Obtaining an accurate perspective on the meaning and relative impacts of cost and payment increases in the healthcare industry depends on the specific metrics that provide the basis for the analysis.
To no one’s surprise, health care was a primary political issue in the Fall midterm elections. Everyone knows that our country spends more on health care as a percentage of GDP than other developed countries. The primary question that the industry has long grappled with is whether we, as a nation, spend more on health care because we consume much more than anyone else or just spend more for the services that we consume.
To read the full article, from HFM Magazine, click here.
Addressing The Latest CMS Update On Price Transparency Disclosures
Earlier this month, the CMS issued another responses to frequently asked questions on its website. Knowledge of – and access to – this latest posting have been limited, however, there is important information administrators have been learning from this latest update. The information in this latest update were largely not part of the original final rule language, nor part of the first responses to frequently asked questions posted earlier in the fall. In all, there have been three pieces of guidance on the new charge disclosure requirement:
The original FY19 IPPS Final Rule language which reads:
“as one step to further improve the public accessibility of charge information, effective January 1, 2019, we announced the update to our guidelines to require hospitals to make available a list of their current standard charges via the Internet in a machine readable format and to update this information at least annually, or more often as appropriate. This could be in the form of the chargemaster itself or another form of the hospital’s choice, as long as the information is in machine readable format.”
While all points are important to know, we believe there are three key updates that could impact the way hospitals choose to comply with the new charge disclosure requirement. We provide a brief discussion of the three key points below:
1. DRUGS/SUPPLIES:
Over the past several months, there have been a number of questions surrounding the disclosure of drug and supply charge information. While the CMS still does not address HOW to disclose this information, they have confirmed that the charges for these items MUST be disclosed. There was some earlier discussion around the industry that hospitals might not have to disclose these items if they are truly not part of the chargemaster, as is inferred in the first responses to frequently asked questions. So, the key takeaway is that these items should be disclosed, but, hospitals still have the ability to determine how to disclose charge information. For information on options to disclose, we refer to our earlier post which contains the table below. We have modified the table slightly to remove the point that a hospital could defend not including these items if they are truly not part of the hospital’s CDM.
2. ADDITIONAL MSDRG DISCLOSURE:
Likely the most confusing point is a reference to an additional charge disclosure at the MSDRG level. The exact language is provided below:
Q.In addition to establishing (and updating) and making public a list of the hospital’s standard charges for all items and services provided by the hospital, what hospitals are required to establish (and update) and make public a list of their standard charges for each diagnosis-related group established under section 1886(d)(4) of the Social Security Act?
A. All hospitals operating within the United States are required establish (and update) and make public a list of their standard charges for all items and services provided by the hospital. Under current guidelines, subsection (d) hospitals are additionally required to establish (and update) and make public a list of their standard charges for each diagnosis-related group established under section 1886(d)(4) of the Social Security Act.
The format for standard charges for each diagnosis-related group is the hospital’s choice. CMS posts information regarding inpatient charges for subsection (d) hospitals at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient.html. Subsection (d) hospitals may, but are not required to, use this format with respect to the additional requirement that the hospital establish (and update) and make public a list of the hospital’s standard charges for each diagnosis-related group established under section 1886(d)(4) of the Social Security Act.
How does this information impact the way a hospital reports charge information? We previously presented a “Compliance Continuum” to help hospitals understand their options for disclosing charge data based on the rule’s language and subsequent responses to frequently asked questions. The continuum is presented below, for reference.
