The Biden administration has finalized proposed payment rates for inpatient services in the coming year, and they’re not likely to be welcomed by hospitals.
Initially, the Centers for Medicare & Medicaid Services (CMS) proposed a 2.6% payment increase for 2025, which providers decried as inadequate. In the final Inpatient Prospective Payment System (IPPS) rule, that increase was bumped up to 2.9%.
CMS said in a press release that its new rates will likely increase payments to inpatient hospitals by $2.9 billion.
However, Soumi Saha, senior vice president for government affairs at Premier, said in a statement that the “payment update only forces hospitals to stretch further to cover basic patient needs.”
“The continued insufficiency of Medicare payments to hospitals year over year is a threat to the sustainability of American healthcare,” Saha said. “A mere 2.9% increase is alarmingly below the true cost of providing care and does not address the stark realities of inflation and operational costs, persistent labor shortages and an aging patient population that will require significantly greater care than generations prior.”
“If we continue to starve the healthcare system, we will only see continued closures, clinician burnout and extended wait times for patient care,” she said.
Alongside the payment rates, CMS finalized a policy update as part of an initiative to address homelessness. The agency said it is aiming to “better account for the resources involved in furnishing care to individuals experiencing housing insecurity,” which will likely lead to higher payouts for hospitals that treat patients with housing needs.
It will also require long-term care hospitals to report additional data around social needs such as housing and food insecurity as part of their quality reporting, according to the press release.
The agency said it will finalize a five-year demonstration as part of the rule that seeks to identify whether using episodic-based payments for several common, high-cost procedures will reduce costs while maintaining quality.
The mandatory model will replace the existing bundled payment program for joint replacement and aligns with other value-based models.
“Before and after surgery, people on Medicare often experience fragmented care, especially following hospital discharge. This can lead to complications, prolonged recovery, unnecessary care, and even readmissions,” said Liz Fowler, Ph.D., director of the CMS Innovation Center, in the release. “By bundling all the costs of care for an episode, this model is designed to incentivize care coordination, improve patient care transitions and outcomes, and decrease the risk of an avoidable readmission.”