CMS  on Monday released its proposed inpatient prospective payment system (PPS) rule for fiscal year (FY) 2024, which would increase Medicare payments to hospitals by a net 2.8% compared to 2023. But many hospital groups say the increase isn't enough to offset inflation, labor, and other costs.

Details on the rule

The 2.8% payment increase represents a hospital market basket increase of 3% plus a productivity cut of 0.2%. The update would increase hospital payments by $3.3 billion, minus a proposed $115 million decrease in disproportionate share hospital payments and a $460 million decrease in new medical technology payments.

The proposed rule would also change two quality measures in CMS' Hospital Value-based Purchasing (VBP) program and would adopt a new measure on sepsis care. CMS also proposed a health equity scoring adjustment in order to reward hospitals providing excellent care to underserved populations. The rule also proposes adding new modes and timelines to patient experience surveys under the VBP program.

In addition, the rule proposes changes to several measures for the Inpatient Quality Reporting program. The rule would also provide several updates and modifications to programmatic language and definitions within the Promoting Interoperability Program, and would adopt three new electronic clinical quality measures.

Among other changes, the proposed rule also includes a:

• Change to graduate medical education payments for rural emergency hospitals in an effort to better support graduate medical training in rural areas
• Continuation of the low wage index hospital policy, which will treat rural reclassified hospitals as geographically rural for the purposes of the wage index calculation
• Clarification of the data and information required under the physician self-referral law and a reinstatement of integrity restrictions removed in the 2021 outpatient prospective payment final rule for physician-owned hospitals that meet the requirements to be classified as "high Medicaid facilities"

The rule also proposed updates to the long-term care hospital PPS. For FY 2024, CMS proposes to update the payment rate by 2.9%, resulting from a 3.1% market basket update, reduced by a 0.2% productivity adjustment. However, the agency expects an overall decrease of 2.5% in standard payments to facilities due to a decrease in high-cost outlier payments.

CMS will accept public comments on the proposed rule through June 9.

Reaction

CMS Deputy Administrator Meena Seshamani said, "CMS is more accurately paying hospitals and recognizing for the first time that homelessness, as a social determinant of health, also impacts resource utilization."

"Creating incentives for hospitals to provide excellent care for underserved populations lays the foundation for a health system that delivers higher-quality, more equitable, and safer care for everyone," Seshamani added.

However, Chip Kahn, CEO of the  Federation of American Hospitals, said the proposed rule "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."

Similarly, the  American Hospital Association (AHA) in a statement said it is "deeply concerned with CMS' woefully inadequate proposed inpatient hospital payment update of 2.8% given the near decades-high inflation and increased costs for labor, equipment, drugs and supplies" and added that long-term care hospitals "would see a staggering negative 2.5% payment update under this proposal."

"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," AHA said. "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."

Beth Feldpush, SVP of policy and advocacy for  America's Essential Hospitals (AEH), said AEH is concerned about the proposed 2.8% payment rate and the proposed cut to Medicare disproportionate share hospital payments.

"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," Feldpush said. (Dreher/Goldman, Axios, 4/11; AHA News, 4/10; LaPointe, RevCycleIntelligence, 4/11; Turner, Modern Healthcare, 4/10; AHA News, 4/10 [2])