The CMS has finalized a 2.9% pay increase for outpatient hospital services in 2025, but the American Hospital Association says the additional pay increase is far less than hospitals need to meet today’s operational challenges .

“Medicare’s sustained and substantial underpayment of hospitals has lasted for nearly two decades, and today’s final outpatient care rule only exacerbates this chronic problem,” said Ashley Thompson, vice Senior President of the AHA, in a November 1 press release. “The agency’s final increase of less than 3% for outpatient hospital services will make it more difficult to provide care, invest in the health workforce and respond to new challenges, such as cybersecurity threats. These payments Inadequate health care will negatively impact patient access to care, particularly in rural and underserved communities across the country.

Hospital margins are gradually improving across the sector, but nearly 40% of facilities are still operating in the red and there is a growing gap between the best and worst performing hospitals, according to Kaufman Hall. Multiple factors are contribute to this growing divide, including market positioning, payer mix, scope of outpatient services, wage inflation, and management of contract work.

CMS’s final outpatient payment rule comes three months after agency finalized a 2.9% salary increase for inpatient hospital payments in 2025.

The 2.9% salary increase is a marginal increase from CMS’s initial 2.6% increase. propose in April, but the AHA argues Updating “inadequate” payments does little to help the hospital sector when 40% of hospitals are still losing money.

“CMS’ payment updates for hospitals will exacerbate the already unsustainable negative or breakeven margins that many hospitals already operate with when caring for their patients,” Molly Smith, AHA Group vice president for policy public, said in a statement. “The AHA is deeply concerned about the impact these inadequate payments will have on patient access to care, particularly in rural and underserved communities.

Chip Kahn, president and CEO of the Federation of American Hospitals, said the organization had raised concerns that CMS’s hospital payment updates had not reflected inflation and hospital care costs which remained high.

“Frankly, these inadequate payment updates and CMS’s real cuts to Medicare DSH for the most vulnerable leave hospitals struggling to meet patient needs,” Mr. Kahn said. said. “To add insult to injury, (the) final rule compounds this problem with an unnecessary demonstration from the Center for Medicare and Medicaid Innovation TEAM that would impose a mandatory payment model on hundreds of hospitals across the country. demonstrates that excessive burden on hospitals will reduce seniors’ access to non-emergency services and force hospitals serving the nation’s most vulnerable patients to assume additional financial risks.

The AHA and FAH also objected to the political framework of two senators which details a plan to impose site independent payments on hospitals.

A site-neutral payment policy would mean that payment for a health service provided to a patient would be the same regardless of the context in which the service is provided. Supporters of the policy see it as a way to lower health care costs for patients and taxpayers through Medicare, but it would result in significant pay cuts at hospitals and health systems.

Hospitals say their higher prices come from the higher overhead costs they incur compared to other providers, such as emergency services and 24-hour access, regulatory compliance, and costs for supplies and services. workforce.

The latest framework, introduced by U.S. Senators Bill Cassidy, M.D., R-La., and Maggie Hassan, D-N.H., on Nov. 1, says the policy would reduce health care costs for patients, improve Medicare’s financial stability , reduce provider consolidation, and help rural hospitals serving communities in need.

However, the AHA argues that this framework would limit or eliminate critical care in hospital settings, leading to increased wait times and decreased access to care.

“It is irresponsible to think that recovering up to $140 billion in Medicare spending for seniors will not destabilize access to care,” AHA Executive Vice President Stacey Hughes said in a statement. statement. “Rather than addressing the root causes of physician recruitment, this instead proposes dramatic and unsustainable cuts to Medicare, reducing seniors’ access to essential hospital care.