Concerns over new quality reporting requirements, modifications to medical residency training programs and—of course—annual pay rate increases topped the hospital industry’s feedback on the Biden administration’s proposed Inpatient Prospective Payment Systems (IPPS) rule for 2025.
As revealed back in April, the Centers for Medicare & Medicaid Services (CMS) has floated a 2.6% increase for inpatient hospitals’ payments for fiscal 2025, which begins in October. That translates to a $3.3 billion increase over 2024, per CMS, and joins a slew of other proposals for Medicare hospitals targeting health equity, care coordination and other focus areas for the administration.
As expected based on their initial reactions to the proposed rule, hospital groups’ public comments for CMS didn’t shy from critiquing the “inadequate” pay bump.
Though the American Hospital Association (AHA) kicked off its letter praising CMS’ proposals to fund drug buffer stocks and better support low-volume and Medicare-dependent hospitals, the 2.6% net payment update doesn’t address the “unrelenting financial challenges faced by hospitals and health systems.” Letters from America’s Essential Hospitals (AEH) and the Federation of American Hospitals (FAH) similarly highlighted hospitals’ high expenses.
The AHA and the FAH specifically called for CMS to authorize a one-time retrospective adjustment to the market basket forecasting methodology to correct underestimates in recent preceding fiscal years. All three of the hospital groups also contested the calculations CMS’ actuary uses to determine disproportionate share hospital (DSH) payments, arguing for greater transparency or outright amendments.
Projections from the CMS Office of the Actuary used in the Medicare DSH formula, the AEH wrote, “are outdated and do not incorporate the latest data available about coverage losses that have occurred due to the expiration of flexibilities tied to the COVID-19 [public health emergency].”
Noting the available data “that seemingly contradict” the actuary’s analysis, the AHA wrote that CMS’ “failure” to share specifics on the actuary’s DSH payment formula in the IPPS proposed rule “unmistakably violates the Administrative Procedure Act.”
Beyond these, the hospital groups shared concerns about CMS’ changes to medical residency under 2025’s IPPS proposed rule. While adjustments to increase training slots for mental health providers and those in rural or underserved areas got the initial headlines, the FAH and the AHA pointed to proposed modifications to the criteria for new residency programs.
Each urged CMS to both clarify and provide some flexibilities over a new requirement that 90% or more residents entering the training program be postgraduate year one trainees. They pushed back on a related request for information from the agency on a policy that appears to restrict too many program directors or faculty with extensive experience in their specialty from joining a new residency training program.
“The agency stated that it wants to avoid new programs essentially taking on all or most of an existing program’s experienced faculty, which may lead to closure of that existing program,” the AHA wrote of the latter issue.
However, the group continued, “We are not aware of any other industry or job requirement where experience in the very same field disqualifies a person from the job. While we appreciate CMS’ desire to avoid the loss of an existing program’s experienced program director or faculty, we seriously question the reasonableness of such a policy.”
Finally, the AHA and the FAH’s letters pushed back on some of the new structural and clinical quality measures CMS is proposing to introduce for Medicare hospitals. For each of these, the hospital organizations underscored the workload and cost burden these “heavy-handed” proposals would bring and called for CMS to delay specific, controversial measures—such as patient-reported outcome-based performance measures related to total hip arthroplasty and total knee arthroplasty.
CMS typically finalizes its inpatient pay rule during the late summer. For 2024, the agency relented somewhat to industry and other stakeholders’ concerns and inched its proposed annual rate increase from a net 2.8% to 3.1%.
Also coming alongside the 2025 rule proposal came the unveiling of CMS’ Transforming Episode Accountability Model (TEAM), a mandatory shared savings model to test whether episode-based payments for five common procedures would incentivize better coordination between providers during and after surgery.
The AHA, in a separate letter sent this week, pushed CMS to make participating in TEAM voluntary and noted that other “extensive changes” to the models’ “significant design flaws” are needed before mandatory implementation should be considered.