Healthcare News

Providers say inpatient pay adjustment for inflation not sufficient

Providers remained largely unhappy early this week despite a final ruling issued by the CMS on Monday that increases inpatient payments to hospitals by more than was initially proposed.

Organizations like The American Hospital Association said it was “pleased” by the payment update, a 4.3% bump up from the proposed 3.2%, but added it “still falls short of what hospitals and health systems need to continue to overcome the many challenges that threaten their ability to care for patients and provide essential services for their communities.”

Group purchasing organization Premier agreed, saying the payment update “falls woefully short” of what is needed for health systems. “Coupled with record high inflation, this inadequate payment bump will only exacerbate the intense financial pressure on American hospitals,” SVP of Government Affairs Soumi Saha said in a statement.

The CMS stated that the payment rate in the final Inpatient Prospective Payment Rule takes into account “a revised outlook regarding the U.S. economy.”

Provider groups had previously asked for more adjustments, but the CMS declined to set aside its regulatory payment formula. Cowen analysts noted the continued pressure hospitals face and the fact that “commercial rate renegotiations take multiple years to cycle through.”

Hospitals have now faced six straight months of negative margins as they fight multiple headwinds including inflation, high labor and operating costs as they try to recover from waves of the coronavirus omicron variant they faced earlier this year.

For-profit hospital operators HCA Healthcare, Tenet Healthcare, Community Health Systems and Universal Health Services all reported lower net income in the second quarter of this year compared to the year prior.

Executives at UHS, which posted a 50% profit loss, told investors that while COVID-19 volumes declined, there was not a corresponding increase in other visits. This led to “significant shortfalls in revenues and earnings as compared to our original forecasts,” they said.

Meanwhile, Fitch Ratings said nonprofit hospitals could take years to recover margins to pre-pandemic levels.

The AHA did applaud some other aspects of the final rule, including a pause on some measures of the Hospital-Acquired Condition Reduction Program. The group, however, lamented that the CMS will continue to publicly report data from the program’s patient safety indicator, which it said could be misleading.

The safety watchdog Leapfrog Group, however, said it approved of releasing the data, which could highlight dangerous medical complications.

AHA also cheered the agency’s decision not to move forward with a plan to exclude some uncompensated care pool days from Medicare’s disproportionate share hospital payment calculation, which AHA argued would have “put at risk hundreds of millions of dollars for patient care.” The CMS, though, said it would continue to consider DHS adjustments in future rulemaking.

The IPPS final rule increased the proposed amount of uncompensated care payments from $6.5 billion to $6.8 billion — ultimately resulting in a drop of $318 million from fiscal year 2022.

The proposed rule included a request for information on how hospitals and other providers can help combat climate change. The CMS said in a fact sheet on the final rule that based on comments it believes hospitals can better prepare for continuing operations during climate-related emergencies and can better understand how to track and reduce emissions.

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