While CMS proposes a modest Medicare payment bump and an increase in uncompensated care funds, industry leaders argue it's not enough to offset rising costs, especially as potential Medicaid cuts loom.
The Centers for Medicare & Medicaid Services (CMS) has announced proposed changes to the Inpatient Prospective Payment System (IPPS) that would result in a net 2.4% increase for fiscal year 2026. This reflects an estimated hospital market basket increase of 3.2%, minus a 0.8% productivity adjustment, which anticipates an increase in hospital efficiency.
The proposed rule would also increase uncompensated care payments to disproportionate share hospitals to $7.29 billion, an increase of approximately $1.5 billion from fiscal year 2025.
The proposed increase falls below increases set by CMS in each of the past two years. The IPPS increased by 2.9% for fiscal year 2025 and by 3.1% for fiscal year 2024.
Unsurprisingly, the American Hospital Association (AHA) was quick to criticize the increase, paying special attention to the productivity adjustment.
“We are very concerned that this update will hurt our ability to care for our communities,” Ashley Thompson, AHA senior vice president for public policy, said in a statement. “Indeed, many hospitals across the country, especially those in rural and underserved communities, already operate under unsustainable financial situations, including negative margins.”
There is some data to support Thompson’s position. A recent report from Fitch Ratings found that nonprofit hospitals ended fiscal year 2024 with a razor-thin median operating margin of 1.2%. And these hospitals had just found stable footing, raising the median operating margin from -0.5% in fiscal year 2023.
The increase to Medicare payments proposed by CMS would also be unlikely to match the amount that many of these hospitals will lose in revenue from Medicaid should proposed policy changes go into effect.
“Federal budget cuts that may decrease Medicaid reimbursement and increase uninsured care would reduce hospitals’ ability to recover operating costs," according to the Fitch Ratings report. "Providers, particularly those with a higher share of Medicaid patients, could cut services, close locations, or reduce staff."
Hospitals stand to lose $408 billion in revenue over 10 years if changes to Medicaid currently under consideration are enacted and Affordable Care Act tax credits expire, according to a separate report from the Urban Institute and Robert Wood Johnson Foundation. Researchers also estimated that the resulting rise in uncompensated care would reach a value of $248 billion over the 10-year time frame.
While revenue cycle leaders await the release of a final rule on changes to the IPPS, they should continue identifying areas for improvement in operational efficiency, optimizing collection of patient payments, and developing contingency plans for potential changes to Medicaid.
In this episode of HL Shorts, Abeni Lee, director of physician revenue cycle at Grady Health System, talks about the challenge of identifying providers who could benefit from coding education and how to build communication pipelines to reach them.
Physician coding education can help to bolster revenue cycle integrity, but it must also meet provider needs. In this episode of HL Shorts, Abeni Lee, director of physician revenue cycle at Grady Health System, talks about the importance of tailoring coding education to specific needs and how to communicatie the availability of coding education to providers and practice leaders.
New survey data show that patients desire streamlined, transparent, and digital front-end experiences. Meeting these needs is essential to boosting patient collections and financial success.
Patient expectations are evolving within the shifting healthcare landscape, and their preferences could have a direct impact on health system revenues. Understanding what patients value in their healthcare journey can help to improve efficiency, satisfcation, and upfront payment rates.
Check out the infographic below to see what matters most, according to a recent Experian Health survey. Or, read additional coverage here.
If enacted, provisions of the reconciliation bill currently under consideration in the Senate, combined with expiration of Affordable Care Act tax credits, could cause a staggering drop in health system revenues.
Providers could face a staggering $1.03 trillion decrease in revenues from 2025 to 2034 if policy changes currently under consideration go into effect, according to an Urban Institute report funded by the Robert Wood Johnson Foundation.
The estimate presumes that the reconciliation bill recently passed by the U.S. House of Representatives becomes law and that enhanced premium tax credits for Affordable Care Act (ACA) health plans expire at the end of 2025.
