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.”
“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.
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.
In a federal lawsuit, seven healthcare organizations and hospitals systems allege HHS exceeded its statutory authority and clinical laboratories will want to watch how this court case unfolds
There is quite a brouhaha over the final new federal rule requiring hospitals to allow patients and the public to see the prices they charge for services—including clinical laboratory and anatomic pathology prices. Some very influential hospital associations and healthcare systems are opposing implementation of this rule.
For more than a decade, Dark Daily has
reported on the federal government’s efforts to enact pricing transparency in
healthcare. In many e-briefings, we advised pathologists
and medical
laboratory leaders that the outcome of those efforts will likely affect
clinical laboratory workflows and bottom lines, and that many clinical laboratories
are not prepared to negotiate directly with customers over the price of their
services.
Now, the federal Centers for Medicare and Medicaid Services
(CMS) has passed a final
rule (CMS-1717-F2) that expands on an earlier rule mandating pricing
transparency for hospital procedures—including medical
laboratory and anatomic
pathology services. This new rule requires hospitals to disclose not only
their chargemaster
prices, but also prices negotiated with payers.
Hospital leaders are not pleased by this, and though the
final rule does not go into effect until January 1, 2021, they are already
pushing back through representative organizations such as the American Hospital Association (AHA), which has
brought a lawsuit to federal court that seeks to overturn the new rule.
New Transparency Rules Include Rates Negotiated with Health
Insurers
Beginning Jan. 1, 2019, CMS required hospitals to disclose chargemaster prices to customers. These are essentially the “list prices” for hospital procedures. However, as Dark Daily reported in “California Healthline Report Finds Hospital Chargemaster Prices Fluctuate Dramatically Even Among Hospitals Located Near Each Other,” June 12, 2019, there were problems. Chargemaster prices typically do not reflect the actual fees charged to patients or payers. Thus, consumers still found it problematic to price shop before committing to healthcare.
In an effort to remedy this, the
new 2020 final rule expands the pricing information hospitals are required to
provide and includes several categories of prices negotiated with health insurers.
Simultaneous to this final rule, CMS also announced a
proposed rule (CMS-9915-P) titled, “Transparency
in Coverage,” that if passed, will require health insurers to disclose
pricing for healthcare services as well.
In a federal Department of Health and Human Services (HHS) press
release, the Trump Administration stated that both rules will “increase
price transparency to empower patients and increase competition among all
hospitals, group health plans, and health insurance issuers in the individual
and group markets.”
“Under the status quo, healthcare prices are about as clear
as mud to patients,” said CMS Administrator Seema Verma in the HHS press
release. “This final rule and the proposed rule will bring forward the
transparency we need to finally begin reducing the overall healthcare costs.”
AHA Sues HHS in Federal Court
In response, four hospital organizations and three health
systems filed a
lawsuit in federal court against the HHS. The suit alleges the final rule
“exceeds the agency’s statutory authority,” and violates the First Amendment by
requiring public disclosure of prices negotiated with payers. This information,
they say, is “highly confidential and commercially sensitive.”
In court
documents, the plaintiffs argue that “the Final Rule is arbitrary and
capricious and lacks any rational basis. The agency’s explanation for the Final
Rule runs counter to both logic and evidence. In fact, it is belied by the
agency’s own research regarding what patients care about most when selecting a
hospital: their own out-of-pocket costs. The agency’s justification for the
Final Rule therefore does not stand up to even the barest of scrutiny. That is
the epitome of arbitrary and capricious agency action.”
A brief
filed by the plaintiffs contends that patients’ actual out-of-pocket costs
are determined by a complex set of factors and aren’t reflected in negotiated
rates. In addition, the brief states, “the sheer burden of compliance with the
rule is staggering, and way out of line with any projected benefits associated
with the rule.”
Charles N. Kahn III (above), President and CEO, Federation of American Hospitals (FAH), said in an AHA press release that, “CMS’ final rule fails to offer patients easy-to-understand information regarding their out-of-pocket obligations for care, so we feel obligated to contest the regulation. We contend the agency exceeded its authority and should go back to the drawing board.” (Photo copyright: FAH.)
Details of the Final Rule on Hospital Price Transparency
If it goes forward, starting Jan. 1, 2021, the final rule
requires hospitals to disclose five types of standard charges, according to the
HHS and AHA press releases:
The chargemaster rate, also known as the gross
charge;
The discounted cash price, which CMS defines as
the amount the hospital will accept from self-paying patients;
The payer-specific negotiated charge, defined as
“the charge that the hospital has negotiated with a third-party payer for an
item or service.” This would be the charge that applies if a patient uses an
in-network provider;
The maximum charge negotiated with payers; and
The minimum charge negotiated with payers.
Hospitals must list these charges for all billable “items
and services,” including medical laboratory and pathology services, in a
machine-readable format, such as a CSV file that
can be opened in a spreadsheet program.
In addition, they must provide a “consumer-friendly” list of charges for at least 300 “shoppable services,” defined as services that consumers can schedule in advance. Each list would include 70 services specified by CMS and an additional 230 services selected by the hospital.
The CMS-specified shoppable services include 14 laboratory
and pathology tests. They include:
Basic metabolic panel
Blood test, comprehensive group of blood
chemicals
Obstetric blood test panel
Blood test, lipids (cholesterol and triglycerides)
Kidney function panel test
Liver function blood test panel
Manual urinalysis test with examination using
microscope
Automated urinalysis test
PSA (prostate specific antigen)
Blood test, thyroid stimulating hormone (TSH)
Complete blood cell count, with differential
white blood cells, automated
Complete blood count, automated
Blood test, clotting time
Coagulation assessment blood test
Blood Brother Clinical Laboratories Also Affected by
Price Transparency
Price transparency is also at the center of two federal
lawsuits involving Laboratory Corporation of America (LabCorp) and Quest
Diagnostics. The Dark Report, Dark Daily’s sister publication, reported
on these suits in “Lawsuits
Alleging Overcharges to Proceed in Two Courts in 2020,” December 16, 2019.
The plaintiffs in those cases are uninsured or underinsured
customers who claim they were charged far more for medical laboratory tests
than customers covered by insurance. In both cases, customers were charged at
the chargemaster rates. The plaintiffs contend that the medical laboratories
should have disclosed their rates in advance.
Whichever way this all goes, clinical laboratories will need
to monitor the multiple efforts by the states and the federal government to
make it easy for patients to see the prices of hospital, physician, and other
medical services in advance of treatment. This has the potential to be a disruptive
trend, particularly for hospitals.
