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CMS IPPS Update Far Too Small Given Current Challenges

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As hospitals throughout the nation struggle to find their financial footing through this latest phase of the COVID-19 pandemic, the Centers for Medicare & Medicaid Services’ proposed Medicare Inpatient Prospective Payment System (IPPS) update for the coming fiscal year falls woefully short of what is needed to preserve access to care and rebuild a tattered health care system. 

The proposed market basket update of 2.7% (before a 0.5% add-back to account for CMS cuts in prior years) is well behind the current 8.6% rate of inflation and will actually result in increased hospital losses when they provide care to Medicare patients. 

In a forthcoming member alert, CHA will ask for your help to make sure that California’s congressional delegation understands that the proposed update must be adjusted upward — especially given the fact that more than half of California’s hospitals are financially underwater. 

In CHA’s letter to the delegation, we will be asking CMS to do three things:  

  • Adjust the inflation increase to account for the now higher levels for the current year (fiscal year 2022)  
  • Eliminate a proposed productivity cut for the fiscal year 2023 payment update 
  • Use data that accurately reflect hospitals’ input price inflation when calculating the payment update    

CMS’ meager proposal comes at a time when hospitals are reeling from the impact of COVID-19, facing the highest costs to care for patients seen in four decades. Median expenses per discharge for California hospitals rose 15% in 2021, driven by higher labor costs (+16%), supply chain shortages impacting pharmaceuticals costs (+41%), and medical supply costs (+19%) — all beyond hospitals’ control.  

And the health system is screaming for not less, but greater investment — in programs to reduce health disparities, expand behavioral health services, and recruit and retain high-quality health care workers.  

All of you know firsthand the challenges COVID-19 has brought when it comes to building long-term plans for care delivery. If the CMS adjustment is not increased, it will be Californians who suffer by losing access to vital health services. Those most affected: people who live in underserved communities. Those who already struggle with access to equitable care.  

Thank you, in advance, for taking time to elevate your voice with California’s federal representatives. Every hospital must be heard and counted in the fight for care for Californians.