On top of the decrease in revenues, Urban Institute researchers valued the likely rise in demand for uncompensated care at $278 billion if the reconciliation bill is enacted and ACA tax credits expire.
For revenue cycle executives, these figures signal profound challenges ahead, potentially reversing insurance coverage gains achieved under the ACA and straining health system finances.
A Trillion-Dollar Hit to Provider Revenue
The projected $1.03 trillion decline in overall healthcare spending translates directly to lost revenues for providers.
Hospitals would bear the largest share of lost revenues, with an estimated $408 billion reduction over the next decade;
Physician services would see an estimated $118 billion decrease;
Other healthcare services, such as dental care and home health, would see an estimated $272 billion decrease; and
Prescription drugs would face reductions of $234 billion.
Provisions within the reconciliation bill would account for about 75% of the total decline, while the expiration of ACA tax credits would account for the rest.
Additionally, these potential policy challenges would likely cause a 15.9 million increase in the number of uninsured people, according to Congressional Budget Office projections. The Urban Institute estimates that these newly uninsured would add $238 billion in uncompensated care costs over the 10-year time frame.
Local and state governments could deliver funding to account for revenue losses and increases in uncompensated care. Otherwise, providers are likely to absorb the costs.
Implications for Revenue Cycle Leaders
While healthcare leaders have consistently warned that cuts to Medicaid and changes to ACA tax credits would significantly disrupt health system revenue cycles, these projections put a price tag on the policy changes, painting a challenging picture for health system finances.
A significant increase in the uninsured population directly impacts payer mix, increases bad debt, and places pressure on revenue cycle operations to manage a higher volume of self-pay accounts and uncompensated care.
For provider organizations that are already financially vulnerable, such as rural hospitals and non-profits, the loss of revenues and increase in uncompensated care could be devastating, potentially leading to service reductions or closures.
Revenue cycle executives will need to closely monitor these legislative developments while preparing for various contingencies. Proactive planning could include:
Reevaluating financial assistance programs and policies to accommodate larger uninsured and underinsured populations;
Optimizing collection of patient payments as they become responsible for larger shares of healthcare costs;
Engaging in advocacy efforts to inform lawmakers of the potential real-world consequences of proposed changes; and
Identifying areas for improvement in operational efficiency, leveraging technology where possible.
The potential consequences of policy changes currently under consideration present a sobering outlook for healthcare providers. A $1 trillion decrease in revenues, combined with a significant surge in uncompensated care demand, would profoundly impact health system finances. For revenue cycle executives, these projections underscore the critical need to vigilantly monitor legislative developments and proactively develop contingency plans.
Technology can complement, but not replace, the human component of patient access, according to this ProMedica executive.
In this episode of HL Shorts, Shannon Ducat, associate vice president of patient access at ProMedica, discusses the difficult task of balancing technology with the human touch when it comes to patient access.
A recent CMS announcement signals a more aggressive approach to auditing Medicare Advantage plans. Revenue cycle leaders should be prepared for the ripple effects.
The Centers for Medicare & Medicaid Services (CMS) is taking a more aggressive approach to Medicare Advantage (MA) plan audits, according to a recent announcement. While MA payers will feel the direct impact of increased regulatory scrutiny, ripple effects could put significant pressure on provider revenue cycles.
Why providers may feel the pinch
Increased oversight seems set to focus most intensely on risk-adjustment data validation (RADV), which confirms medical records support diagnoses used for patients. Noting in its recent announcement that the Medicare Payment Advisory Committee estimates MA plans overbill the government by up to $43 billion per year, CMS seems intent on recouping at least some of those costs.
Increased oversight over MA plans will likely translate to heightened scrutiny for providers, who are the source of clinical documentation and coding that underpins plan payments, as payers look to safeguard their positions.
Key pressure points for revenue cycle leaders
The downstream effects of MA plan audits may be felt in several areas of revenue cycle operations.
