AHA wants Congress to pressure CMS to reverse updates for inpatient payment rule

The American Hospital Association (AHA) is turning to lawmakers to pressure the Biden administration to change “woefully inadequate” payment rates proposed for next year. 

The AHA sent a letter Friday to congressional leaders surrounding the proposed Inpatient Prospective Payment Systems (IPPS) rule, which sets inpatient rates for next year. The hospital lobbying group charged that facilities are facing major challenges not just from the pandemic. 

“Historic inflation has extended and heightened the already severe economic instability brought on by the pandemic resulting in razor-thin operating margins from massive surges in input costs, including a struggling workforce, drug costs, supplies and equipment,” the letter said. 

The Centers for Medicare & Medicaid Services (CMS) had proposed a market basket update of 3.2% to Medicare payments for the 2023 federal fiscal year that begins this fall. This was on top of a 2.7% payment update for 2022. The proposed rule released in April calls for a proposed 0.4 percentage point productivity adjustment.

AHA contends that the market basket and productivity update don’t reflect the major inflation jump and growth in expenses. 

“More recent data shows the market basket for [fiscal year] 2022 is trending toward 4%, well above the 2.7% CMS actually implemented last year,” the group wrote. “Additionally, the latest data also indicate decreases in productivity, not gains.”

AHA is asking Congress to in turn press CMS to implement a retrospective adjustment for 2023 to “account for the difference between the market basket update that was implemented for [fiscal year] 2022 and what the market basket is currently projected to be for [fiscal year] 2022.”

The agency should also remove the productivity cut for next year. 

“These two critical changes to the IPPS proposed rule would help to more accurately reflect the cost of providing healthcare and provide hospitals and health systems with some of the resources needed to continue to help their patients and communities,” the AHA wrote.

The AHA’s letter comes as hospitals have experienced a mixed bag in their latest financial filings for the first quarter of the year when facilities faced a massive surge in January due to the highly transmissible omicron variant of COVID-19.

Despite major headwinds in the first quarter of 2022, some hospital chains were able to turn a profit in the quarter. For example, HCA Healthcare posted a net income of nearly $1.3 billion in the first quarter, and Tenet Healthcare generated $139 million in profit.

Some nonprofit systems saw major losses in the first quarter, including Kaiser Permanente with a net loss of $1 billion.

Hospitals say that while the cases and hospitalizations from COVID-19 hit a high in January, numbers started to ebb and rates for contract labor are starting to come down from massive pandemic highs.