Medicare rates should increase more than the 2.6 percent the Centers for Medicare & Medicaid Services calls for in its proposed FY 2025 Medicare inpatient prospective payment system regulation, the Alliance of Safety-Net Hospitals has told CMS in a formal response to the proposed rule.

In addition, CMS should increase the Medicare disproportionate share (Medicare DSH) uncompensated care pool, alter its proposed changes in the Medicare area wage index, and make specific refinements of the agency’s proposed “Transforming Episode Accountability Model” (TEAM).

In its letter to CMS, ASH calls CMS’s proposed inpatient prospective system rate increases of 2.6 percent inadequate and urges CMS instead to increase those rates 8.81 percent, a sum consisting of two parts:  a 4.51 percent increase to better reflect the actual increase in the cost of delivering care and another 4.3 percent forecast error adjustment to account for three consecutive years of rate increases that fell far short of covering actual cost increases.

Similarly, ASH urges CMS to raise its proposed increase in the Medicare DSH uncompensated care pool from $560 million to $1.23 billion.  In its letter, ASH maintains that the actual uninsured rate is higher than the assumption underlying the calculation of the $560 million figure and that the COVID-era decline in hospitalizations, which led to a $1.9 billion reduction of uncompensated care pool funding, has now given way to a period during which low-income patients are now addressing health problems they neglected during the pandemic, thereby justifying the greater increase in the uncompensated care pool.

In addition, ASH calls for:

  • Changes in CMS’s proposal for the Medicare area wage index, including an increase in the labor-related share to reflect the unusual growth in hospital labor costs driven primarily by the enormous increase in the cost of contract labor; a glide path to help hospitals adjust to the impact of the once-a-decade update of the core-based statistical area (CBSA) delineations used to calculate wage indexes; and termination of the low wage index hospital policy that for the past five years has reduced the wage indexes of hospitals in high-cost areas, including many areas in which community safety-net hospitals are located, to redistribute that money to hospitals in low-cost areas – a change made without any policy rationale.
  • Reduced over-reliance on Health Professional Shortage Area (HPSA) scores in the distribution of new graduate medical education slots, an approach CMS has taken that is contrary to Congress’s intent when it authorized the new residency slots and that effectively blocks hospitals in large parts of the country, including many where community safety-net hospitals are located, from obtaining new slots even though they meet the other criteria for new positions established in the enabling legislation.
  • Changes in the proposed TEAM program, including making participation in the program voluntary; not targeting for participation, as proposed, geographic areas with disproportionate numbers of safety-net hospitals; permitting participating hospitals to choose involvement in only some of TEAM’s designated surgical procedures; reducing the size of the payment discount CMS requires; establishing a broader range of target prices; permitting safety-net hospitals to participate without exposure to downside risk; and increasing the number of procedures participants must perform.

Learn more about ASH’s perspective on the proposed FY 2025 Medicare inpatient prospective payment system rule from ASH’s formal comment letter to CMS about that proposed rule.