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New Federal Rules on Sepsis Treatment Could Cost Hospitals Millions of Dollars in Medicare Reimbursements

Some hospital organizations are pushing back, stating that the new regulations are ‘too rigid’ and interfere with doctors’ treatment of patients

In August, the Biden administration finalized provisions for hospitals to meet specific treatment metrics for all patients with suspected sepsis. Hospitals that fail to meet these requirements risk the potential loss of millions of dollars in Medicare reimbursements annually. This new federal rule did not go over well with some in the hospital industry.

Sepsis kills about 350,000 people every year. One in three people who contract the deadly blood infection in hospitals die, according to the Centers for Disease Control and Prevention (CDC). Thus, the federal government has once again implemented a final rule that requires hospitals, clinical laboratories, and medical providers to take immediate actions to diagnose and treat sepsis patients.

The effort has elicited pushback from several healthcare organizations that say the measure is “too rigid” and “does not allow clinicians flexibility to determine how recommendations should apply to their specific patients,” according to Becker’s Hospital Review.

The quality measures are known as the Severe Sepsis/Septic Shock Early Management Bundle (SEP-1). The regulation compels doctors and clinical laboratories to:

  • Perform blood tests within a specific period of time to look for biomarkers in patients that may indicate sepsis, and to
  • Administer antibiotics within three hours after a possible case is identified.

It also mandates that certain other tests are performed, and intravenous fluids administered, to prevent blood pressure from dipping to dangerously low levels. 

“These are core things that everyone should do every time they see a septic patient,” said Steven Simpson, MD, Professor of medicine at the University of Kansas told Fierce Healthcare. Simpson is also the chairman of the Sepsis Alliance, an advocacy group that works to battle sepsis. 

Simpson believes there is enough evidence to prove that the SEP-1 guidelines result in improved patient care and outcomes and should be enforced.

“It is quite clear that this works better than what was present before, which was nothing,” he said. “If the current sepsis mortality rate could be cut by even 5%, we could save a lot of lives. Before, even if you were reporting 0% compliance, you didn’t lose your money. Now you actually have to do it,” Simpson noted.

Chanu Rhee, MD

“We are encouraged by the increased attention to sepsis and support CMS’ creation of a sepsis mortality measure that will encourage hospitals to pay more attention to the full breadth of sepsis care,” Chanu Rhee, MD (above), Infectious Disease/Critical Care Physician and Associate Hospital Epidemiologist at Brigham and Women’s Hospital told Healthcare Finance. The new rule, however, requires doctors and medical laboratories to conduct tests and administer antibiotic treatment sooner than many healthcare providers deem wise. (Photo copyright: Brigham and Women’s Hospital.)

Healthcare Organizations Pushback against Final Rule

The recent final rule builds on previous federal efforts to combat sepsis. In 2015, the Centers for Medicare and Medicaid Services (CMS) first began attempting to reduce sepsis deaths with the implementation of SEP-1. That final rule updated the Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospitals Prospective Payment System (LTCH PPS).

Even then the rule elicited a response from the American Hospital Association (AHA), the Infectious Disease Society of America (IDSA), American College of Emergency Physicians (ACEP), the Society of Critical Care Medicine (SCCM), and the Society of Hospital Medicine (SHM). The organizations were concerned that the measure “encourages the overuse of broad-spectrum antibiotics,” according to a letter the AHA sent to then Acting Administrator of CMS Andrew Slavitt.

“By encouraging the use of broad spectrum antibiotics when more targeted ones will suffice, this measure promotes the overuse of the antibiotics that are our last line of defense against drug-resistant bacteria,” the AHA’s letter states.

In its recent coverage of the healthcare organizations’ pushback to CMS’ final rule, Healthcare Finance News explained, “The SEP-1 measure requires clinicians to provide a bundle of care to all patients with possible sepsis within three hours of recognition. … But the SEP-1 measure doesn’t take into account that many serious conditions present in a similar fashion to sepsis … Pushing clinicians to treat all these patients as if they have sepsis … leads to overuse of broad-spectrum antibiotics, which can be harmful to patients who are not infected, those who are infected with viruses rather than bacteria, and those who could safely be treated with narrower-spectrum antibiotics.”

CMS’ latest rule follows the same evolutionary path as previous federal guidelines. In August 2007, CMS announced that Medicare would no longer pay for additional costs associated with preventable errors, including situations known as Never Events. These are “adverse events that are serious, largely preventable, and of concern to both the public and healthcare providers for the purpose of public accountability,” according to the Leapfrog Group.

In 2014, the CDC suggested that all US hospitals have an antibiotic stewardship program (ASP) to measure and improve how antibiotics are prescribed by clinicians and utilized by patients.

