CMS says it is responding to hospitals’ plea for relief from burdensome reporting requirements, but not altering federal price transparency laws
Despite federal price transparency law that went into effect January 1 after a year-long court battle, some hospitals continue to balk at sharing their payer-negotiated rates for healthcare goods and services—including medical laboratory testing—claiming a variety of challenges due to the COVID-19 pandemic, vaccine distribution, and other difficulties, Modern Healthcare reported.
This requirement was originally part of the Hospital Price Transparency Final Rule (84 FR 65524), passed in 2019 during the Trump administration, which required hospitals to “establish, update, and make public a list of their standard charges for the items and services that they provide,” including clinical laboratory test prices. This reporting requirement did not sit well with the AHA.
In a statement, Ashley Thompson, Senior Vice President for Public Policy Analysis and Development for the American Hospital Association, said, “This policy will require hospitals to divert critically needed resources during this historic pandemic to administrative tasks that will not benefit patients.” She added, “We do not believe CMS has the authority to compel the disclosure of these terms and our legal challenge remains ongoing.”
However, if the new proposed rule goes into effect, CMS would no longer expect hospitals to report the rates they have negotiated with each Medicare Advantage plan, RevCycleIntelligence reported.
CMS Relieving a Burden, Not Eliminating a Requirement
In the fact sheet, CMS wrote that it “is proposing to repeal the requirement that a hospital report on the Medicare cost report the median payer-specific negotiated charge that the hospital has negotiated with all of its MA organization payers, by MS-DRG (Medicare-severity diagnosis related group), for cost reporting periods ending on or after January 1, 2021. CMS estimates this will reduce administrative burden on hospitals by approximately 64,000 hours.”
Experts noted that CMS is attempting to reduce providers’ administrative burdens, while keeping federal price transparency requirements in effect.
“The repeal of this requirement more falls into the bucket of easing hospitals’ burden as opposed to the agency’s stance on hospital price transparency,” Caitlin Sheetz, Director and Head of Analytics at ADVI Health, LLC, told Fierce Healthcare.
Still, the recent CMS action could be a sign that price transparency requirements for hospitals will not intensify, she added. “I would think it is very unlikely that [CMS] would put out a rule that is easing up hospital administrative burden [and] they would then ramp up audits for the hospital price transparency rule.”
AHA Supports CMS’ Latest Proposed Rule on Hospital Reporting
The AHA said the new proposed rule moves in the right direction.
In a statement, Tom Nickels, Executive Vice President of the AHA, said, “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.” He added, “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.”
Though federal price transparency rules are evolving, medical laboratories are encouraged to accept that consumer demand is one powerful force driving this trend. Thus, clinical laboratories that currently make it easy for patients to see the prices for common medical laboratory tests in advance of service should gain competitive advantage from this feature over time.
Sophisticated cyberattacks have already hit hospitals and healthcare networks in Oregon, California, New York, Vermont, and other states
Attention medical laboratory managers and pathology group administrators: It’s time to ramp up your cyberdefenses. The FBI, the federal Department of Health and Human Services (HHS), and the federal Cybersecurity and Infrastructure Security Agency (CISA) issued a joint advisory (AA20-302A) warning US hospitals, clinical laboratories, and other healthcare providers to prepare for impending ransomware attacks, in which cybercriminals use malware, known as ransomware, to encrypt files on victims’ computers and demand payment to restore access.
The joint advisory, titled, “Ransomware Activity Targeting the Healthcare and Public Health Sector,” states, “CISA, FBI, and HHS have credible information of an increased and imminent cybercrime threat to US hospitals and healthcare providers.” It includes technical details about the threat—which uses a type of ransomware known as Ryuk—and suggests best practices for preventing and handling attacks.
In his KrebsOnSecurity blog post, titled, “FBI, DHS, HHS Warn of Imminent, Credible Ransomware Threat Against U.S. Hospitals,” former Washington Post reporter, Brian Krebs, wrote, “On Monday, Oct. 26, KrebsOnSecurity began following up on a tip from a reliable source that an aggressive Russian cybercriminal gang known for deploying ransomware was preparing to disrupt information technology systems at hundreds of hospitals, clinics, and medical care facilities across the United States. Today, officials from the FBI and the US Department of Homeland Security hastily assembled a conference call with healthcare industry executives warning about an ‘imminent cybercrime threat to US hospitals and healthcare providers.’”
Krebs went on to reported that the threat is linked to a notorious cybercriminal gang known as UNC1878, which planned to launch the attacks against 400 healthcare facilities.
