CMS proposes nearly 3% bump to inpatient pay in fiscal 2024 and installs equity requirements

The Biden administration is proposing a 2.8% bump to inpatient payments to eligible hospitals in the next fiscal year, a $3.3 billion boost for facilities. 

The Centers for Medicare & Medicaid Services (CMS) released the proposed Inpatient Prospective Payment Systems (IPPS) rule and the Long-Term Care Hospital pay rule. In addition to changes to payment rates, the agency is proposing to measure hospitals on how they tackle health equity. 

“CMS is helping to build a resilient healthcare system that promotes good outcomes, patient safety, equity and accessibility for everyone,” said CMS Administrator Chiquita Brooks-LaSure in a statement. 

Hospitals that participate in the IPPS Quality Reporting Program and meaningfully use electronic records are projected to get a 2.8% increase to payments for fiscal year 2024, which begins in October. The pay raise is based on a 3% projected hospital market basket update of 3%, which is “reduced by a projected 0.2 percentage point productivity adjustment,” according to a release on the rule. 

Overall, this will lead to a $3.3 billion increase in inpatient payments. Long-term care hospitals are expected to get reduced payments by 2.5%, or $59 million.

“Overall, CMS expects [long-term care] payments under the dual-rate payment system to decrease by 0.9%, or $24 million, primarily due to a projected decrease in high-cost outlier payments in FY 2024 compared to FY 2023,” the agency said.

Hospital groups slammed the proposed payment rates for the IPPS and long-term care hospitals as inadequate.

"Layering these inadequate inflationary adjustments on top of Medicare’s existing underpayments to hospitals does not reflect the reality of the world hospitals are providing care in," said Ashley Thompson, senior vice president of public policy analysis and development for the American Hospital Association, in a statement.

America's Essential Hospitals, which represent safety-net hospitals, also slammed the pay rate update and a proposal to cut disproportionate share hospital payments by more than $200 million.

The Federation of American Hospitals called the update "disappointing. It fails to recognize today's headwinds that will strain the health safety net in 2024," said President Chip Kahn in a statement.

In addition to the payment rates, the agency is also proposing to install health equity adjustments as part of the Hospital Value-Based Purchasing Program. The goal is to give hospitals an incentive to tackle health equity gaps.

“We are proposing to add 15 new health equity hospital categorizations for the FY 2024 IPPS payment impacts,” a fact sheet on the rule said.

CMS also proposed to change the severity of three diagnosis codes that describe homelessness to coincide with higher resource costs of “cases with these diagnosis codes compared to similar cases without these codes,” the fact sheet added. 

The new equity effort is part of a major priority by the Biden administration. CMS has sought to add equity adjustments for the Medicare Shared Savings Program, Medicare Advantage and Part D.

CMS also proposed rural emergency hospitals can be designated for graduate medical education training sites, ensuring more residents can train in a rural setting and help ease shortages.

CMS will hold a comment period on the rule through June 9.