Industry hospital groups are pushing the Centers for Medicare & Medicaid Services (CMS) to consider a higher annual pay bump and to shed some light on why it believes the number of uninsured patients won’t be increasing during fiscal year 2024.
In April, CMS released its proposed fiscal year 2024 Inpatient Prospective Payment Systems (IPPS) rule with a 2.8% increase in payments for the 12-month period beginning in October.
The tentative pay raise for eligible participating hospitals translates to a collective $3.3 billion increase, CMS said at the time, and is based on a 3% projected hospital market basket update minus a 0.2 percentage point productivity adjustment.
Comment letters submitted by the American Hospital Association (AHA) and other major hospital industry groups on Friday homed in on the 2.8% net update as “woefully inadequate” in light of cost pressures, such as inflation and labor spend, that have not subsided since the height of the COVID-19 pandemic.
The groups pointed also to the 2.7% market basket update for fiscal year 2022, an estimate implemented by CMS that turned out to be lower than the 5.7% rate that’s now projected for that period, per data cited in the letters.
With both past and present in mind, they called on CMS to increase the current market basket proposal and/or to use its “special exceptions and adjustments” authority to make a retrospective adjustment to close the gap for 2022.
“At a minimum, CMS must address the gross underpayment that occurred in FY 2022 via a one-time adjustment of at least 3%,” Premier Inc., a group purchasing network for hospitals, wrote in its submitted comment letter.
Each of the provider groups also took issue with the proposed 0.2% productivity factor, an adjustment meant to align with longitudinal gains in care delivery efficiency that, in AHA’s words, “generates significant departures from economic reality.” Multiple groups encouraged CMS to use its same statutory authority to eliminate the productivity adjustment.
“The AHA continues to have deep concerns about the proposed productivity cut, particularly given the extreme pressures in which hospitals and health systems continue to operate,” the group wrote in its comment letter.
Those calls of higher pay to meet expenses were echoed in a Monday letter signed 30 U.S. senators. The bipartisan group said they were "concerned that the proposed payment updates ... will result in an overall payment reduction for hospitals in FY 2024" and, again, urged the agency to use the special exceptions and adjustments authority for the 2024 increase and to amend the 2022 estimate.
The other top-line critique for CMS’ proposed rule related to how the agency calculated disproportionate share hospital (DSH) payments. Provider groups said they were concerned a payment calculation that hinges on the estimated rate of uninsured patients is “significantly” underestimating how post-pandemic policy shifts will affect coverage rates.
“For instance, CMS maintains that the rate of the insured stayed the same as FY 2023,” AHA wrote. “However, it is expected that health coverage for millions of people will end as the Medicaid continuous coverage requirements are now unwinding. As such, we expect to see a large increase in the number of uninsured in FY 2024.”
The Federation of American Hospitals noted that even minor relative changes in the rate of uninsured patients—say, an additional 0.7 percentage point increase—would add roughly 2.4 million additional uninsured individuals and increase the proposed uncompensated care DSH pool by about $511 million more than CMS’ proposal.
As such, the groups called on CMS and the Office of the Actuary to be more transparent on how they are calculating DSH payments and to consider additional research on disenrollment projections. Further, America’s Essential Hospitals, which represents safety-net hospitals, called on CMS to establish a safety-net hospital definition that relies on Medicare disproportionate payment percentage and to use its authority to adopt policies that would protect those hospitals from “the adverse effects of payment cuts and other policies that affect patient access.”
The proposed IPPS rule included proposals to install new health equity adjustments as part of the Hospital Value-Based Purchasing Program, which it described as part of the administration’s efforts to address inequity.
Those measures were broadly applauded by the hospital groups for acknowledging the relationship between health outcomes and social risk factors such as homelessness, though Premier requested that the agency work with stakeholders going forward to “fine-tune its methodology … especially in light of the redistributive impacts the addition of the bonus may have on Hospital [Value-based Purchasing] Program incentive payments.”
Multiple organizations also applauded proposals to modernize the Hospital Consumer Assessment of Healthcare Providers and Systems survey via the use of web-based surveys and to allow rural emergency hospitals to be designated as a non-provider site for Medicare graduate medical education purposes.
Common critiques and suggestions listed lower down on the groups’ letters included requests not to adopt a new quality measure (the Severe Sepsis and Septic Shock: Management Bundle) as part of the Hospital Value-Based Purchasing Program and to reevaluate how hospitals should be reporting COVID-19 vaccination coverage among their personnel.