CMS proposes 2.8% hospital payment bump for 2024; lobbies decry rise as ‘woefully inadequate’

Rebecca Pifer | April 11, 2023

Dive Brief:
The CMS is proposing a 2.8% pay increase for hospitals in 2024, which would result in $3.3 billion in additional funding that year. Hospitals say it’s not enough.

The Biden administration released its annual Medicare payment rule for inpatient hospitals and long-term care facilities, which also includes a 2.9% bump for long-term care hospitals, on Monday.

Hospital lobbies including the American Hospital Association and Federation of American Hospitals slammed the rule as insufficient to help hospitals address inflation and rising labor costs, though research signals hospitals are more financially stable than such groups suggest.

Hospital margins are starting to stabilize after 2022, which was the most financially challenging year for hospitals during the pandemic. Half of hospitals finished the year with a negative operating margin due to inflation and higher costs for labor, equipment, drugs and supplies, according to Kaufman Hall.

Hospitals been using the losses as a rallying cry for increased government support to navigate the tricky operating environment. Some of the biggest groups in the sector said that Monday’s proposal doesn’t go far enough.

The Federation of American Hospitals, which represents for-profit facilities, called the proposed payment update “disappointing” as the cost of caring for patients continues to rise.

America’s Essential Hospitals said it was concerned about proposals in the rule that would decrease payments to safety-net hospitals.

The CMS estimates Medicare disproportionate share hospital payments and Medicare uncompensated care payments will decrease by roughly $115 million in 2024 as a result of the rule. Regulators did ask for public comment on additional support for safety-net hospitals, which serve a greater number of vulnerable and low-income patients.

The American Hospital Association said it was “deeply concerned” with the “woefully inadequate” proposed payment update.

“These insufficient adjustments are simply unsustainable,” Ashley Thompson, AHA’s public policy senior vice president, said in a statement. “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.”

However, research suggests that hospitals could be exaggerating the severity of their financial situation. Several academic studies have found that federal financial assistance to hospitals during COVID-19 has offset operating losses, and hospitals’ profit margins have essentially remained unchanged in 2020 and 2021 compared to 2019.

In addition, most publicly traded hospitals’ stocks have generated positive shareholder returns since the pandemic began, according to The Wall Street Journal.

CMS proposes 2.8% hospital payment bump for 2024; lobbies decry rise as ‘woefully inadequate’ | Healthcare Dive(opens in a new tab)

And the financial strain that’s being reported by large nonprofits is driven primarily by investment losses, not higher costs, a recent analysis in Health Affairs found. Patients, payers and taxpayers shouldn’t be responsible to pay higher prices to offset the impact of stock market declines, the researchers argued.

The proposed rule also includes a number of changes to improve health equity metrics. The CMS is proposing changes to how it scores hospitals, including 15 new health equity categories.

Regulators said it’s a priority to expand the collection, reporting and analysis of standardized health equity data. The CMS is also proposing a higher severity level designation for patients experiencing homelessness, which would result in higher reimbursement for hospitals treating those individuals.

The rule proposed Monday also clarifies that hospitals won’t receive additional payments for new COVID-19 treatments beginning in 2024, as long as the public health emergency ends in May as currently scheduled.

Source: Healthcare Dive