Clinical laboratories are advised to continue developing methods for making prices for procedures available to the general public

Even as an effective treatment for COVID-19 continues to elude federal healthcare agencies, Medicare officials are pressing ahead with efforts to bring about transparency in hospital healthcare pricing, including clinical laboratory procedures and prescription drugs costs.

In FY 2021 Proposed Rule CMS-1735-P, titled, “Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals,” the Centers for Medicare and Medicaid Services (CMS) proposes to “revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from our continuing experience with these systems for FY 2021 and to implement certain recent legislation.”  

A CMS news release noted, “The proposed rule would update Medicare payment policies for hospitals paid under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) for fiscal year 2021.”

The proposed rule suggests a 1.6% increase (about $2 billion) in reimbursement for hospital inpatient services for 2021, but also eludes to the possibility of payer negotiated rates being used to determine future payment to hospitals.

In its analysis of the proposed rule, Modern Healthcare noted that CMS is “continuing its price transparency push, to the chagrin of some providers.”

However, the provisions in the proposed rule do, according to the CMS news release, advance several presidential executive orders, including:

Controversial Use of Payer Data for Future Medicare Rates

This latest CMS proposed rule (comments period ended July 10) moves forward “controversial price transparency” and has a new element of possible leverage of reported information for future Medicare payment rates, Healthcare Dive reported.

The 1,602-page proposed rule (CMS-1735-P) calls for these requirements in hospital Medicare cost reports:

“In addition, the agency is requesting information regarding the potential use of these data to set relative Medicare payment rates for hospital procedures,” the CMS news release states.

Thus, under the proposed rule, the nation’s 3,200 acute care hospitals and 360 long-term care hospitals would need to start reporting requested data for discharges effective Oct. 1, 2020, a CMS fact sheet explained.

In the news release following the release of the proposed rule, CMS Administrator Seema Verma had a positive spin. “Today’s payment rate announcement focuses on what matters most to help hospitals conduct their business and receive stable and consistent payment.”

However, the American Hospital Association (AHA) articulated a different view, even calling the requirement for hospitals to report private terms “unlawful.”

“We are very disappointed that CMS continues down the unlawful path of requiring hospitals to disclose privately negotiated contract terms,” AHA Executive Vice President Tom Nickels (above) said in a statement, adding, “The disclosure of privately negotiated rates will not further CMS’ 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.” (Photo copyright: American Hospital Association.)

AHA and other organizations attempted to block a price transparency final rule last year in a lawsuit filed against the U.S. Department of Health and Human Services (HHS), which oversees CMS, Dark Daily reported.

During in-court testimony, provider representatives declared that revealing rates they negotiate with payers violates First Amendment rights, Becker’s Hospital Review reported.

Officials for the federal government pushed back telling the federal judge that they can indeed require hospitals to publish negotiated rates. Hospital chargemasters, they added, don’t tell the full story, since consumers don’t pay those rates, Modern Healthcare reported.

2020 Final Rule Affected Clinical Laboratories

In a recent e-briefing on Final Rule CMS-1717-F2 on hospital outpatient price transparency, titled, “Health Insurers and Hospital Groups Argue Price Transparency Rules on Hospitals, Clinical Laboratories, and Other Providers Will Add Costs and ‘Confuse’ Consumers,” May 29, 2020, Dark Daily reported that effective January 1, 2021, hospitals are required to disclose outpatient prices for common lab tests, such as basic metabolic panel, PSA (prostate-specific antigen), and complete blood count (CBC), and 10 other clinical laboratory tests.

In addition to the increase in inpatient payments and price transparency next steps, the recent CMS proposed rule also includes a new hospital payment category for chimeric antigen receptor (CAR) T-cell therapy. The technique uses a patient’s own genetically-modified immune cells to treat some cancers, as an alternative to chemotherapy and other treatment covered by IPPS, CMS said in the news release.

The agency also expressed intent to remove payment barriers to new antimicrobials approved by the FDA’s Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD pathway). “The LPAD pathway encourages the development of safe and effective drug products that address unmet needs of patients with serious bacterial and fungal infections,” the CMS fact sheet states.

Clinical laboratories are gateways to healthcare. For hospital lab leaders, the notion of making tests prices easily accessible to patients and consumers will soon no longer be a nice idea—but a legal requirement.

Therefore, clinical laboratory leaders are advised to stay abreast of price transparency regulations and continue to prepare for sharing test prices and information with patients and the general public in ways that fulfill federal requirements. 

—Donna Marie Pocius

Related Information:

CMS Proposed Rule CMS-1735-P

CMS Final Rule CMS-1717-F2

CMS Aims to Boost Inpatient Payments; Adds Pressure for Price Transparency

CMS Builds on Commitment to Transform Healthcare Through Competition and Innovation

Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States

Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First

Executive Order on Protecting and Improving Medicare for Our Nation’s Seniors

Fact Sheet: FY 2021 Medicare Hospital Inpatient Prospective Payment System (IPPS)

Hospitals Balk as CMS Doubles Down on Price Transparency

AHA Statement on FY 2021 Proposed IPPS Rule

Hospitals Blast CMS Decision to Double Down on Price Transparency

AHA Slams CMS for Advancing Hospital Price Transparency Rule

Wide State-Level Variation in Commercial Health Care Prices Suggests Uneven Impact of Price Regulation

Health Insurers and Hospital Groups Argue Price Transparency Rules on Hospitals and Clinical Laboratories and Other Providers Will Add Costs, Confuse Consumers