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Hospitals slam proposed Medicare payment plan


The government plans to raise the Medicare inpatient prospective payment system rates by 3.2% in the 2023 fiscal year. The American Hospital Association says the projected loss of other aid would mean hospitals could see less money.

The federal government has issued a proposal to raise rates for hospital payments for the 2023 fiscal year, but advocates for hospitals said the increase is insufficient.

In fact, hospitals would face a net decrease due to other cuts and the potential expiration of other sources of aid, the American Hospital Association said Tuesday.


The Centers for Medicare & Medicaid Services has issued its proposed rule to raise payment rates to hospitals for inpatient care. Under the proposal, Medicare plans to raise rates in the Inpatient Prospective Payment System by 3.2% in 2023, an increase of $1.6 billion.

The government sets base payment rates for inpatient stays based on the diagnosis and services performed. Acute care hospitals rely on these payments as a critical source of revenue.

However, the 3.2% increase would be offset by other cuts, the hospital association says.

While proposing the increase in payments under the inpatient system, the CMS is also projecting an $800 million decrease in 2023 for two payment programs important to hospitals: Medicare disproportionate share hospital (DSH) payments and Medicare uncompensated care payments.

In addition, CMS is projecting an $800 million cut in payments for inpatient cases involving new medical technologies in the next fiscal year.

Hospitals are also waiting to see if other programs facing an expiration date will get another extension. Currently, added payments for Medicare Dependent Hospitals and a temporary change in payments for low-volume hospitals are set to expire in the 2023 fiscal year.

Congress could agree to extensions of those programs, CMS notes. But if those programs aren’t extended, hospitals would see another $600 million reduction, CMS says.


Stacey Hughes, vice president of the American Hospitals Association, said the organization is “extremely concerned” about the CMS payment proposals.

“This is simply unacceptable for hospitals and health systems, and their caregivers, that have been on the front lines of the COVID-19 pandemic for over two years now,” Hughes said in a statement. “While we have made great progress in the fight against this virus, our members continue to face a range of challenges that threaten their ability to continue caring for patients and providing essential services for their communities.”

Other highlights

COVID-19: Since hospitals are still dealing with the COVID-19 pandemic, CMS says it will refine some measures in programs that can penalize hospitals for excessive readmissions or hospital-acquired preventions.

In a fact sheet, CMS said, “These policies are intended to ensure that these programs do not reward or penalize hospitals based on circumstances caused by the PHE (public health emergency) for COVID-19 that the measures were not designed to accommodate.” The hospital association said it’s grateful the government is recognizing the pandemic is still affecting hospital performance.

Wage index: The Center for Medicare & Medicaid Services also plans to apply a 5% cap on any decrease to a hospital’s wage index compared to the prior fiscal year, regardless of the reasons for the decline. The hospital association cheered this proposal.

Health outcomes: CMS is asking hospitals how they can better measure disparities in health outcomes. The Biden administration has been very focused on health equity. CMS is seeking comments on guiding principles for identifying goals and approaches to track disparities.

Maternal health: Hospitals could soon receive a designation to demonstrate their quality of care in treating pregnant women and post-partum patients. CMS is moving forward with plans to recognize “birthing friendly” hospitals. The government plans to begin issuing the designation in the fall of 2023.

Climate impact: CMS is also asking hospitals how the government can help providers reduce their climate impact and also cut their emissions. Last month, U.S. Rep. Richard E. Neal, chairman of the House Ways and Means Committee, asked some leading hospitals to explain what they’re doing to address the climate crisis.

Long-term care: The agency also issued a proposed rule for payments for long-term care hospitals. CMS is proposing an increase of $25 million in payments in the 2023 fiscal year.

Deadline: CMS will accept comments on the proposal through June 17.

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