Increased Administrative Burden and Scrutiny Over Documentation: Providers should anticipate a surge in medical record requests from MA plans. Payers will likely conduct more detailed chart reviews and issue more coding queries to validate diagnoses, although many providers have been preparing for this since CMS issued a final rule on RADV audits in 2023.
Heightened Risk of Payment Recoupments and Denials: Payers facing recoupments from CMS due to audit findings may become more aggressive in their own post-payment reviews of provider claims.Providers participating in risk-sharing arrangements are especially exposed to recoupments, as Sabrina Skeldon wrote for an American Bar Association article last year.
Stricter Prior Authorization and Utilization Management: To mitigate their audit risk, payers could introduce more restrictive prior authorization and utilization management protocols, further adding to the administrative burden and potentially leading to more delays and denials.
There are several strategies revenue cycle leaders can adopt to prepare for heightened scrutiny over government payments to MA plans.
Fortifying clinical documentation and coding practices;
Ramping up internal audits and compliance programs; and
Reviewing MA plan contracts for details on audits, recoupments, and record requests.
Additional details from the CMS announcement
CMS will now audit all MA plans annually, which amount to approximately 550 audits, rather than the 60 or so it currently audits each year. Additionally, CMS will increase the number of records it reviews per plan from 35 per year to between 35 and 200 per year depending on the plan size. CMS is also aiming to clear out its backlog of audits from payment years 2018 to 2024.
CMS intends to accomplish this increased workload by leveraging technology and increasing its staff of medical coders from 40 to approximately 2,000.
CMS’ renewed commitment to stricter oversight of MA plans could signal a rocky road ahead. However, by focusing on documentation integrity, strengthening internal compliance, and carefully managing payer relationships and contracts, revenue cycle leaders can protect their organization's financial stability.
During a recent discussion in the HealthLeaders' The Winning Edge series, revenue cycle leaders from UW Health, INTEGRIS Health, Moffitt Cancer Center, and Waystar shared their insights on shifting approaches to collecting patient payments.
Collecting patient payments is becoming more important as patients take on a greater share of their healthcare costs. In the past, health systems typically sought patient portions of medical bills after rendering services. That's beginning to change as health systems explore new technologies and new strategies to collect patient payments as far upstream in the revenue cycle as possible.
In the most recent episode of The Winning Edge, sponsored by Waystar, panelists shared their thoughts on engaging patients on their financial responsibility, how technology is streamlining patient payments, and the massive hurdles standing in the way of accurate pricing estimates.
A panel of four revenue cycle leaders spoke during the most recent webinar in HealthLeaders' The Winning Edge series about the ways they are rethinking patient payments.
Patients have more financial responsibility over their healthcare costs than they have in recent memory, which means collecting patient payments is becoming more critical to healthy revenue cycle operations.
The latest webinar in The Winning Edge series features a discussion among leaders from UW Health, INTEGRIS Health, and Moffitt Cancer Center on strategies for improving pre-service collections and navigating the complexities of accurate pricing estimates.
As patients’ share of their healthcare costs has grown, revenue cycle leaders are focusing on two front-end revenue components: securing pre-service payments and providing accurate cost estimates.
In the latest webinar for HealthLeaders’ The Winning Edge series, four revenue cycle experts shared how they are rethinking patient payments and working to create more accurate cost estimates.
Collecting patient payments upfront is becoming a clear priority at many health systems.
"There's a longstanding tradition or culture of patients receiving medical bills after services are provided,” Klein said. “And we all know that's changing dramatically."
The need for a proactive approach has become more clear as patient out-of-pocket costs rise. Moffitt has tried to move as many conversations about bills to the front of the process as possible, according to Talford. The intent is to have “patients start their journey with a pretty good idea of, ‘Here’s what I owe.’”
For self-pay patients, Moffitt creates cost estimates and requires a deposit before treatment begins, underscoring the commitment to securing pre-service payments among a population where bad debt has traditionally been an issue.
