CMS' inpatient rule adds 'insult to injury,' say hospital groups

CMS' Inpatient Prospective Payment System final rule will raise inpatient hospital payments by 2.9% in fiscal year 2025, but national hospital groups argue that the update does not do enough to cover the costs of inflation and the rising cost of care while also imposing a mandatory value-based model on hundreds of hospitals across the country. 

Here are three leaders' reactions to the final rule:

Chip Kahn, president and CEO of the Federation of American Hospitals: We have consistently raised concerns that CMS hospital payment updates have failed to reflect inflation and the costs of hospital care that remain stubbornly high. Frankly, these inadequate payment updates and CMS' real Medicare DSH cuts for the most vulnerable leave hospitals struggling to meet patient needs.

To add insult to injury, [the] final rule makes this problem worse with an unnecessary Center for Medicare and Medicaid Innovation TEAM demonstration that would impose a mandatory payment model on hundreds of hospitals across the country. This demonstrates excessive burden on hospitals will reduce seniors’ access to elective services and force hospitals serving the country's most vulnerable patients to take on additional financial risk.

Molly Smith, group vice president for public policy of the American Hospital Association: CMS' payment updates for hospitals will exacerbate the already unsustainable negative or breakeven margins many hospitals are already operating under as they care for their patients. The AHA is deeply concerned about the impact these inadequate payments will have on patient access to care, especially in rural and underserved communities.

We are troubled that the final long-term care hospital outlier threshold is nearly 30% higher than it is currently. Since FY 2021, this figure has increased by more than 180%, which forces these hospitals to absorb hundreds of thousands of dollars in additional losses when caring for the sickest patients. This increase will create serious access issues for patients and put additional burden back on acute-care hospitals and other providers that do not specialize in caring for this unique patient population.

In addition, while the AHA has long supported widespread adoption of meaningful value-based and alternative payment models to deliver high quality care at lower costs, the rule's mandatory bundled payment model for five different surgical episodes will not advance these objectives. Not only is the model extremely similar to other bundled payment approaches that have failed to meet the statutory criteria for expansion as they have not reduced program costs or generated net savings, it puts at particular risk many hospitals that are not of an adequate size or in a position to support the investments necessary to succeed. 

Soumi Saha, senior vice president of government affairs for Premier: 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.

Hospitals need the ability to focus on delivering exceptional, patient-centric care, however the payment update only forces hospitals to stretch further to cover basic patient needs. CMS must take advantage of the wealth of data on the labor, operational, and financial pressures facing hospitals to calculate payment rates that accurately reflect the true cost of providing care, enabling hospitals to focus on their core mission — improving the health of their communities and saving lives.

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