It appears from this latest language that the CMS wants a “CDM-type” disclosure (like the “Minimum CDM” or “Expanded CDM” options) PLUS a disclosure of average charges by MSDRG (like the “Encounter Charges” option). We believe that this latest language has been presented by the CMS in an attempt to cover the original ACA transparency language that included mention of diagnosis-related groupings. That language is actually what caused us to believe that “encounter level disclosures” would be sufficient on their own. While that likely could still be argued, it would seem to us that the CMS would now like to see both. We do emphasize, however, that “encounter level charges” disclosures still meet all four keys to compliance:
TYPE OF INFORMATION:A hospital must show standard charges via the chargemaster (CDM) or another form of the hospital’s choosing – however – all items and services must be represented
AVAILABILITY OF INFORMATION:Information must be made available on the internet – however – participation in a state online transparency initiative does not exempt a hospital from the requirement
FORMAT OF INFORMATION:Data must be machine readable and not provided solely in a .pdf
UPDATES OF INFORMATION:At least annually
We believe both could be useful as the CMS has used the language “in addition.” As a result, presenting a Minimum CDM/Expanded CDM disclosure PLUS a MSDRG encounter disclosure would seem to cover all possibilities. Some of this is still debatable, though, which is a point we will revisit in a moment.
One final point on the MSDRG disclosure. There have been some questions regarding the references the CMS makes in its answer and we thought it could be helpful to address those (in italics below):
A. All hospitals operating within the United States are required establish (and update) and make public a list of their standard charges for all items and services provided by the hospital. Under current guidelines, subsection (d) hospitals are additionally required to establish (and update) and make public a list of their standard charges for each diagnosis-related group established under section 1886(d)(4) of
the Social Security Act. **This is a reference to the establishment of a DRG-based payment system. So, CMS is just indicating that they’d like to see the charges disclosed by MSDRG.
The format for standard charges for each diagnosis-related group is the hospital’s choice. CMS posts information regarding inpatient charges for subsection (d) hospitals at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient.html. Subsection (d) hospitals may, but are not required to, use this format with respect to the additional requirement that the hospital establish (and update) and make public a list of the hospital’s standard charges for each diagnosis-related group established under section 1886(d)(4) of the Social Security Act.**The link takes the user to a download of hospital charges by MSDRG from the Medicare PUF data. We believe they are attempting to say that a hospital could use this as a template for disclosure, but, is not required to do so if some other format of average charge by MSDRG is used. Essentially, the hospital simply needs a reference of some kind (either the MSDRG number, description, or both) and an average charge. We believe that whatever format is selected, it could be useful to include some qualifying statement that actual patient charges could differ based on unique patient utilization of services.
3. PENALTIES FOR NON-COMPLIANCE
Unfortunately, there have been some “scare-tactic” emails regarding penalties for non-compliance – or – not complying with a prescribed “proprietary” methodology put forth by some companies. We believe these emails are intended to drive business – not to truly educate providers on what the new language says and does NOT say. As far as penalties, the CMS does address this in the latest document:
Q.What happens if a hospital does not make public a list of its standard charges via the Internet?
A. The hospital will not be in compliance with the law. In the FY 2019 IPPS/LTCH proposed rule (83 FR 20549), CMS sought comment on the most appropriate mechanism for CMS to enforce price transparency requirements. As indicated in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41686), specific additional future enforcement or other actions that we may take with the guidelines will be addressed in future rule making.
Let’s be clear: hospitals need to comply with the law. However, we believe the CMS understands there is some latitude here for complying given that they’ve provided language that permits hospitals to use disclosure formats of their choosing. These requirements will most likely be refined in the years ahead. In fact, in March, the current Administrator of the Centers for Medicare and Medicaid Services, Seema Verma said “we are just beginning on price transparency. We know that hospitals have this information and we’re asking them to post what they have online.”
While there are no penalties prescribed, we believe there are three critical points:
Hospitals should NOTtake this as a “free pass” to not comply.
Hospitals should NOTbecome overly worried about disclosure formats – so long as the four compliance keys are met and the hospital can reasonably defend its approach.
Hospitals SHOULDput forth a good faith effort to provide the information that has been requested. If the CMS can see hospitals are trying to meet the requirements, it’s likely that future penalty language can be avoided or mitigated.
