Hospitals Urge Higher Medicare Payment Updates

The American Hospital Association (AHA) has called on the Medicare Payment Advisory Commission (MedPAC) to update payment recommendations for hospitals, post-acute care facilities, and physicians ahead of its January 16 public meeting. The AHA urged MedPAC to issue a higher update than the current-law market basket update plus an additional 1% for the hospital inpatient and outpatient prospective payment systems.

The AHA disagreed with a draft recommendation from the commission in December that would reduce fiscal year 2026 inpatient rehabilitation facility PPS payments by 7%. Instead, the AHA urged MedPAC to support a current-law market-basket update for IRFs. The AHA made similar requests for payments to skilled nursing facilities and home health agencies.



MedPAC was also urged by the AHA to recommend a higher update to physician reimbursement that would more fully account for impacts from inflation and physician fee schedule cuts. The AHA argued that the proposed 50% increase in the Medicare Economic Index (MEI) for physician reimbursement is insufficient to offset the impact of rising input costs and the 2% reimbursement cut in 2023, as well as the estimated 3.25% cut in 2024.

The AHA's recommendations come as hospitals face consistent negative margins and increasing input costs, particularly for labor and supplies. The current market basket updates have not kept pace with these rising costs, placing strain on many providers. The AHA urged MedPAC to consider these factors when making its final recommendations for Medicare payment updates.



In conclusion, the AHA's call for higher Medicare payment updates highlights the financial challenges faced by hospitals and the need for policymakers to consider the impact of inflation and input cost growth on healthcare providers. By addressing these concerns, MedPAC can help ensure that hospitals and other healthcare facilities have the resources they need to provide high-quality care to patients.