Medicare Delays Recouping $7.8 Billion From Hospitals Over Billing Errors
WASHINGTON – Medicare officials have announced they will substantially delay plans to claw back $7.8 billion from hospitals due to billing errors related to wage index adjustments, a reversal that provides immediate financial relief to healthcare providers facing a looming deadline. The Centers for Medicare & Medicaid services (CMS) revealed the decision late Friday, extending the repayment period and adjusting the amount hospitals will ultimately need to return.
The move comes after months of intense lobbying from hospital associations and lawmakers who warned that a rapid recoupment of the funds would destabilize already strained hospital finances. The disputed payments stem from a CMS calculation error in how it determined wage indexes - geographic adjustments to hospital reimbursement rates – between 2019 and 2023.While hospitals where initially notified of the overpayments, the scale and speed of the planned recovery sparked widespread concern, particularly as many facilities continue to grapple with rising costs and workforce shortages.
CMS initially proposed recouping the $7.8 billion over a relatively short timeframe, beginning in late 2024. Though, the agency now plans to phase in the repayments over a longer period, starting in October 2025 and extending through December 2026. Furthermore, the total amount subject to recoupment has been reduced to approximately $6.2 billion after CMS re-examined the data and identified additional adjustments.
“We heard the concerns of the hospital community loud and clear,” said a CMS spokesperson in a statement. “We are committed to ensuring a fair and manageable process for recovering these overpayments while minimizing disruption to patient care.”
The American Hospital Association (AHA) praised the decision as a “meaningful step in the right direction.” “We appreciate CMS’s responsiveness to our concerns and its willingness to work with hospitals to find a solution that protects access to care,” said AHA President and CEO rick Pollack. “This revised approach will provide hospitals with much-needed financial stability.”
The delay and reduced recoupment amount offer a temporary reprieve for hospitals, but the issue of wage index accuracy remains unresolved.CMS has indicated it is working on long-term solutions to improve the wage index calculation methodology and prevent similar errors in the future. The agency is expected to release further details on the revised recoupment plan in the coming weeks.
