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Why The New IPPS Proposed Rule Likely Won’t Affect Price Transparency Enforcement

Although the proposed rule doesn’t mean CMS will also ease up on its price transparency mandate, it does suggest that the agency recognizes the administrative burden of such requirements, especially during the COVID-19 pandemic.

Does CMS’s proposed repeal of a requirement that hospitals disclose privately negotiated contract terms with payers on the Medicare cost report send a signal that it’s also going to ease up on its price transparency mandate?

Not likely, says Becky Greenfield, partner with the Miami law firm Wolfe Pincavage.

But it does suggest CMS recognizes the administrative burden of such requirements, especially during the COVID-19 pandemic.

In its fiscal year (FY) 2022 Inpatient Prospective Payment System (IPPS) proposed rule CMS has proposed repealing a requirement that hospitals report median payer-specific negotiated payment rates by MS-DRG for Medicare Advantage payers.

CMS estimates that the repeal of this market-based MS-DRG relative weight policy, which was included in the 2021 IPPS final rule, “will reduce administrative burden on hospitals by approximately 64,000 hours,” the agency said.

The American Hospital Association (AHA) applauded the proposed change.
“Based on our initial review, we are very pleased CMS is proposing to repeal the requirement that hospitals and health systems disclose privately negotiated contract terms with payers on the Medicare cost report,” AHA executive vice president Tom Nickels said in a statement.

“We have long said that privately negotiated rates take into account any number of unique circumstances between a private payer and a hospital and their disclosure will not further CMS’ goal of paying market rates that reflect the cost of delivering care. We once again urge the agency to focus on transparency efforts that help patients access their specific financial information based on their coverage and care,” he said.

HealthLeaders spoke with Greenfield about the proposed change and what it might mean for price transparency enforcement. The conversation has been lightly edited for length and clarity.

HealthLeaders: Can you tell us about the repeal of the market-based MS-DRG relative weight policy that was included in the 2022 IPPS proposed rule?

Becky Greenfield: Sure. Under the Trump administration there were two pieces [in the 2021 IPPS final rule] regarding how hospitals are paid for Medicare services for inpatient admission. The first was the cost report. [As of January 1, 2022], hospitals were required to report in their cost report the median payer-specific negotiated rate that they have for all Medicare Advantage (MA) plans by each MS-DRG.

My understanding, based on guidance, was that under this [rule] the hospitals would have to list every admission that they had for a Medicare Advantage patient; they would add up what the contractual rates were for each admission; and then they would take the average … and that would be the average MS-DRG.

The second part was effective for 2024, and that was that CMS was going to use these average MS-DRGs to use as a new calculation methodology of what they’re calling a market-based methodology for determining what the MS-DRG relative weight would be for the hospital. [CMS would use] this negotiated payment data to establish the MS-DRG rate for the hospital, rather than using the cost-based methodology.

More recently, under the Biden administration, CMS has kind of pivoted from that. They have said that … they think they’re going to repeal both of those requirements for now, so that they can figure out how useful this payer-specific information would be for rate-setting purposes.

HL: Do you think this proposed walk-back will have any bearing on the way CMS is looking at its price transparency mandate for hospitals?

BG: Transparency still exists, the requirements are still in place, and I think transparency, to some extent, will stay forever. But it just seems like this administration’s being a little bit more reasonable in their approach.

It seems like they’re acknowledging the burden that these types of rules and regulations pose on hospitals and acknowledging that maybe this isn’t the best time to be doing that in light of the COVID pandemic.

But that being said, even though it appears that they’re taking a more reasonable approach … CMS has still conducted audits. Both CMS and private vendors are conducting audits of hospitals. And my understanding is that most recently some hospitals have received warning notices from CMS, giving them, I think … 90 days to come into compliance.

So, again, I don’t think that this change has much bearing on the 2021 transparency rule, but I think it reflects that the agency has maybe stepped back a little bit and said, “We know we need to administer these rules, but perhaps we can hopefully give hospitals a little bit of slack.” That’s how I see it. But, I think, again, transparency is here to stay in one form or the other.

HL: Can you tell me what you know about those CMS audits?

BG: My understanding—and I have not heard this from my clients; none of them have any audits on their own facilities—is that [CMS is] reviewing websites on their own and they’re also taking complaints from consumers, and they are investigating.

HL: So, the bottom line is, hospitals shouldn’t get too excited and think that price transparency might be going away.

BG: I don’t think so. I’m hopeful that, again, this administration is more reasonable in how they enforce transparency. It appears that they are taking the route of putting out warnings instead of just imposing $300 penalties, at least this early in the stage.

Who knows what’s going happen next year when the pandemic is over, and hospitals have had more time to devote [the needed] resources? But I don’t believe … that we’re going to see the price transparency rule be totally overturned.

HL: Despite the hope that at least part of it—revealing negotiated rates—would be overturned.

BG: Yeah, and there’s bipartisan support to disclose that information. It’s one thing that both sides appear to agree on. It would make many [hospitals] happy if that were the case, but I don’t see that happening.