CMS Proposes Repeal of Certain Cost Reporting Requirements from the IPPS Final Rule for 2021

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[co-author: Jarrod Brodsky*]

On April 27, 2021, the Centers for Medicare and Medicaid Services (“CMS”) released the Hospital Inpatient Prospective Payment System (“IPPS”) and Long-Term Care Hospital (“LTCH”) unpublished Proposed Rule for 2022 (“Proposed Rule”). The Proposed Rule, if enacted, would eliminate the requirement from the Hospital IPPS and LTCH Final Rule for 2021 (“IPPS Final Rule for 2021”), as discussed in our September 11, 2020 blog post, that hospitals report the median payer-specific negotiated charge with Medicare Advantage (“MA”) payers, by MS-DRG, on its Medicare cost reports for cost reporting periods ending on or after January 1, 2021. CMS estimates that this will reduce the administrative burden on hospitals by approximately 64,000 hours.

In a statement released by the American Hospital Association (“AHA”), Executive Vice President Tom Nickels is pleased with the proposal, saying, “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.”

Still, experts such as Caitlin Sheetz, head of analytics for the consulting firm ADVI, say that “[t]he repeal of this requirement more falls into the bucket of easing hospitals’ burden as opposed to the agency’s stance on hospital price transparency.”

Other Trump-era regulations aimed at price transparency remain unaffected by the Proposed Rule, including CMS’ Price Transparency Requirements for Hospitals to Make Standard Charges Public Final Rule (“Price Transparency Rule”) requiring hospitals to publish prices privately negotiated with payers online. The Price Transparency Rule, as discussed in our June 9, 2020 blog post, went into effect January 1, 2021, and already requires hospitals to make public the payer-specific negotiated charges with MA payers from which the median payer-specific charges were calculated under the IPPS Final Rule for 2021.

Implementation of the Price Transparency Rule has also been bumpy, with hospital compliance to date remaining very low.  An analysis by The Peterson Center on Healthcare and KFF (Kaiser Family Foundation) found that many hospitals are not complying, with only 3% of the largest hospitals providing the required payer-specific negotiated rates on their consumer-facing tools. In another assessment, Health Affairs looked at compliance for the 100 largest hospitals in the US and found that 65 were “unambiguously noncompliant.” CMS is proactively auditing hospital compliance and recently sent warning letters to hospitals that failed to comply with the Price Transparency Rule. Hospitals that received the warning were provided a 90-day window to address the lack of compliance outlined in the letter, after which  CMS may close its inquiry, deliver a second warning letter, or request a corrective action plan from the hospital. As a last resort, CMS may impose a civil monetary penalty on the hospital and publicize the penalty on a CMS website if the hospital fails to submit or comply with a corrective action plan.

It remains to be seen whether these enforcement efforts will overcome hospital resistance to the Price Transparency Rule.  Given the ongoing challenges faced by hospitals in complying with the Price Transparency Rule, the Proposed Rules anticipated changes to hospital cost reporting requirements – while a welcome respite from already onerous reporting requirements – may be a drop in the bucket in addressing the burden associated with the governmental push toward price transparency.

*Jarrod Brodsky is a Healthcare Intern at Sheppard Mullin

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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