Hospitals denounce Medicare’s proposed 2025 payments

Hospitals say they are deeply disappointed with the federal government’s planned Medicare payments for inpatient services next year.

The federal government has released its proposed 2025 payments to hospitals, and hospitals say the proposal is inadequate.

The Centers for Medicare & Medicaid Services released its 2025 inpatient prospective payment system (IPPS) proposed rule. The proposal calls for a 2.6% increase for hospitals, compared to 2024. CMS proposes to increase payments to hospitals by $2.9 billion.

Hospitals had been hoping for a more substantial increase.

Ashley Thompson, senior vice president of public policy analysis and development for the American Hospital Association, said the CMS proposal is “woefully inadequate, especially following years of high inflation and rising costs for labor, drugs, and equipment.”

“Many hospitals across the country, especially those in rural and underserved communities, continue to operate under unsustainable negative or break-even margins,” Thompson said in a statement. “We urge CMS to reconsider their policy in the final rule so that all hospitals can provide high-quality, around the clock, essential care to their communities.”

Premier, the group purchasing organization working with hospitals nationwide, said it is “profoundly disappointed” with the CMS proposal.

Soumi Saha, Premier’s senior vice president of government affairs, said in a statement that CMS “is once again proposing an update for hospital inpatient services that is dismally deficient given the current fiscal challenges hospitals continue to face.”

“With a mere 2.6 percent payment increase that fails to align with the stark realities of inflation and operational costs, persistent labor shortages and an aging demographic, the sustainability of our healthcare system is jeopardized,” Saha said.

CMS can adjust its proposal before finalizing the payments. Last year, CMS initially proposed a 2.8% increase in inpatient payments, but ultimately revised the increase to 3.1%. Hospitals said the 2024 payment rates were insufficient, given the financial struggles of many hospitals.

America’s Essential Hospitals, which represents safety-net hospitals serving disadvantaged communities, is pushing CMS to revise payments to reflect the needs and costs of those organizations. Most safety-net hospitals serve a high volume of patients relying on Medicare and Medicaid.

Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, said CMS should have a definition of safety-net hospitals to improve healthcare quality.

“While CMS recognizes the need to define these providers, the approach it takes in today’s IPPS proposed rule would not fully capture hospitals at the core of the nation’s safety net,” Feldpush said in a statement. “These hospitals would be best defined by measures that capture the extent to which a hospital disproportionately serves low-income and uninsured patients and the amount of uncompensated care it provides.”

Lawmakers have introduced legislation to provide more federal aid for safety net hospitals, and Feldpush pointed to that bill as a useful step forward. Under the bill, hospitals could be designated as essential health systems if they had a high portion of patients on Medicaid and with lower incomes, or if they had high levels of uncompensated care to patients without insurance.

The CMS has also proposed a 1.2% increase in the rate for long-term care hospital payments, which the American Hospital Association said is also insufficient.

“Long-term care hospitals care for complex patients who require extended hospitalization – a population they provide care for already at a considerable financial loss,” Thompson said in a statement.

CMS is basing projections on the scheduled expiration of assistance for Medicare-Dependent Hospitals, and changes in payments for low-volume hospitals, which are slated to end Dec. 31, 2024. Hospitals are pushing for those streams of federal aid to continue.

CMS is accepting comments on proposals for inpatient payments and long-term hospitals until June 10.