UW Health has a similar policy, according to Klein. When patients are checking in, whether on the phone, in person with frontline staff, or on a self-serve kiosk, they are required to either pay in full, set up a payment plan, or apply for financial assistance. Automated payment plans have also been a huge success.
"Having those automated payments on a monthly basis makes a huge difference and reduces the amount of effort that our teams are having to do when it comes to outreach,” Klein said.
The Persistent Hurdle: Delivering Accurate Pricing Estimates
The ability to provide patients with accurate pricing estimates is critical to collecting payments upfront, but it is also a task fraught with challenges.
Part of the difficulty is that each payer and plan has its own benefits and policies. Lack of standardized, reliable benefit information is one significant barrier to creating accurate pricing estimates, according to the panelists.
However, there is an inherent variability in pricing for many healthcare procedures that also complicates estimates. This unpredictability, especially for procedures where the scope is unclear, makes it difficult for healthcare to mirror fixed pricing that consumers experience in other industries.
Lorenz compared healthcare services to a mechanic’s services to highlight how much more difficult it can be.
“There may be things [that] arise during surgery that, unlike your car, they can't call you and ask how you’re going to go ahead and do this because it's going to be an extra $5,000,” he said.
While revenue cycle leaders are making strides in shifting collections to the pre-service stage through technology and process changes, the ability to consistently provide accurate pricing estimates remains a significant challenge.
In today's HealthLeaders Winning Edge webinar, panelists will discuss the challenges to collecting patient payments.
Patients are taking on greater responsibility for their healthcare costs. Trends toward high-deductible health plans (HDHPs) and rising overall costs seem likely to continue in the foreseeable future.
This means health systems must rethink their approach to collecting patient payments to secure their financial health.
The shifting landscape creates considerable challenges for both patients and providers. Patients grapple with affordability and potential medical debt. Meanwhile, provider organizations pursue costly new technologies and tweak delicate workflows to optimize payment collections. Additionally, pricing transparency requirements like those found in the No Surprises Act add another layer of complexity.
On Tuesday, May 27, the next webinar in our Winning Edge series will tackle the challenges health systems face, and the strategies they adopt, on the road to patient payment success.
Our panel features:
Ryan Klein, senior director of patient access and financial experience at UW Health;
The growing prevalence of HDHPs is one culprit for growth in patient responsibility for healthcare costs. Enrollment in HDHPs increased from 20% of covered employees in 2013 to 29% in 2023, according to the KFF 2023 Employer Health Benefits Survey.
In a bad sign for revenue cycle leaders, recent data from Kodiak Solutions suggests that collection rates after insurance payments have fallen as patient financial responsibility has risen.
To make matters worse, a growing share of patients say they are struggling to afford their healthcare bills. Only 55% of patients responded that they can afford their healthcare bills in a recent Gallup survey, a six-point decline since 2022.
This affordability gap suggests health systems may need to think about delivering more creative financing options to patients who are struggling to pay their bills.
Confusion over cost sharing
Part of the problem when it comes to patient payments is confusion over what is owed. Between inaccurate pricing estimates and a combination of premiums, co-pays, and deductibles built into health plans, patients often face difficulty determining what their financial responsibility is for the costs of care.
Three out of ten patients said it was somewhat or very difficult to understand their out-of-pocket costs when using health insurance, according to a recent KFF issue brief. This knowledge gap suggests provider organizations could boost patient payments by better educating patients on their financial responsibility for healthcare services.
Can technology bridge the gaps?
Patients usually want to pay their bills, but health systems sometimes stand in their way. While there is a lot of talk among revenue cycle leaders about expanding digital door fronts, many health systems are not offering consumer-friendly, tech-based tools that make payment experiences so much simpler in other industries, like retail and banking.
The evolving patient payment landscape presents undeniable hurdles for both patients and providers. As patients grapple with affordability and complex cost-sharing, there is a clear need for a new approach from revenue cycle leaders.
Please join HealthLeaders for an insightful discussion on these topics and more during the upcoming Winning Edge on Patient Success.