Clinical Labs, Pathology Groups at Risk Because of the Patient Data They Keep
Hackers initially gain access to organizations’ computer systems through phishing campaigns, in which users receive emails “that contain either links to malicious websites that host the malware or attachments with the malware,” the advisory states. Krebs noted that the attacks are “often unique to each victim, including everything from the Microsoft Windows executable files that get dropped on the infected hosts to the so-called ‘command and control’ servers used to transmit data between and among compromised systems.”
Charles Carmakal, SVP and Chief Technology Officer of cybersecurity firm Mandiant told Reuters, “UNC1878 is one of the most brazen, heartless, and disruptive threat actors I’ve observed over my career,” adding, “Multiple hospitals have already been significantly impacted by Ryuk ransomware and their networks have been taken offline.”
Multiple Healthcare Provider Networks Under Attack
Hospitals in Oregon, California, and New York have already been hit by the attacks, Reuters reported. “We can still watch vitals and getting imaging done, but all results are being communicated via paper only,” a doctor at one facility told Reuters, which reported that “staff could see historic records but not update those files.”
Some of the hospitals that have reportedly experienced cyberattacks include:
In October, the Associated Press (AP) reported that a recent cyberattack disrupted computer systems at six hospitals in the University of Vermont (UVM) Health Network. The FBI would not comment on whether that attack involved ransomware, however, it forced the UVM Medical Center to shut down its computer system and reschedule elective procedures.
Threat intelligence analyst Allan Liska of US cybersecurity firm Recorded Future told Reuters, “This appears to have been a coordinated attack designed to disrupt hospitals specifically all around the country.”
He added, “While multiple ransomware attacks against healthcare providers each week have been commonplace, this is the first time we have seen six hospitals targeted in the same day by the same ransomware actor.”
An earlier ransomware attack in September targeted 250 healthcare facilities operated by Universal Health Services Inc. (UHS). A clinician at one facility reported “a high-anxiety scramble” where “medical staff could not easily see clinical laboratory results, imaging scans, medication lists, and other critical pieces of information doctors rely on to make decisions,” AP reported.
Outside of the US, a similar ransomware attack in October at a hospital in Düsseldorf, Germany, prompted a homicide investigation by German authorities after the death of a patient being transferred to another facility was linked to the attack, the BBC reported.
CISA, FBI, HHS, Advise Against Paying Ransoms
To deal with the ransomware attacks, CISA, FBI, and HHS advise against paying ransoms. “Payment does not guarantee files will be recovered,” the advisory states. “It may also embolden adversaries to target additional organizations, encourage other criminal actors to engage in the distribution of ransomware, and/or fund illicit activities.” The federal agencies advise organizations to take preventive measures and adopt plans for coping with attacks.
The advisory suggests:
Training programs for employees, including raising awareness about ransomware and phishing scams. Organizations should “ensure that employees know who to contact when they see suspicious activity or when they believe they have been a victim of a cyberattack.”
Regular backups of data and software. These should be “maintained offline or in separated networks as many ransomware variants attempt to find and delete any accessible backups.” Personnel should also test the backups.
Continuity plans in case information systems are not accessible. For example, organizations should maintain “hard copies of digital information that would be required for critical patient healthcare.”
“Without planning, provision, and implementation of continuity principles, organizations may be unable to continue operations,” the advisory states. “Evaluating continuity and capability will help identify continuity gaps. Through identifying and addressing these gaps, organizations can establish a viable continuity program that will help keep them functioning during cyberattacks or other emergencies.”
Dark Daily Publisher and Editor-in-Chief, Robert Michel, suggests that clinical laboratories and anatomic pathology groups should have their cyberdefenses assessed by security experts. “This is particularly true because the technologies and methods used by hackers change rapidly,” he said, “and if their laboratory information systems have not been assessed in the past year, then this proactive assessment could be the best insurance against an expensive ransomware attack a lab can purchase.”
Financial losses for hospitals and health systems due to cancelled procedures and coronavirus expenses will lead to changes in healthcare delivery, operations, and clinical laboratory test ordering
COVID-19 is reshaping how people work, shop, and go to school. Is healthcare the next target of the coronavirus-induced transformation? According to two experts, the COVID-19 pandemic is pushing hospitals and health systems toward a “fundamental and likely sustained transformation,” which means clinical laboratories must be prepared to adapt to new provider needs and customer demands.
Burik and Fisher called attention to the staggering $50 billion-per-month loss for hospitals and health systems that was first revealed in an American Hospital Association (AHA) report published in May. The AHA report estimated a $200 billion loss from March 1, 2020, to June 30, 2020, due to increased COVID-19 expenses and cancelled elective and non-elective surgeries.
