New hospital price transparency requirements included in IPPS proposed rule

• CMS proposed a 3.1% inpatient hospital rate increase for FY21.
• Also proposed was a requirement for hospitals to report median commercial health plan rates to Medicare.
• Calculations of DSH payment cuts have raised reliability concerns.

Hospitals would need to start reporting the median inpatient payment rates they receive from health plans under an annual Medicare payment proposed rule.

The Centers for Medicare & Medicaid Services (CMS) on May 11 issued a Medicare Inpatient Prospective Payment System (IPPS) proposed rule with a net 3.1% increase in rates for FY21. The increase applies to hospitals that are designated as meaningful users of electronic health records (EHRs) and that submit required quality measure data.

After including the effects of proposed changes to IPPS payment policies, changes in uncompensated care payments, new technology add-on payments and capital payments, CMS estimated the total increase would drop to 1.6%.

All told, Medicare projected its spending on inpatient hospital services would increase in FY21 by about $2.07 billion.

Transparency initiatives

The rule, which applies to about 3,200 acute care hospitals, would require their Medicare cost reports to include the median health plan-specific negotiated rates for inpatient services, by Medicare Severity-Diagnosis Related Group (MS-DRG). The requirement would apply to rates from Medicare Advantage (MA) plans and other health plans.

The proposal drew fire from hospital advocates, which are already suing to stop an earlier CMS initiative to require public reporting of privately negotiated health plan rates.

“We are very disappointed that CMS continues down the unlawful path of requiring hospitals to disclose privately negotiated contract terms,” Tom Nickels, executive vice president of the American Hospital Association, said in a written statement. “The disclosure of privately negotiated rates will not further CMS’s goal of paying market rates that reflect the cost of delivering care. These rates take into account any number of unique circumstances between a private payer and a hospital and simply are not relevant for fixing fee-for-service Medicare reimbursement.”

The proposed requirement would apply to cost-reporting periods ending Jan. 1, 2021 or later.

CMS has solicited feedback on whether to use the disclosed health plan rates as the basis for the DRG weights.

Some industry watchers have expressed confusion about the reasons for that proposal, but it may be connected to the Trump administration’s previous support for tying provider rates to market prices.

In a separate transparency initiative, CMS dropped plans to propose methodological changes in the star-rating system used to designate overall hospital quality. The agency had sought feedback, including from a technical expert panel, but dropped plans for changes after deciding to limit this year’s rulemaking to “essential policies as well as proposals that reduce provider burden and may help providers in the COVID-19 response.”

The agency planned to advance changes to the hospital rating system in “future rulemaking.”

A related transparency initiative would require CY21 electronic clinical quality measure (eCQM) data to be publicly reported on Hospital Compare or other websites.

DSH payment calculations

Another proposal that could affect many hospitals is using a single year of uncompensated-care data from the 2017 Medicare cost report to determine the distribution of Disproportionate Share Hospital (DSH) uncompensated care payments for FY21. The Affordable Care Act required DSH payment reductions to an estimated 75% of previous DSH rates, with adjustments for changes in the uninsured rate.

However, CMS’s estimates for two of the three factors that will determine those payments raised questions. CMS projected Medicare patient volume would decrease by 7% next year and that the unemployed rate would remain at 9.5%.

“I don’t know how accurate that will be with unemployment surging due to the coronavirus,” said Chad Mulvany, director of healthcare financial practices, perspectives and analysis, for HFMA.

For future years, CMS proposed — with exceptions for Indian Health Service and Tribal hospitals — to base uncompensated care payments on the most recent available year of audited Worksheet S-10 data.

CMS estimated that it will disburse $11.6 billion in DSH payments in FY21, or $1.1 billion less than in FY20. Included in the FY21 payments is $7.8 billion for uncompensated care, or $500 million less than in FY20.

Other details affecting hospital finances

The many other proposed provisions with financial consequences for hospitals include:

• Creating a new MS-DRG for CAR-T cell therapy based on available Medicare claims data
• Phasing in an increase in the number of quarters of ECQM data required until reaching a full year for 2023
• Expanding the definition of a displaced resident to allow funding to be transferred for residents who are not physically at the closing hospital/closing program
• Proposing a minimum EHR reporting period of any continuous 90-day period for CY22

LTCH policies

The rule proposed a 0.9% decrease in overall FY21 payments for the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS).

The $36 million cut stemmed from implementation of revisions to the LTCH PPS site-neutral payment system, as required by statute.

CMS will accept comments on the proposed IPPS and LTCH PPS changes through July 10.