News | Transparency

Hospitals worry latest Medicare transparency effort will increase costs

News | Transparency

Hospitals worry latest Medicare transparency effort will increase costs

  • Medicare has proposed new reporting requirements on median payer-specific negotiated charges.
  • CMS would incorporate this information in IPPS MS-DRG relative weights by FY24.
  • HFMA has developed a proposed alternative to allow hospitals to rebase their charges.

Medicare aims to build on its pending requirement for hospitals to release negotiated charges, recently issuing proposed additional requirements. But hospitals have spelled out a range of concerns, including increased costs for them and for patients.

In its FY21 Inpatient Prospective Payment System (IPPS) proposed rule, CMS would add “market-based payment rate information” requirements to hospitals’ annual Medicare cost report. Those include:

  • Reporting median payer-specific charges that the hospital has negotiated with all of its Medicare Advantage (MA) health plans
  • Reporting median payer-specific charges that the hospital has negotiated with all of its third-party payers, including MA plans, by MS–DRG.
  • Commenting on incorporating this information in IPPS MS-DRG relative weights beginning in FY24

The American Hospital Association (AHA), which is challenging in court a preceding requirement for hospitals to report all negotiated charges starting Jan. 1, was blunt in a letter to CMS.

“The AHA believes that both proposals are unlawful and urges CMS not to finalize them,” AHA wrote, referring to the requirements set to take effect Jan. 1.

Hospitals react to the proposed requirements

In a letter to CMS, Trinity Health, a system with facilities in 22 states, said it supports the underlying goal of bringing price transparency to patients but challenged whether the proposal would do that.

“Instead, CMS has created a significant new burden for hospitals to publish information, the type and volume of which will be exceptionally challenging for patients to use,” wrote Tina Weatherwax Grant, JD, vice president of public policy and advocacy. “Additionally, it will offer little to no insight on what they can expect to pay out-of-pocket for any given service.”

BJC Healthcare, located in Missouri and Illinois, urged CMS to withdraw the proposal or at least limit the reporting to only the median charge negotiated with MA plans. Additionally, the health system urged delaying implementation until a uniform MS-DRG cross-walking methodology is developed in consultation with stakeholders.

Price estimator tools may serve as an alternative to the proposed requirements. Like many hospitals, the University of Pittsburgh Medical Center (UPMC) has developed costly price estimator tools to provide clear and accurate information about patients’ potential out-of-pocket costs. The tool provides an average of about 1,800 individual price estimates each month, wrote Renee Johnson, vice president of corporate reimbursement.

“These tools provide the patient with the clarity they seek on the actual cost to them for a service or patient encounter,” Johnson wrote.

Kaiser Permanente also criticized the possible FY24 move to incorporate the proposed information in IPPS MS-DRG relative weights.

“Disclosure of median payer-specific negotiated charges will further solidify the FFS system and may increase prices of healthcare,” Kaiser wrote, adding that the  proposal would impede efforts to move away from payment by MS-DRG and toward value-based payment.

“The COVID-19 pandemic has only underscored the need for a shift to value-based care; we urge CMS not to pursue proposals that perpetuate the FFS model,” Kaiser wrote.

HFMA provides an alternative

Since 2009, acute hospital charges have increased by 31.5% relative to their Medicare allowable cost to provide care, noted Joseph J. Fifer, FHFMA, CPA, president and CEO of HFMA. He said such charge inflation has negatively impacted certain types of patients whose payments are based on hospital charges.

However, rebasing charges requires a hospital to coordinate any reduction with Medicare, Medicaid and commercial health plans to ensure the modification occurs in a revenue-neutral manner, he wrote in a letter to CMS.

“Otherwise, the hospital will be financially harmed, thus diminishing its ability to serve the broader community, in its efforts to reduce costs for patients whose payments are based on charges,” Fifer wrote.

After discussions with members representing over 580 hospitals, HFMA proposed using data from acute care hospitals’ internal costing systems to calculate and submit as part of the Medicare cost-reporting process:

  • The allowable cost per discharge for inpatient services
  • The allowable cost per ambulatory payment classification for outpatient services

Such data would replace CMS’s imputed cost per discharge or per outpatient service in the calculation of certain cost-based payments and annual weight rebasing.

HFMA worked with a health economics modeling firm to validate the model and ensure the data produced is reliable and does not result in changes to total program spending or a reallocation of spending across different types of acute care hospitals.

The proposed model would allow CMS to decouple payments for outliers, new technology and critical access hospital outpatient payments, and would separate weight rebasing from charges. That would eliminate the most significant barrier hospitals face when attempting to rebase charges.

“HFMA anticipates once this barrier is removed, hospitals will rebase their charges,” Fifer wrote. “This will not only provide immediate relief for patients whose payments are based on charges but also will create an environment where price transparency can flourish.”


About the Author

Rich Daly, HFMA senior writer and editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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