Adding to the financial carnage is the expectation that patient volumes will be slow to return. In “Hospitals Forecast Declining Revenues and Elective Procedure Volumes, Telehealth Adoption Struggles Due to COVID-19,” Burik said, “Healthcare has largely been insulated from previous economic disruptions, with capital spending more acutely affected than operations. But this time may be different since the COVID-19 crisis started with a one-time significant impact on operations that is not fully covered by federal funding.
“Providers face a long-term decrease in commercial payment, coupled with a need to boost caregiver and consumer-facing digital engagement, all during the highest unemployment rate the US has seen since the Great Depression,” he continued. “For organizations in certain locations, it may seem like business as usual. For many others, these issues and greater competition will demand more significant, material change.”
A Guidehouse analysis of a Healthcare Financial Management Association (HFMA) survey, suggests one-in-three provider executives expect to end 2020 with revenues at 15% below pre-pandemic levels, while one-in-five of them anticipate a 30% or greater drop in revenues. Government aid, Guidehouse noted, is likely to cover COVID-19-related costs for only 11% of survey respondents.
“The figures illustrate how the virus has hurled American medicine into unparalleled volatility. No one knows how long patients will continue to avoid getting elective care or how state restrictions and climbing unemployment will affect their decision making once they have the option,” Burik and Fisher wrote. “All of which leaves one thing for certain: Healthcare’s delivery, operations, and competitive dynamics are poised to undergo a fundamental and likely sustained transformation.”
As a result, the two experts predict these pandemic-related changes to emerge:
Payer-Provider Complexity on the Rise; Patients Will Struggle. As the pandemic has shown, elective services are key revenues for hospitals and health systems. But the pandemic also will leave insured patients struggling with high deductibles, while the number of newly uninsured will grow. Furthermore, upholding of the hospital price transparency ruling will add an unwelcomed spotlight on healthcare pricing and provider margins.
Best-in-Class Technology Will Be a Necessity, Not a Luxury. COVID-19 has been a boon for telehealth and digital health usage, creating what is likely to be a permanent expansion of virtual healthcare delivery. But only one-third of executives surveyed say their organizations currently have the infrastructure to support such a shift, which means investments in speech recognition software, patient information pop-up screens, and other infrastructure to smooth workflows will be needed.
The Tech Giants Are Coming. Both major retailers and technology stalwarts, such as Amazon, Walmart, and Walgreens, are entering the healthcare space. In January, Dark Daily reported on Amazon’s roll out of Amazon Care, a 24/7 virtual clinic, for its Seattle-based employees. Amazon (NASDAQ:AMZN) is adding to a healthcare portfolio that includes online pharmacy PillPack and joint-venture Haven Healthcare. Meanwhile, Walmart is offering $25 teeth cleaning and $30 checkups at its new Health Centers. Dark Daily covered this in an e-briefing in May, which also covered a new partnership between Walgreens and VillageMD to open up to 700 primary care clinics in 30 US cities in the next five years.
Work Location Changes Mean Construction Cost Reductions. According to Guidehouse’s analysis of the HFMA COVID-19 survey, one-in-five executives expect some jobs to remain virtual post-pandemic, leading to permanent changes in the amount of real estate needed for healthcare delivery. The need for a smaller real estate footprint could reduce capital expenditures and costs for hospitals and healthcare systems in the long term.
Consolidation is Coming. COVID-19-induced financial pressures will quickly reveal winners and losers and force further consolidation in the healthcare industry. “Resilient” healthcare systems are likely to be those with a 6% to 8% operating margins, providing the financial cushion necessary to innovate and reimagine healthcare post-pandemic.
Policy Will Get More Thoughtful and Data-Driven. COVID-19 reopening plans will force policymakers to craft thoughtful, data-driven approaches that will necessitate engagement with health system leaders. Such collaborations will be important not only during this current crisis, but also will provide a blueprint for policy coordination during any future pandemic.
As Burik and Fisher point out, hospitals and healthcare systems emerged from previous economic downturns mostly unscathed. However, the COVID-19 pandemic has proven the exception, leaving providers and health systems facing long-term decreases in commercial payments, while facing increased spending to bolster caregiver- and consumer-facing engagement.
“While situations may differ by market, it’s clear that the pre-pandemic status quo won’t work for most hospitals or health systems,” they wrote.
The message for clinical laboratory managers and surgical pathologists is clear. Patients may be permanently changing their decision-making process when considering elective surgery and selecting a provider, which will alter provider test ordering and lab revenues. Independent clinical laboratories, as well as medical labs operated by hospitals and health systems, must be prepared for the financial stresses that are likely coming.
July data shows some volume gains for providers since June; however, analysts say current predictions depends on progress of the COVID-19 pandemic
Clinical laboratory managers preparing strategic plans for 2020 and 2021 face a basic and key question: when and if they can expect patient volumes and associated lab test referrals to return to pre-COVID-19 pandemic levels.
