'Simply unsustainable': Hospital groups react to proposed inpatient payment rule

CMS released its annual Inpatient Prospective Payment System proposed rule April 10. Here is how three hospital groups responded to the proposal, via statements:

America's Essential Hospitals: We appreciate the administration's ongoing interest in advancing health equity, as seen in today's fiscal year 2024 Inpatient Prospective Payment System (IPPS) proposed rule and its desire to define safety net hospitals.

Establishing a safety net hospital definition is a long-overdue initiative critical to stabilizing and supporting essential hospitals and their vital role in our healthcare system. We look forward to working with [CMS] to ensure it adopts an accurate and comprehensive definition and steers clear of definitions that fail to account for the diversity of the low-income Medicare, Medicaid and uninsured patients who rely on the nation's safety net.

\We are concerned other provisions in the proposed rule would undermine the safety net, including those to decrease Medicare disproportionate share hospital payments by more than $200 million and to update the IPPS base payment rate by a lackluster 2.8 percent. Ongoing pressures, such as inflation and high labor and supply costs, demand a stronger investment by Medicare, a critical source of support for essential hospitals and the communities they serve.

American Hospital Association: The AHA is deeply concerned with CMS' woefully inadequate proposed inpatient hospital payment update of 2.8 percent given the near decades-high inflation and increased costs for labor, equipment, drugs and supplies. Moreover, long-term care hospitals would see a staggering negative 2.5 percent payment update under this proposal. These insufficient adjustments are simply unsustainable.

[The year] 2022 was the most financially challenging year for hospitals during the pandemic, with half of hospitals finishing the year with a negative operating margin. So far, this worrying trend has continued in 2023, most recently with reports of record high hospital defaults. The AHA has repeatedly requested that CMS and the administration remedy shortcomings in its previous market basket forecasts for all hospitals. For example, CMS' inpatient payment update was a full three percentage points less than what actual market basket inflation was in 2022, and the long-term care update was 2.9 percentage points less.

Layering these inadequate inflationary adjustments on top of Medicare’s existing underpayments to hospitals does not reflect the reality of the world hospitals are providing care in. Without more substantial updates in the final rule, hospitals' ability to continue caring for patients and providing essential services for their communities will be threatened.

Federation of American Hospitals: As the cost of groceries and gas continue to rise, so does the cost of caring for patients. Just as the ravages of record setting inflation are affecting every American family – community hospitals are being hit too. Hospitals aren’t immune to inflation. They are contending with rising labor costs combined with the growing challenges of a deepening caregiver shortage, drug price increases and supply chain breakdowns, among other inflation challenges. All reasons why hospitals need more support from Medicare.

This IPPS proposed inflationary payment update is disappointing. It fails to recognize today's headwinds that will strain the health safety net in 2024, which will further threaten patients' access to care as hospitals are forced to reduce services or in some cases, especially rural areas, close completely.

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