Cleverley + Associates hope this information is helpful and welcome any questions or comments. As always, we will continue to monitor communication and provide relevant updates as appropriate.
FY 2019 IPPS Final Rule: Questions on Drugs and Supplies
We had several questions following our webinar on the FY 2019 IPPS Final Rule regarding drugs and supplies. We created a matrix to help you understand the options based on billing methodology.
If you’d like to watch the full webinar, you can see it here!
FY 2019 IPPS Final Rule: A Closer Look at Payment Per Discharge
CMS reports an estimated increase by 2.4 percent for FY 2019 in overall payments to hospitals paid under the IPPS. This increase is due to the applicable percentage increase and changes to policies related to MSDRGs, geographic adjustments, and outliers. National standardized amount increases by 1.85 percent. Hospitals paid under the hospital-specific rate will receive a 1.35 percent hospital update.
The annual hospital update includes:
9 percent market basket update
8 percentage point reduction for the multifactor productivity adjustment
75 percentage point reduction under section 3401 of the Affordable Care Act
*Data Source; FY 2019 IPPS Final Rule, CMS Table II
By payment classification, urban areas hospitals are estimated to experience a 2.3 percent increase in payments per discharge in FY 2019. Rural area hospital payments per discharge are estimated to increase by 2.7 percent in FY 2019.
*Data Source; FY 2019 IPPS Final Rule, CMS Table II
In review of payment changes by Bed Size, larger hospitals (urban hospitals with 500 or more beds, rural hospitals with 200 or more beds) are estimated to experience the largest increase in payments at 2.9% and 1.6% change, respectively. However, the bed size category of 500 or more beds only accounts for approximate 8.8% of all urban geographic location hospitals and 5.2% of all rural geographic location hospitals.
*Data Source; FY 2019 IPPS Final Rule, CMS Table II
What are the effects of the changes to Medicare Disproportionate Share Hospital (DSH) and Uncompensated Care (UC) Payments?
Hospitals eligible to receive Medicare DSH payments will receive:
25 percent of the amount they previously would have received under the statutory formula for Medicare DSH payments under section 1886(d)(5)(F) of the Act.
75 percent of the remainder of what formerly would have been paid as Medicare DSH payments (Factor 1), reduced to reflect changes in the percentage of uninsured individuals and additional statutory adjustments (Factor 2), plus additional payment based on estimated share of the total amount of uncompensated care (Factor 3).
Note: The change to Medicare DSH payments under section 3133 of the Affordable Care Act is not budget neutral.
*Data Source; FY 2019 IPPS Final Rule, CMS Modeled Uncompensated Care Payments for Estimated FY 2019 DSHs by Hospital Type: Model UCP $ (in Millions) from FY 2018 to FY 2019
CMS included 2,448 hospitals projected to be eligible for DSH in FY 2019.
*Data Source; FY 2019 IPPS Final Rule, CMS Modeled Uncompensated Care Payments for Estimated FY 2019 DSHs by Hospital Type: Model UCP $ (in Millions) from FY 2018 to FY 2019
CMS is continuing to incorporate data from Worksheet S-10 to determine Factor 3 for amount of uncompensated care. For FY 2019, Worksheet S-10 for FYs 2014, 2015 with proxy data regarding a hospital’s share of low-income insured dates for FY 2013 were utilized.
Why should hospitals be aware of Overall Payment Changes?
Overall payment changes are affected by several policy factors, of which key factors are:
Operating Base Rate
Wage Index
MSDRG Relative Weight
Unique service volumes
IPPS payments before and after changes are required to result to be budget neutral, which include the factors of wage index, geographic reclassification, and MSDRG recalibration and reclassification. Yet, impacts to each hospital could vary. With changes in these factors from year to year, hospitals should understand what is driving any significant payment differences specific to the provider.
In addition, hospitals need to provide appropriate attention to the completion of Worksheet S-10 due to direct impact in UCP payments.
