Dive Brief:
- The CMS has finalized a 3.1% payment rate increase for hospitals for 2024, an increase from the 2.8% bump regulators proposed earlier this year. The final rate increase should boost hospital payments by $2.2 billion, according to the agency.
- The final inpatient payment rule released Tuesday dictates how Medicare reimburses acute care hospitals for inpatient stays. It reflects a hospital market basket update of 3.3%, reduced by a 0.2% productivity adjustment required by law. Under the rule, for-profit hospitals would see an average rate increase of 3.8%, according to a TD Cowen analysis.
- The CMS expects Medicare disproportionate share hospital payments and uncompensated care payments will drop next year by roughly $957 million as a result of the rule.
Dive Insight:
Hospital margins are starting to stabilize after 2022, which research suggests was the most financially challenging year for hospitals during the pandemic.
Hospitals had been using the losses as a rallying cry for increased government support to navigate the tricky operating environment. But research, and recent outperforming earnings reports from hospital operators, paint a different picture.
HCA, Tenet and UHS all increased their 2023 earnings expectations following second quarter results that showed a rebound in demand for acute care.
Hospital groups decried the inpatient rate adjustment, saying it ignores inflationary pressures and could threaten patient access to care.
Hospital purchasing group Premier said it was “deeply disappointed” in the “inadequate” payment update, citing rising healthcare costs, labor shortages and an aging population requiring a higher level of service.
“The chasm between a [3.1%] payment update and reality, coupled with uncomfortably high inflation, is unsustainable and threatens the viability of the American healthcare system,” said Soumi Saha, Premier SVP of government affairs, in a statement. “CMS can and must do better to adopt new or supplemental data sources to calculate the real costs hospitals incur moving forward, such as more accurately reflecting the cost of labor inclusive of contract labor.”
In a statement, Federation of American Hospitals CEO Chip Kahn said the increase “falls far short.”
The American Hospital Association took particular issue with the disproportionate share hospital cut, which is based on CMS actuaries’ estimates that the uninsured rate will drop from 9.2% this year to 8.3% next year.
“This is an inexplicable assumption,” especially in light of ongoing Medicaid redeterminations that could leave millions without coverage, said Ashley Thompson, SVP of public policy at the AHA, in a statement.
In the final rule, the CMS also finalized a policy that will result in higher payments to hospitals treating people experiencing homelessness, by increasing the severity of codes affiliated with those patients.
Regulators also finalized a health equity adjustment in the Hospital Value-Based Purchasing Program, with the goal of rewarding hospitals that serve higher proportions of dual-eligible patients. Under the new methodology, hospitals can earn up to 10 bonus points depending on the makeup of their population and their performance on quality measures.
The final rule also allows Medicare to pay rural hospitals for graduate medical training after they become rural emergency hospitals, a new Medicare provider type.
