In big win for hospitals, CMS pitches nixing mandate to submit some payer-negotiated rates

In a major win for hospitals, CMS is seeking to abandon a plan to require them to disclose certain negotiated rates it reaches with Medicare Advantage organizations in reports submitted to the federal government, per a proposal released Tuesday.

The agency is also proposing a hospital payment bump totaling $2.5 billion for fiscal year 2022 as well as implementation of a floor wage index provision from legislation passed earlier this year.

The proposed Inpatient Prospective Payment System also adds 1,000 graduate medical education slots over the next five years, with a priority given to those in rural areas and with underserved patient populations.

The rule would also update some data collection requirements for hospitals, adjust quality metrics collected and has changes related to the COVID-19 pandemic, including extended add-on payments for COVID-19 treatment and suppression of measures used to assess hospital performance that have been unduly affected by the pandemic.

Early industry reaction to the proposal was largely favorable, with the American Hospital Association applauding the provision that removes the requirement that hospitals report privately negotiated rates with Medicare Advantage payers on Medicare cost reports and another that repeals market-based weight methodology for determining payments.

“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’s goal of paying market rates that reflect the cost of delivering care,” AHA said in a statement.

CMS estimated this change would save hospitals about 64,000 hours in administrative burden.

Comments on the rule are due June 28.

Payment changes

Hospital payments are set to increase by as much as $3.4 billion, a 2.8% increase compared with the year prior. However, after taking into account proposed reductions in Medicare disproportionate share payments and uncompensated care, the total payment increase will be closer to $2.5 billion, CMS said.

The effects of the pandemic raised concerns about effective rate setting for fiscal year 2022, the agency flagged in its proposal. 

Noting the drastic volume changes at healthcare facilities last year, CMS said it may be “less suitable” to rely on data from 2020. 

As such, CMS is proposing to use fiscal year 2019 data to set payment rates for fiscal year 2022 as fiscal year 2020 data does not reflect activity expected for the coming year with the vaccination rollout continuing.

On the other hand, CMS is seeking to cut uncompensated care payments by $660 million from fiscal year 2021. In sum, CMS is proposing to disburse about $7.6 billion to Medicare DSH facilities. 

CMS is also reinstating the “imputed floor wage index,” as required by the American Rescue Plan Act of 2021. Under this policy, New Jersey, Rhode Island, Delaware, Connecticut and Washington, D.C. can expect to see increases in their wage indices. The wage index is designed to modify payments by recognizing that labor costs vary depending on whether a facility is in an urban or rural area. Under this plan, the aforementioned states and D.C. will now be recognized as “all-urban,” leading to the wage index bump.

Focus on equity in data reporting

The proposal includes a request for information on collecting more data from patients in an effort to address “significant and persistent inequities in health outcomes in the U.S.” and analyze disparities across programs, according to a CMS fact sheet.

Intake information collected would include race, dual eligible status, disability, sexual orientation and socioeconomic status.

America’s Essential Hospitals praised this focus on equity, saying its members “welcome this focus on systemic barriers to care.”

CMS is also considering a health equity score measure modeled after one used to rate MA plans and is seeking comment on future potential reporting “to assess the degree of hospital leadership engagement in health equity performance data.”

For the Hospital Inpatient Quality-Reporting Program, CMS is proposing to add five new measures, including COVID-19 vaccination among healthcare personnel and a metric affecting maternal morbidity. It would also remove five measures, and the agency is seeking comment on adding a measure assessing mortality for patients admitted with COVID-19 and one on patient-reported outcomes after joint replacement.

The agency is also adjusting quality measure reporting to avoid metrics that might be tainted by COVID-19 data. “The policies CMS is proposing to mitigate the impact of COVID-19 on quality measures will help prevent a hospital’s quality score from telling a false story and being unfairly penalized,” group purchasing organization Premier said in a statement.