CMS Finalizes 2.9% Inpatient Payment Rate Hike Amid Rising Hospital Costs

The Biden administration has finalized payment rates for inpatient services in 2025, increasing the rate from the initially proposed 2.6% to 2.9%. This adjustment, while slightly higher, is still considered insufficient by many healthcare providers. The Centers for Medicare & Medicaid Services (CMS) announced that this new rate would boost payments to inpatient hospitals by $2.9 billion.

Soumi Saha, senior vice president for government affairs at Premier, criticized the increase, stating it falls short of covering the true costs of care, which are exacerbated by inflation, labor shortages, and an aging population. Saha warned that inadequate Medicare payments threaten the sustainability of American healthcare, leading to potential closures, clinician burnout, and longer wait times for patients.

In addition to the payment rates, CMS has introduced a policy update to better support hospitals treating patients experiencing homelessness. This initiative will likely increase payments for hospitals dealing with housing insecurity. Moreover, long-term care hospitals will be required to report data on social needs such as housing and food insecurity. CMS also plans a five-year demonstration project to assess whether episodic-based payments for high-cost procedures can reduce costs while maintaining care quality. This model aims to improve care coordination, patient transitions, and outcomes, and reduce avoidable readmissions.

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