Some insights into how to answer that question can be found in two separate reports. Separately, healthcare analysts from Advisory Board and Kaufman Hall explored possible COVID-19 case scenarios and implications for providers’ volumes and operating margins for the remaining months of 2020.
The Advisory Board analysts do not see a snap back to pre-pandemic volume levels happening this year. However, they do envision a gradual volume increase that has already started, they reported in “Projecting Volume Recovery through 2020.”
Patient Volumes Depend on COVID-19 Cases
With 200 experts and more than 4,500 member organizations, the Advisory Board, according to its website, “helps leaders and future leaders in the healthcare industry work smarter and faster by providing provocative insights, actionable strategies, and practical tools to support execution.”
In a Radio Advisory broadcast concerning volume outlook for 2020, Anna Yakovenko, Advisory Board Practice Manager, said there are two likely scenarios for patient volumes, each based on COVID-19 having:
An overall plateau of cases;
A potential of a second wave in advance of influenza season.
What If There’s a Second Wave of COVID-19?
The Advisory Board predicts that, even if a COVID-19 second wave occurs earlier than the traditional mid-autumn influenza outbreak, a gradual recovery for providers will still happen. “But then we think we’ll see a dip in volumes—not remotely the level of dip that we saw in March and April—but a dip nonetheless,” Yakovenko said.
In a blog post, Yakovenko cited a Moody’s Investors Service report showing healthcare systems with more patient encounters in May. She wrote that providers need to overcome three pandemic-related issues to get volumes back on track in 2020:
Patients cancelling care because they are anxious;
Loss of jobs and insurance coverage resulting in decreased care demand;
Need for safety precautions, which could result in lower efficiency.
Kaufman Hall Report: Margins Could Go as Low as -11% in Q4 2020
The second report looked at hospital finances and patient volumes. It was done by Kaufman Hall, a Chicago firm providing management consulting services and software. The analysis by Kaufman Hall, released by the American Hospital Association (AHA) titled, “The Effect of COVID-19 on Hospital Financial Health,” predicted median hospital operating margin of -3% in the second quarter (Q2) of 2020, and a possible year-end range of -1% and -11% due to COVID-19. The report noted that—even before COVID-19—hospitals had a modest median margin (money made from operations) of 3.5%.
An AHA news release describes two COVID-19 case scenarios that could affect providers’ margins:
A steady decrease in cases could see median margin of -1% by the fourth quarter of 2020.
However, Kaufman Hall’s analysts spotted signs of recovery that were evidenced in data for June to July, when operating margins improved 24% due to pent-up demand for patient services, Healthcare Dive reported.
Their analysis also showed that providers in July had boosts in discharges and surgeries due to resumption of elective procedures. Other data for the seven months ending July 31, and for the month-to-month period June to July, showed:
Operating margins fell 5% year-over-year, but rose 12% month-over-month.
Discharges were down 7% year-over-year, but up 6% month-over-month.
Emergency Department visits fell 17% compared to first seven months in 2019 and were up 10% month-over-month.
Operating Room minutes were down 15% year-to-date and up 3% month-over-month.
Inpatient and outpatient revenues (without CARES funding) are down 5% and 11%, respectively, year-to-date. Inpatient and outpatient revenues June to July increased 6% and 5%, respectively.
“Hospitals saw flat year-over-year gross operating revenue performance, continued high-per-patient expenses, and a fifth consecutive month of volumes falling below 2019 performance and below budget across most metrics. Emergency Department volumes have been hardest hit. Even, so July volumes continued to show some signs of recovery month-over-month,” the Kaufman Hall analysts wrote.
One Provider’s Financial Tale
Allina Health System in Minneapolis, Minn., experienced financial struggles but is reportedly experiencing the type of turnaround the Advisory Board and Kaufman Hall analysts predicted. Allina had an $85 million operating loss in Q2 2020, compared to $14.4 million loss in Q2 2019. But it had positive income for June, according to the Minneapolis/St. Paul Business Journal.
Clearly, the researchers studying patient volumes recognize that it is possible for patient volumes to return to pre-pandemic levels. However, a surge in the number of COVID-19 cases would obviously discourage patients from returning to get routine care and schedule elective procedures with their local hospitals. In turn, that would restrict the volume of clinical laboratory test referrals flowing into the nation’s medical laboratories.
Pathologists and medical laboratory managers should take into account these expert predictions and the supporting data in these two research reports as they plan staffing schedules and consider major purchasing of instruments and test supplies.
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.”
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:
Median payer-specific negotiated inpatient services;
Inclusion of rates for Medicare Advantage plans and other third party plans;
“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.”
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.
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.