3.2% payment increase is not enough, American Hospital Association says

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The American Hospital Association is “extremely concerned” that the Centers for Medicare and Medicaid Services is proposing only a 3.2% payment update for general acute care hospitals in 2023, said Executive Vice President Stacey Hughes.

The payment increase is not enough, she indicated, given the current state of inflation as well as continued labor and supply cost pressures on hospitals and health systems.

Blair Childs, senior vice president for Public Affairs at Premier, also said the proposed payment update of 3.2% does not adequately account for the increased labor costs. Hospitals’ labor rates alone jumped 16.6% on a per-paid-hour basis since Q4 2020 and do not show signs of slowing, Childs said.

“Considering that labor accounts for nearly 68% of the CMS market basket calculation, the proposed payment update fails to cover the actual costs,” he said.

CMS released the Hospital Inpatient Prospective Payment System proposed rule on Monday.


In the proposed rule, CMS projects Medicare disproportionate share hospital payments and Medicare uncompensated care payments combined will decrease by approximately $0.8 billion.

This means payments to hospitals are decreasing, the AHA said.

“Even worse, hospitals would actually see a net decrease in payments from 2022 to 2023 under this proposal because of proposed cuts to DSH (disproportionate share hospital) and other payments,” Hughes said. “This is simply unacceptable for hospitals and health systems, and their caregivers, that have been on the front lines of the COVID-19 pandemic for over two years now.”

Essential Hospitals President and CEO Dr. Bruce Siegel said he was also disappointed to find that uncompensated care-based Medicare disproportionate share hospital payments are projected to decline for a third consecutive year.

“This would undermine vital support for essential hospitals as they recover from the financial stress of the COVID-19 public health emergency, which continues,” Siegel said.


CMS is proposing to apply a 5% cap on any decrease to a hospital’s wage index from its wage index in the prior fiscal year, regardless of the circumstances causing the decline. This means that a hospital’s wage index would not be less than 95% of its final wage index for the prior year.

CMS is also proposing to apply the proposed wage index cap policy in a budget neutral manner through a national adjustment to the standardized amount.

The AHA said it was pleased the agency has proposed a 5% cap on any decrease to a hospital’s wage index, though the organization wants it applied in a non-budget neutral way.


Proposed policies would better measure healthcare quality disparities and would improve the safety and quality of maternity care. CMS is also soliciting comments on how providers could tackle climate change.

“Hospitals and health systems share CMS’ deep commitment to advancing health equity,” the AHA said.

Siegel also applauded CMS’s focus on improving healthcare equity and reducing health disparities.

“Essential hospitals embrace and champion equity with their mission to serve underrepresented people and communities. So, we welcome this equity focus as seen in the proposed rule’s requests for information related to the Hospital Readmissions Reduction Program, climate change, and maternal health,” Siegel said. “But we caution that 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. It also will require a sound foundation of evidence, including socio demographic data , to understand the challenges historically disadvantaged patients face.”

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com

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