An Inadequate Increase: CMS Finalizes 2.9% Pay Increase for Outpatient Services

For many health systems, the increase feels like just a drop in the bucket.

We’re here once again. the Centers for Medicare & Medicaid Services has finalized a 2.9% pay increase for hospital outpatient services in 2025. This increase is based on the projected hospital market basket increase of 3.4%, and factors in less 0.5 percentage points for multifactor productivity.

The updates are aimed to result in an additional $2.2 billion in OPPS payments for hospitals in 2025 compared to 2024.

While this is a slight increase from the 2.6% proposed in July, much of the industry is crying out that it is simply not enough.

On the ball as always, the American Hospital Association is arguing that the slight pay bump is far below what hospitals need to have a chance at addressing today's operational challenges.

AHA Senior Vice President Ashley Thompson released a media statement saying:

“Medicare's sustained and substantial underpayment of hospitals has stretched for almost two decades, and today's final outpatient rule only worsens this chronic problem. The agency's final increase of less than 3% for outpatient hospital services will make the provision of care, investments in the healthcare workforce, and addressing new challenges, such as cybersecurity threats, more difficult. These inadequate payments will have a negative impact on patient access to care, especially in rural and underserved communities nationwide.”

While some health systems are gradually improving finances, many feel the increase is just not enough. And these sentiments seem appropriate given that nearly 40% of health systems are operating in the red, according to a Kaufman Hall report. Several factors are playing into the downward trend, including market positioning, payer mix, depth of outpatient services, wage inflation and pricey contract labor.

CMS' rule comes three months after the agency finalized a 2.9% pay increase for inpatient hospital payments in 2025.

Where Does This Leave CFOs?

For some CFOs, this adjustment could offer an optimistic outlook for budget forecasting. It could allow for more predictable reimbursement for services provided in outpatient settings, which is important to continue the shift toward more value-based, ambulatory care models. The rule could enable some CFOs to better manage cash flow, especially for outpatient-focused providers and those looking to expand their outpatient services.

While this increase is a step in the right direction, it still doesn’t solve systemic issues and greater operational challenges. The healthcare industry needs to look at deeper structural changes to combat rising costs.

As more procedures shift from inpatient to outpatient settings, the financial models for hospitals need to evolve rapidly.. CFOs must navigate these changes carefully, ensuring that outpatient departments remain financially viable in the face of stagnant reimbursement rates and rising costs.

Additionally, CFOs may need to carefully strategize to create sustainable financial balance and ride out operational challenges. One trend seen by some health systems is cutting contract labor where possible to improve earnings.

Medicare reimbursement rates and site-neutral payments also play into these complicated issues. Stay tuned for a deeper dive on these two additional contributing factors.