CMS released its preliminary plans for the Inpatient Prospective Payment System (IPPS), proposing a 2.4% increase for inpatient hospital services and a 2.6% increase for long-term care hospitals. These are the first payment plans unveiled since President Trump’s return to the White House—and they’re drawing criticism across the healthcare industry.

“Medicare payments to hospitals are insufficient and threaten the long-term strength and resilience of American healthcare,” said Soumi Saha, SVP of Government Affairs at Premier Inc.. “Hospitals are expected to absorb skyrocketing costs while continuing to deliver care—it’s not sustainable.”

The American Hospital Association echoed this concern, describing the proposed updates as disappointing. Ashley Thompson, the association’s senior vice president for policy, said the proposal could “hurt our ability to care for our communities,” especially in rural and underserved areas already operating at a loss.

Hospitals also face added pressure from:

• Tariffs on Chinese medical supplies
• Potential cuts to Medicaid by Congress
• Reduced funding for the National Institutes of Health
• Ongoing workforce shortages and clinician burnout

The Federation of American Hospitals, representing for-profit facilities, added that the payment increases don’t reflect real-world inflation. They warned that hospitals may be forced to scale back services or close entirely without additional support.

“Prepare for the worst while hoping for the best,” advised Kevin Holloran of Fitch Ratings, urging health systems to conserve cash and expand more profitable services.

While CMS may revise the rates later this year—as it did in 2025, raising its initial 2.6% proposal to 2.9%—hospital leaders say that even higher adjustments would fall short of what’s needed to keep the nation’s healthcare infrastructure stable.