CMS raises inpatient payments for 2023, drawing relief from hospitals

The federal government is going beyond the payment rate initially proposed in the spring, which drew sharp criticism. Hospitals welcome the move but say they could use more aid.

Hospitals will be getting bigger payments from the Centers for Medicare and Medicaid Services than the agency initially proposed.

The CMS issued its final rule for Medicare payments to hospitals for inpatient care. The agency is raising rates in the Inpatient Prospective Payment System by 4.3% for the 2023 fiscal year, CMS announced Aug. 1.

It’s a boost from the initial 3.2% increase CMS first proposed in April. Hospitals and health systems slammed that proposal as insufficient.

Hospitals welcomed the bigger bump from CMS, but also indicated the federal government should be doing more to support health systems that have been battered by the COVID-19 pandemic.

Summary

The CMS adjusted its payment plans largely due to expected increases in compensation for hospital workers, the agency said.

The agency also said the boost reflects the highest “market basket” update in 25 years. The market basket refers to the change in price for healthcare goods and services.

CMS Administrator Chiquita Brooks-LaSure touted the additional help to hospitals and health systems.

“CMS is taking action to support hospitals, including updating payments to hospitals by a significantly higher rate than in the proposed IPPS rule. This final rule aligns hospital payments with CMS’ vision of ensuring access to health care for all people with Medicare and maintaining incentives for our hospital partners to operate efficiently,” Brooks-LaSure said in a statement.

Reaction

The American Hospital Association welcomed the news of a bigger increase in payments. The group said the initial proposal essentially would have meant a loss for hospitals, with federal aid declining in other areas.

Still, hospitals need more assistance than they are getting, the association said.

“We are pleased that CMS will provide hospitals and health systems with increased inpatient payments next year, rather than a cut as proposed, allowing them to better provide care for their patients and communities,” Stacey Hughes, AHA’s executive vice president, said in a statement.

“That said, this update 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,” Hughes added. “This includes the extraordinary inflationary expenses in the cost of caring hospitals are being forced to absorb, particularly related to supporting their workforce while experiencing severe staff shortages."

Other reductions looming

Under current law, some sources of revenue to hospitals will be declining or vanishing, CMS projects.

For now, CMS is forecasting that disproportionate share hospital (DSH) payments and Medicare uncompensated care payments will decrease by about $300 million in the 2023 fiscal year. Payments for inpatient cases involving new medical technologies will fall by $750 million in 2023, CMS projects.

The agency also said additional payments for Medicare-Dependent Hospitals and a change in payments for low-volume hospitals are set to expire in the 2023 fiscal year. Congress has extended the payments in the past.

But if lawmakers don’t act and those payments disappear, CMS estimates that would be a loss of $600 million.

“We will continue to urge Congress to take action to support the hospital field, including by extending the low-volume adjustment and Medicare-dependent hospital programs," Hughes said in a statement.

Focus on maternal health

President Biden’s administration has been focusing on improving maternal health outcomes. CMS is moving forward with plans to designate “birthing friendly” hospitals to reduce maternal mortality and identify those hospitals who have shown a commitment to high-quality maternity care.

The agency is planning to establish the designation in the fall of 2023.

Long-term care hospitals

CMS expects payments to long-term care hospitals under the Prospective Payment System to rise by about 2.4%, or $71 million, the agency said.

For more details on Medicare payments to hospitals and health systems, read the CMS Fact Sheet.