Hospital associations push CMS for higher 2027 pay bump, softer ramp-up for mandatory model

Alongside their annual criticisms of the Centers for Medicare and Medicaid Services’ annual pay rate increase for inpatient care, hospital groups are pushing the agency to reconsider a mandatory nationwide test of an episode-based payment model rolling out for most hospitals next fall. 

In public comment letters submitted this week, the industry associations and other provider-adjacent organizations told CMS that the 2.4% net pay bump proposed in April’s Inpatient Prospective Payment System (IPPS) proposed rule offers scant support for hospitals staring down substantial financial headwinds. 

The groups took issue with both components of the proposed 2.4% increase: a 3.2% annual market basket update that the American Hospital Association (AHA) said was “not keeping pace with real-world cost growth”, and a statutory 0.8 percentage point productivity adjustment that the AHA said has long proven to be “a poor fit” for measuring anticipated productivity within healthcare.

“We urge CMS to revisit both its market basket forecasts and the magnitude of the productivity adjustment, and to consider the combined effect on provider reimbursements,” the AHA wrote in one of its comment letters to the agency. “As such, we ask CMS to work with Congress to reduce the magnitude of the productivity adjustment.”

The Federation of American Hospitals (FAH), which represents more than 1,000 for-profit hospitals, noted that CMS’ cumulative IPPS rate updates have been 4.2 percentage points behind cumulative inflation since the 2021 fiscal year, “a gap that compounds year over year” and should be corrected with more timely inflationary data plus a forecast error correction policy. 

Premier and Vizient, which both provide analytics and other services to hospital customers, echoed the arguments. Each of the organizations also had varying critiques of the calculations CMS makes for certain supplemental payments like Medicare Disproportionate Share Hospital Payments, which they noted have not been sufficiently disclosed to the public, and called for CMS to conduct a court-ordered transition away from its increased wage index for low-wage hospitals in a manner that does not budget neutral (in other words, does not pull funds from all other hospitals). 

But beyond the pay changes, chief on hospital groups’ minds is CMS’ proposal to expand the Comprehensive Care for Joint Replacement (CJR) Model. The payment model—tested from April 2016 to 2024 with “significant” savings and care quality, per CMS—holds hospitals responsible for government spending on Medicare patients’ joint replacement surgeries, hospital stays and the first 90 days of recovery including follow-up care.

The CJR-X Model would be mandatory for most hospitals starting Oct. 1, 2027. AHA and FAH dedicated standalone comment letters telling the agency why the plan should be reconsidered, or at least made voluntary. 

“While we appreciate CMS’ efforts to expand the reach of value-based models, we believe that mandatory participation in the CJR-X Model would present significant challenges, particularly for hospitals that lack the scale or financial capacity to make the necessary investments in care redesign,” AHA wrote. “A phased or voluntary approach would better support success, allowing organizations to build the infrastructure and partnerships needed to achieve shared savings and improved outcomes.”

FAH said it “strongly opposes” implementation of the CJR-X Model as proposed, writing that the model “presents a complex set of structural, methodological and operational concerns that warrant substantial reconsideration before the model is finalized.” The group pointed to “several” design elements of the model that “impose avoidable operational complexity and overlapping accountability obligations on participating hospitals” that aren’t present in other recent Innovation Center models, such as the Transforming Episode Accountability Model (TEAM). 

FAH called for CMS to delay implementation for at least a year, and provide an initial year where participating hospitals do not bear risk. The AHA called for CJR-X’s initial year to be “a data-sharing period only, followed by at least two years of no downside risk for all participants as well as upside-only risk for special designation hospitals for the model’s entire duration.”

The organizations wrote in their letters that they were broadly supportive of proposals to increase support for educational programs, such as updates defining new residency programs under graduate medical education policies. 

AHA said it backed the removal of certain measures from quality reporting “that are no longer providing useful information to improve patient outcomes,” while FAH said it supported several changes related to the Medicare Promoting Interoperability Program and proposed updates to electronic prior authorization. 

CMS typically finalizes its annual IPPS rule in late July or early August.