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Hospitals Push Back on CMS' 'Inadequate' 2.6% Rate Increase Proposal

Analysis  |  By Jasmyne Ray  
   April 12, 2024

The proposed 2.6% payment increase is the lowest rate increase proposed since 2019.

Just over a week after finalizing a rate increase for Medicare Advantage payments, CMS dropped another rule.

The fiscal year 2025 IPPS proposed rule calls for a 2.6% increase to Medicare payments for hospital inpatient care. This payment update reflects a hospital market basket increase of 3.0%, and would increase hospital payments by $2.9 billion.

However, some hospital groups are saying it’s not enough.

The cost of care has steadily increased since the COVID-19 pandemic, with systems and providers alike calling for higher rates. The prices of drugs and medical equipment continue to rise due to inflation, and the ongoing labor crisis continues to strain system’s finances causing disatisfaction with the 2.6% increase.

Similar concerns were brought up in August, when CMS finalized the FY 2024 payment increase.

“The AHA is deeply concerned with CMS’ woefully inadequate inpatient and long-term care hospital payment updates,” Ashley Thompson, AHA senior vice president for public policy analysis and development, said in a statement. “The agency continues to finalize rate increases that are not commensurate with the near decades-high inflation and increased costs for labor, equipment, drugs and supplies that hospitals across the country are experiencing.”

With these persisting economic challenges, it’s clear that executives can no longer rely on rate increases to level out their financial margins.

Jasmyne Ray is the revenue cycle editor at HealthLeaders. 


CMS recently released the fiscal year 2025 IPPS proposed rule to unhappy providers.

The rate change reflects a 3% market basket increase and 0.4% productivity adjustment.

And even though hospitals could  see a payment increase of $2.9 billion if the rule is finalized as is, some say systems will still be financially strained.

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