Hospital groups and providers are demanding the Biden administration increase a proposed 3.2% pay bump for inpatient payments to facilities, arguing inflation and a staffing crisis are still hitting them hard.
The Centers for Medicare & Medicaid Services (CMS) proposed the pay bump for fiscal year 2023 as part of the Inpatient Prospective Payment System rule released Monday. But hospitals are already pushing back that more relief is needed, especially as labor rates are still high and the agency proposed cuts to disproportionate share hospital (DSH) payments.
“We must conclude the CMS net 3.2% market basket update is woefully inadequate,” said the Federation of American Hospitals in a statement. “It does not reckon for the hyper-inflation, staffing crisis, and the continuing pandemic, which will impact resources necessary for patient care well into the future.”
The agency said Monday that the 3.2% bump reflects a projected 0.4 percentage point productivity adjustment, which reflects changes in physician productivity. The agency also included a 0.5 percentage point adjustment required under federal law.
CMS projected that overall hospital payments will increase by $1.6 billion for the federal fiscal year that begins in October.
It also predicts that DSH and Medicare uncompensated care payment cuts will decline by $0.8 billion. However, Congress has traditionally delayed such cuts from going into effect and could postpone them again.
CMS said in a fact sheet that the payment rates are based on the best available data, but some experts question whether the agency is missing key data surrounding a massive staffing crisis facing hospitals.
“Given many of the compounding issues that hospitals are facing right now we don’t see this payment update is adequate,” said Aisha Pittman, vice president of policy for healthcare improvement company Premier Inc., which works with more than 4,000 hospitals and health systems. “We have seen a 6.5% increase in labor rates for the same data CMS uses to contribute to the market basket calculation.”
Hospitals across the country have faced a staffing crunch exacerbated by the pandemic, including paying higher rates for contract labor and a large number of retirements.
“Prior to pandemic knew there was going to be a nursing staff shortage [that] would be projected to be a shortage of 1 million by 2020,” Pittman told Fierce Healthcare.
But hospitals were happy with other parts of the rule, especially a proposed 5% decrease to a hospital’s wage index. Groups are also happy with the agency’s proposal to employ more than one year of data to estimate a facility’s uncompensated care costs.
“We have long stated that utilizing a single year of S-10 data may increase the potential for anomalies and undue fluctuations in uncompensated care payments especially with hospitals experience unforeseen circumstances such as a pandemic,” said the American Hospital Association in a statement.
Hospitals also cheered CMS’ push to include three quality measures focused on health equity in the Hospital Quality Reporting Program, part of a larger administration effort to close equity gaps in care.
America’s Essential Hospitals welcomed the equity focus but cautioned that CMS needs to go just beyond hospitals, as “meaningful change will require partners and policies outside our hospitals’ circle—housing, education, social services and other stakeholders who touch upstream factors that influence health,” President and CEO Bruce Siegel said in a statement. “It also will require a sound foundation of evidence, including sociodemographic data, to understand the challenges historically disadvantaged patients face.”