The Centers for Medicare & Medicaid Services today issued a proposed rule that would increase Medicare inpatient prospective payment system rates by a net 2.8% in fiscal year 2024, compared with FY 2023, for hospitals that are meaningful users of electronic health records and submit quality measure data.

This 2.8% payment update reflects a hospital market basket increase of 3.0% as well as a productivity cut of 0.2%. It would increase hospital payments by $3.3 billion, minus a proposed $115 million decrease in disproportionate share hospital payments and proposed $460 million decrease in new medical technology payments.

In a statement shared with the media today, Ashley Thompson, AHA’s senior vice president for public policy analysis and development, said, “The AHA is deeply concerned with CMS’ woefully inadequate proposed inpatient hospital payment update of 2.8% given the near decades-high inflation and increased costs for labor, equipment, drugs and supplies. Moreover, long-term care hospitals would see a staggering negative 2.5% payment update under this proposal. These insufficient adjustments are simply unsustainable.

“2022 was the most financially challenging year for hospitals during the pandemic, with half of hospitals finishing the year with a negative operating margin. So far, this worrying trend has continued in 2023, most recently with reports of record high hospital defaults. The AHA has repeatedly requested that CMS and the Administration remedy shortcomings in its previous market basket forecasts for all hospitals. For example, CMS’ inpatient payment update was a full three percentage points less than what actual market basket inflation was in 2022 and the long-term care update was 2.9 percentage points less.

“Layering these inadequate inflationary adjustments on top of Medicare’s existing underpayments to hospitals does not reflect the reality of the world hospitals are providing care in. Without more substantial updates in the final rule, hospitals’ ability to continue caring for patients and providing essential services for their communities will be threatened.”

Among other provisions, the proposed rule would:

  • Change graduate medical education payments for Rural Emergency Hospitals to better support graduate medical training in rural areas.
  • Continue the low wage index hospital policy for FY 2024, and treat rural reclassified hospitals as geographically rural for the purposes of calculating the wage index.
  • Clarify the data and information that is required under the physician self-referral law and reinstate program integrity restrictions removed in the 2021 outpatient prospective payment final rule for physician-owned hospitals meeting “high Medicaid facilities” requirements.
  • Seek public comments on approaches to support safety-net hospitals and the patients they serve.

In addition, CMS proposes a number of changes to its quality reporting and value programs. For the Hospital Value-based Purchasing program, CMS proposes to modify two quality measures and adopt a new measure on sepsis care; the agency also proposes a health equity scoring adjustment to reward excellent care to underserved populations. Finally, CMS proposes to add new modes and timelines for patient experience survey administration under the VBP program only.

The agency proposes to adopt three new measures for the Inpatient Quality Reporting program, while modifying three others (including a measure on COVID-19 vaccination among health care personnel) and removing three more.

CMS also proposes several updates and modifications to programmatic language and definitions under the Promoting Interoperability Program, and would adopt three new electronic clinical quality measures — the same measures proposed for adoption into the IQR.

CMS will accept comments on the proposed rule through June 9. AHA members will receive a Special Bulletin with further details on the rule.

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