Becker's Hospital Review

8 CFO / FINANCE CMS sets 2.9% inpatient pay bump for hospitals in 2025: 6 things to know By Alan Condon C MS on Aug. 1 released its Inpatient Prospective Payment System final rule, which will increase inpatient hospital payments by 2.9% in fiscal year 2025. e 2.9% net pay bump is a marginal increase from the 2.6% increase CMS proposed in April, but the American Hospital Association argues the "inadequate" payment update does little to help the inpatient hospital sector when 40% of hospitals are still losing money. "CMS' payment updates for hospitals will exacerbate the already unsustainable negative or breakeven margins many hospitals are already operating under as they care for their patients," Molly Smith, AHA group vice president for public policy, said in an Aug. 1 statement. "e AHA is deeply concerned about the impact these inadequate payments will have on patient access to care, especially in rural and underserved communities." Six things to know: 1. e 2.9% payment update represents a hospital market basket increase of 3.4% and a productivity cut of 0.5%. CMS expects the rate adjustment to increase total hospital payments by $3.2 billion in 2025. 2. CMS also finalized many of its provisions in the Transforming Episode Accountability Model, including mandatory participation for IPPS hospitals in certain areas and a program term of five years beginning Jan. 1, 2026. e TEAM model will bundle payment to acute care hospitals for five types of surgical episodes: • Lower extremity joint replacement • Surgical hip/femur fracture treatment • Spinal fusion • Coronary artery bypass gra • Major bowel procedure 3. e AHA has pushed back against mandatory participation in the TEAM model, arguing that it places too much risk on providers with too little opportunity for reward through shared savings. "Not only is the model extremely similar to other bundled payment approaches that have failed to meet the statutory criteria for expansion as they have not reduced program costs or generated net savings, it puts at particular risk many hospitals that are not of an adequate size or in a position to support the investments necessary to succeed," Ms. Smith said. 4. CMS has also cemented various proposed changes to its quality reporting and value programs, including: • Adding seven measures to the inpatient quality reporting program focused on hospital patient safety-related practices and outcomes while removing five other measures. • Updating the Hospital Consumer Assessment of Healthcare Providers and Systems survey, resulting in changes to the sub-measures used in the IQR and the hospital value-based purchasing program. • Increasing the number of mandatory electronic clinical quality measures that hospitals must report for both the IQR and the Promoting Interoperability programs. 5. e agency also finalized its proposal to implement a separate payment to small, independent hospitals for establishing and maintaining access to a buffer stock of essential medicines. 6. Beginning Nov. 1, CMS will require hospitals and critical access hospitals to report to the CDC certain data on acute respiratory illnesses, such as confirmed infections of COVID-19, influenza and respiratory syntactical virus among hospitalized patients, hospital capacity, and limited patient demographic information, including age. Most provisions of the final rule take effect Oct. 1. n IU Health takes 73% hit to operating income despite increased volumes, revenue: CFO By Alan Condon I ndianapolis-based Indiana University Health posted $53.1 million in operating income (1.2% margin) for the six months ending June 30, a 73% slide from the $195.7 million (4.6% margin) reported in the same period last year. However, operating income from core operations was comparable year over year. Core operating revenue increased 7.1% ($296.4 million) versus the first half of 2023 due to strong patient volumes, according to financial documents published Aug. 1. Core operating expenses, excluding strategic projects, grew by 7.5% ($302.7 million) year over year as costs of labor, supplies and drugs increased to meet the higher demand for surgeries and inpatient care. Consolidated revenue increased 5.1% versus the first half of 2023 to $4.5 billion, and consolidated expense increased 8.8% year over year to $4.4 billion. "Costs have surged at a faster pace than our revenue growth as labor and supply and drug costs continue to increase, and we focus on strategic capital investments that support our future vision," Jenni Alvey, senior vice president and CFO, said in an Aug. 1 news release. "We remain confident that our continued focus on operational efficiencies and growth will aid us in achieving IU Health's vision of making Indiana one of the healthiest states in the nation by ensuring healthcare is of the highest quality, affordable and accessible." Despite financial and operational challenges facing the healthcare industry, IU Health said it remains committed to a multi-year strategy and affordability plan to bring commercial prices as a percentage of Medicare consistent with national averages by 2025. n

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