Research Does Not Show Federal Sepsis Programs Work

In a paper published in the Journal of the American Medical Association (JAMA) titled, “The Importance of Shifting Sepsis Quality Measures from Processes to Outcomes,” Chanu Rhee, MD, Infectious Disease/Critical Care Physician and Associate Hospital Epidemiologist at Brigham and Women’s Hospital and Associate Professor of Population Medicine at Harvard Medical School, stressed his concerns about the new regulations.

He points to analysis which showed that though use of broad-spectrum antibiotics increased after the original 2015 SEP-1 regulations were introduced, there has been little change to patient outcomes.  

“Unfortunately, we do not have good evidence that implementation of the sepsis policy has led to an improvement in sepsis mortality rates,” Rhee told Fierce Healthcare.

Rhee believes that the latest regulations are a step in the right direction, but that more needs to be done for sepsis care. “Retiring past measures and refining future ones will help stimulate new innovations in diagnosis and treatment and ultimately improve outcomes for the many patients affected by sepsis,” he told Healthcare Finance.

Sepsis is very difficult to diagnose quickly and accurately. Delaying treatment could result in serious consequences. But clinical laboratory blood tests for blood infections can take up to three days to produce a result. During that time, a patient could be receiving the wrong antibiotic for the infection, which could lead to worse problems.

The new federal regulation is designed to ensure that patients receive the best care possible when dealing with sepsis and to lower mortality rates in those patients. It remains to be seen if it will have the desired effect.  

Jillia Schlingman

Related Information:

Feds Hope to Cut Sepsis Deaths by Hitching Medicare Payments to Treatment Stats

Healthcare Associations Push Back on CMS’ Sepsis Rule, Advocate Tweaks

Value-Based Purchasing (VBP) and SEP-1: What You Should Know

NIGMS: Sepsis Fact Sheet

CDC: What is Sepsis?

CDC: Core Elements of Antibiotic Stewardship

The Importance of Shifting Sepsis Quality Measures from Processes to Outcomes

Association Between Implementation of the Severe Sepsis and Septic Shock Early Management Bundle Performance Measure and Outcomes in Patients with Suspected Sepsis in US Hospitals

Infectious Diseases Society of America Position Paper: Recommended Revisions to the National Severe Sepsis and Septic Shock Early Management Bundle (SEP-1) Sepsis Quality Measure

CMS to Improve Quality of Care during Hospital Inpatient Stays – 2014

New Proposed Federal Rule Could Remove Requirement for Hospitals to Share Negotiated Medicare Advantage Rates with CMS

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.

Now, after the American Hospital Association (AHA) in a January 7 letter asked the federal Centers for Medicare and Medicaid Services (CMS) to “exercise enforcement discretion with respect to the hospital price transparency rule,” CMS has removed the requirement that hospitals report certain negotiated-rates.

The CMS “Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH)” proposed rule for fiscal year (FY) 2022 (CMS-1752-P) removes hospitals’ need to report Medicare Advantage (MA) rates on Medicare cost reports effective Jan. 1, 2021, according to a CMS fact sheet.

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.

HHS-Secretary-Xavier-Becerra-at-podium
“Hospitals are often the backbone of rural communities—but the COVID-19 pandemic has hit rural hospitals hard, and too many are struggling to stay afloat,” HHS Secretary Xavier Becerra (above) said in an announcement, RevCycleIntelligence reported. “This rule will give hospitals more relief and additional tools to care for COVID-19 patients and it will also bolster the healthcare workforce in rural and underserved communities.” (Photo copyright: Modern Healthcare.)

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.

Donna Marie Pocius

Related Information:

Fact Sheet: Fiscal Year (FY) 2022 Medicare Hospital Inpatient System (IPPS) and Long-Term Care Hospital (LTCH) Rates Proposed Rule (CMS 1752-P)

CMS Proposes $2.5B IPPS Rate Hike, with Eye on Rural Health Equity

Experts Say CMS is Still Committed to Price Transparency after Proposal to Pull MA Requirements

AHA Statement on FY 2022 Proposed IPPS Rule

AHA Urges HHS to Exercise Enforcement Discretion with Respect to the Hospital Price Transparency Rule

Hospitals Slow to Disclose Their Payer-Negotiated Rates

CMS Price Transparency Rule Offers Providers, Payers a Win, Too

Wall Street Journal Investigation Finds Computer Code on Hospitals’ Websites That Prevents Prices from Being Shown by Internet Search Engines, Circumventing Federal Price Transparency Laws

Despite the Coronavirus Pandemic, Medicare Officials Continue Push for Price Transparency by Pressuring Hospitals to Disclose Rates Negotiated with Private Payers

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.”

AHA Executive Vice President Tom Nickels at a podium
“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

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