increases are high enough.

In a statement, American Hospital Association Group Vice President for Public Policy Molly Smith said that the payment updates will exacerbate hospitals’ “already unsustainable negative or break-even margins.” She also noted that the AHA is “deeply concerned” about the impact these payment rates will have when it comes to patient’s access to care, particularly in rural and underserved communities.

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Soumi Saha, senior vice president of government affairs at Premier, issued a statement decrying the rule as well.

“The continued insufficiency of Medicare payments to hospitals year over year is a threat to the sustainability of American healthcare. A mere 2.9% increase is alarmingly below the true cost of providing care and does not address the stark realities of inflation and operational costs, persistent labor shortages and an aging patient population that will require significantly greater care than generations prior. If we continue to starve the healthcare system, we will only see continued closures, clinician burnout and extended wait times for patient care,” Saha wrote in her statement.

She also encouraged CMS to take a deeper look into “the wealth of data” available on hospitals’ labor, operational and financial pressures in order to calculate more accurate payment rates.

Photo: claudenakagawa, Getty Images