CMS proposes Medicare pay hikes for hospitals

Modern Healthcare – Friday, April 11, 2025
By Bridget Early

Medicare reimbursements for inpatient hospital care would increase 2.4% in fiscal 2026 under a proposed rule the Centers for Medicare and Medicaid Services published Friday.

Long-term care hospitals would get a 2.6% pay hike under the same draft regulation. A separate rule issued Friday calls for a 2.4% boost to inpatient psychiatric facility rates next fiscal year, which begins Oct. 1.

The proposed hospital inpatient prospective payment system update reflects a 3.2% increase in the market basket used to calculate rates, minus a productivity adjustment. Hospitals that don’t participate in the quality reporting program or don’t meet “meaningful use” standards for electronic health record usage would receive lower payments.

The reimbursement increase is insufficient, and underscores the risks of a congressional Republican plan to drastically reduce federal Medicaid funding and the impending expiration of enhanced subsidies for health insurance exchange plans, the Federation of American Hospitals said in a news release.

“While CMS’s proposed update reflects the inflation formulas established by law, the reality is that patient care still faces the twin problems of hangover cost increases from hyperinflation and the cumulative effect of inadequate payment over time from Medicare and Medicaid,” the Federation of American Hospitals said. “This is why it’s mission-critical Congress protects Medicaid coverage by avoiding funding cuts as well as extends the enhanced tax credits to protect individual coverage.”

The inpatient hospital proposed rule includes a slew of requests for information as the agency pivots under its new administrator, Dr. Mehmet Oz. Chief among them is a call for input on how the federal government might further deregulate under President Donald Trump’s executive order directing agencies to eliminate 10 rules for each new one proposed.

“Healthcare providers serving Medicare beneficiaries face numerous regulatory requirements that, while intended to protect the health and safety of the beneficiaries, often result in duplicative efforts and unnecessary administrative burdens,” CMS wrote in a notice on its website. “These requirements can divert resources from patient care, contribute to inefficiencies and can create financial strain on providers.”

The agency wants to hear from the industry on how it could improve digital quality measurement as the sector transitions to electronic clinical quality measures. For instance, CMS asks for input on using Fast Healthcare Interoperability Resources, or FHIR, to complete electronic quality measurement.

CMS further solicits input on updating the quality measures themselves, with a focus on well-being and nutrition, that could be modified in future rulemakings.

In the draft inpatient hospital regulation, CMS proposes modifying four metrics for complications, mortality rate and readmissions. The agency also proposes eliminating measures for health equity, social drivers of health and COVID-19 vaccinations of healthcare workers.

CMS also proposes tweaks to the Transforming Episode Accountability Model, known as TEAM, such as adding a neutral score for hospitals that don’t generate sufficient quality data.

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