Case Hospital Example: Urban Ohio Hospital
An Urban Ohio case hospital is showing to experience an overall 1.2% increase in operating payments from FY 2018 to FY 2019, despite this hospital’s overall Wage Index decreasing by 1.72% from 0.971 in FY 2018 to 0.9543 in FY 2019.
However, this projection was created under the assumption unique service volumes are not changing. Keeping that assumption in mind, the hospital should keep a watch on any individual MSDRG changes and how those changes affect overall payment. If volume increases in negatively impacted MSDRG payment areas, the hospital may not experience the projections set forth in the Final Rule polices.
What is the Impact to my Hospital?
Assessing the impact to Prospective Payment Rule polices is essential is understanding future Medicare payments and Medicare-like payments. Identifying driving factors could assist the hospital in offering feedback to CMS, other payers, and/or budgetary purposes at the facility and departmental levels.
Want further information?
FY 2019 IPPS Final Rule posted to the Federal Register on August 17, 2018: www.federalregister.gov/documents/2018/08/17/2018-16766/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the
Based on the data above, the clear majority of hospitals are experiencing an increase or decrease less than 5% or no change at all (92%).
Why should hospitals be aware?
Even small changes with wage index (WI) combined with MSDRG relative weight (RW) changes could mean significant payment differences based on a hospital’s case mix. The WI is calculated and assigned to hospitals on the basis of the labor market area in which the hospital is located. WI is updated annually and applied to the labor-related share of the national IPPS base payment rate. A provision of the Act requires updates or adjustments to the WI be made in a manner that ensures aggregate payments to hospitals are not affected by the change in the WI. However, to an individual hospital, overall change in payment will also depend on changing services and volumes in addition to policy change factors such as Operating Base Payment and MSDRG RWs.
Case Hospital Example: Urban Ohio Hospital with > 10% Decrease in WI
Reviewing the top 3 MSDRGs for an example hospital illustrates a change in payment from 2018 to 2019. In this example, the volumes by MSDRG remain static, with the assumption volumes will remain the same or similar in subsequent years. The other key ingredients to payment include Operating Base Rate and MSDRG RWs in addition to WI.
FY 2019 Wage Index = 0.8237
FY 2018 Wage Index = 0.9366
Operating base rate increases from FY 2018 to FY 2019. MSDRG RWs are various in terms of increasing or decreasing from FY 2018 to FY 2019. However, the overall decrease in the WI for this hospital example is showing to drive the decrease in overall payment, especially prominent with MSDRG 871.
1Payment Differences due to WI Changes: FY 2019 Operating base rate and FY 2019 MSDRG Relative Weights to isolate Wage Index impact with static volumes
2Payment Differences due to RW Changes: FY 2019 Operating base rate and FY 2019 Wage Index to isolate Relative Weight impact with static volumes
3Payment Differences due to Operating Base Payment Changes: FY 2019 MSDRG Relative Weights and FY 2019 Wage Index to isolate Operating Base Payment impact with static volumes
4Total Payment Differences: FY 2018 and 2019 Operating base rate, FY 2018 and 2019 MSDRG Relative Weights, and FY 2018 and 2019 Wage Index to illustrate overall payment change with static volumes
What is the Impact to my Hospital?
Assessing the impact to Prospective Payment Rule polices is essential is understanding future Medicare payments. Identifying driving factors could assist the hospital in offering feedback to CMS, budgetary purposes at the facility and departmental levels, or potentially pursuing reclassification designation.
Is Wage Index reclassification beneficial for your Organization?
While the process to reclassify is complex, if a hospital meets the criteria to potentially reclassify to be advantageous, the process may be worth the efforts.
NOTE:Hospitals may also appeal denials of MGCRB decisions to the CMS Administrator. Hospitals have 45 daysfrom the date the IPPS proposed rule is issued in the Federal Register (published in Federal Register on August 17, 2018) to decide whether to withdraw or terminate an approved geographic reclassification for the following year.
