Beyond the Big Number: 3 Federal Regs for CFOs to Watch

Healthcare insiders 'DSH' on IPPS, 340B eligibility, and the future of telehealth.

The fiscal year (FY) 2025 IPPS proposed rule, released April 10, bodes ever-tighter financial futures for hospitals: Next year's projected increase is 2.6%, down from this year's 3.1% bump.

"That will truly be a challenge for us, and I'm sure all healthcare systems," says Denise Scoffic, CFO, east region, at Mercy, a St. Louis, Missouri–headquartered health system with more than 50 hospitals and 50,000 team members across four states. "It's disappointing to see the lack of recognition of the current state of inflation that we're in, both from a labor perspective and from a supply and drug perspective."

Disappointing—"woefully" so, perhaps—but not surprising.

"I'm in Washington, DC. No one's talking on Capitol Hill about, 'let's put more money in healthcare,'" says Richard L. Gundling, FHFMA, CMA, senior vice president of content and professional practice guidance at Healthcare Financial Management Association.

For health system CFOs, it means getting even comfier doing more with less—while keeping an eye toward the regulatory movement bubbling beneath the surface.

"If you're not paying attention […] that can come back and bite you on the back end," says Venson Wallin, CPA, CGMA, CFE, CHC, CHFP, FHFMA, HCISPP, managing director and national healthcare compliance and regulatory leader at BDO, a global financial advisory firm.

Ahead, how not to get bit by less-buzzy regs.

Setting the stage

Mercy's fiscal year ends June 30, so forecasting is top of mind. "We definitely need to be realistic about what's coming our way," says Scoffic. "We must build in these regulatory challenges, such as the IPPS rate increase," even as "we'll continue to advocate for more reimbursement."

It's a balancing act.

Given the slim increase proposed for 2026, Mercy is seeking ways to "think and act even more quickly," says Scoffic, in part by exploring automation and ensuring all caregivers are working to the top of their licenses. She's also tapping team members across the organization for insight. 

Mercy Hospital St. Louis, which is part of the system's east region that Scoffic helms, has an innovation center in one of their inpatient nursing units "where we engage the frontline caregivers to collaborate and think with us" about how to maintain high care standards while improving efficiency, she explains. The collaboration has yielded "great progress in reducing our length of stay and improving our throughput."

Wallin also supports a long view. When it comes to regulations, finance leaders should think beyond basic compliance to areas of risk and reward. "Where is your biggest focal point, and what could either benefit the hospital the most, or what could create the largest negative impact by not addressing it immediately?" Wallin asks. 

As an example, CMS introduced new cost reporting requirements in the 2024 IPPS final rule, which apply to Medicare bad debts, Medicaid eligible days for disproportionate share hospitals (DSH), charity care charges by patient, and total bad debt by patient.

"This is not something that has been traditionally done in the past," Wallin says. And failure to comply could bring increased audit risk or, in the worst-case scenario, a "pause" on certain federal payments that hampers cash flow and threatens 340B eligibility (more on that next).

DSHing on 340B eligibility

CMS projects Medicare uncompensated care payments to DSH providers will increase $560M in FY2025. Although that'd be a rebound from this year's "staggering" $957M cut for providers serving a significant number of low-income patients, it may not be enough of a boost.

That's because DSH rules impact hospitals' eligibility for the federal 340B Drug Pricing Program, which requires Medicaid-participating pharmaceutical manufacturers to sell outpatient drugs at a discount to providers that care for many uninsured and low-income patients. 

"The 340B program is on the radar, and under a lot of pressure at national and state levels," Scoffic says. Mercy Hospital Saint Louis, like several sibling sites, qualifies for 340B based on their share of Medicaid patients. "It's very important that we continue to advocate with our governmental officials." 

Adding to recent stress on the program, this year's final rule introduced tightened criteria for Medicaid Section 1115 days that can be included in the DSH payment calculation. And fewer days could mean less reimbursement for many.

It could also jeopardize providers' access to 340B dollars altogether. 

"With DSH, if you reduce your percentage, it reduces your reimbursement; with 340B, if you fall below the threshold, you get nothing," Wallin explains. The potential loss is magnified for small- to mid-sized community hospitals that may rely on 340B to make payroll and keep the lights on, he adds.

If your status stands to shift, consider reassessing your intake process to ensure you're properly capturing Medicaid eligibility as soon as patients walk through the door, Wallin advises. And if losing eligibility is unavoidable, brace for that impact to your bottom line.

Despite the challenges, Scoffic is heartened by recent moves to enhance the 340B program oversight. She points to an April 19 final rule introducing a pathway for resolving pricing disputes with drug manufacturers.

Additionally, Scoffic believes in the power of storytelling to win hearts and minds. "It's important to […] put stories to those dollars that we hope and think will be helpful in advocating that that 340B program continues on." 

As part of their advocacy efforts, Mercy Hospital St. Louis puts a percentage of 340B dollars each month into a dedicated patient assistance fund, which is governed by a committee composed of members from the community, the hospital's mission team, and clinical leadership. All told, they're able to provide over $2M in annual assistance to patients undergoing costly drug therapies. 

The hospital has also used program benefits to stand up substance use recovery programs; hire additional social workers to serve areas with underinsured patients; and invest in new technologies, like modern imaging platforms, in those same areas, "which, honestly with the pressure on finances, we wouldn't otherwise be able to do," Scoffic notes.

It's a testament to the program's role in "really, truly allowing us to get healthcare access back to those challenged communities," she says, "not just dropping to the bottom line."

Transcending physical boundaries

Looking at reimbursement beyond the IPPS, healthcare insiders are bullish on virtual care. In a recent address to AHA members, Rep. Brett Guthrie, R-Ky, who chairs the House Energy and Commerce Subcommittee on Health, said "there will be an extension of telehealth" because it's "convenient" and "helpful."

The remarks came days after AHA submitted a statement to the subcommittee, voicing support for telehealth proposals that would extend flexibilities set to expire this year and expand patient access.  

At Mercy, whose systemwide virtual care program serves 600,000 patients across seven states, there's excitement over "starting to see recognition from a reimbursement perspective," Scoffic says. "Virtual care is really important to bring care to the patient, regardless [of] if they're in a rural area or elsewhere, with a goal of making the access [...] even easier."