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Hospital Associations 'Extremely Concerned' About CMS' Proposed Payment Rate Update

Analysis  |  By Amanda Schiavo  
   April 20, 2022

Multiple hospital groups have released statements blasting CMS' latest payment rate proposal given high inflation costs.

Hospital associations are pushing back on CMS' 3.2% payment rate update for hospitals that was recently issued in the fiscal year (FY) 2023 inpatient prospective payment system (IPPS) proposed rule.

"We are extremely concerned with CMS' proposed payment update of only 3.2%, given the extraordinary inflationary environment and continued labor and supply cost pressures hospitals and health systems face," Stacey Hughes, executive vice president of the American Hospital Association, said in a statement. "Even worse, hospitals would actually see a net decrease in payments from 2022 to 2023 under this proposal because of proposed cuts to disproportionate share hospital (DSH) and other payments."

Hughes continued by calling the decision "unacceptable" given that hospitals and health systems are still dealing with the COVID-19 pandemic and the variety of challenges the crisis has placed on their ability to provide patients with essential services.

The Federation of American Hospitals (FAH) has also pushed back against the rate update, saying it won't provide enough support to hospitals and health systems facing hyper-inflation, staffing shortages, and the pandemic.

"From our initial read, we must conclude the CMS net 3.2% market basket update is woefully inadequate," FAH said in a statement. "To add insult to injury, the policies proposed, combined with certain payment policies set to expire, would, according to the proposed rule, result in an actual decrease in payments from FY 2022 to FY 2023."

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However, both organizations did react positively to CMS' decision to eliminate the penalties facing organizations that haven't been reporting their data to CMS since the pandemic hit, which fell under the Hospital-Acquired Condition (HAC) Reduction and Value-Based Purchasing (VBP) programs.

"On the positive side, we commend CMS for extending its measure suppression policies under its value-based payment programs," FAH said. "It is particularly important that CMS finalize its proposal to eliminate penalties under both the VBP and HAC programs. Hopefully, these programs can get back on course when it is practicable." According to the proposed rule, CMS is increasing operating payment rates by a net 3.2% for FY 2023 for hospitals that are meaningful users of electronic health records and submit quality measure data.

The proposed increase in operating and capital IPPS payment rates, partially offset by decreases in outlier payments for extraordinarily costly cases, will generally increase hospital payments in FY 2023 by $1.6 billion, CMS said.

Amanda Schiavo is the Finance Editor for HealthLeaders.

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