CMS Issues IPPS Proposed Rule Featuring Reversal of Key Transparency Requirement

The AHA had lobbied hard for a change – and appears to have gotten it.

Less than eight months after introducing a final rule featuring a controversial key element of the federal push to enhance transparency in hospital pricing, officials this week unveiled a proposed rule featuring an abrupt about-face.

The Centers for Medicare & Medicaid Services (CMS) proposal, set to affect rates for the Medicare Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospitals (LTCHs), would wholly repeal the looming requirement that hospitals report their median payor-specific negotiated rates for inpatient services, sorted by Medicare Severity-Diagnosis Related Group (MS-DRG), for Medicare Advantage (MA) organizations.

“Based on our initial review, we are very pleased CMS is proposing to repeal the requirement that hospitals and health systems disclose privately negotiated contract terms with payors on the Medicare cost report,” American Hospital Association (AHA) Executive Vice President Tom Nickels said in a statement. “We have long said that privately negotiated rates take into account any number of unique circumstances between a private payor and a hospital, and their disclosure will not further CMS’s goal of paying market rates that reflect the cost of delivering care. 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.”

When CMS had issued its final rule in September 2020, AHA issued a statement indicating that it was “deeply disappointed” by the now seemingly defunct CMS requirement, suggesting that federal officials focus more on patient out-of-pocket costs instead. A little more than two months prior to that, a federal judge had dismissed a lawsuit filed by AHA and three other advocacy groups challenging the initial pricing transparency requirement.

Panacea CEO Frederick Stodolak noted that only an estimated 40 to 50 percent of hospitals nationwide are reportedly in compliance so far with the CMS pricing transparency rule requiring hospitals to produce both a consumer display and machine-readable file, making it clear that such providers “are already under a significant burden.”

“So, CMS repealing this rule, stating that ‘this proposal will avoid imposing additional unnecessary burden on hospitals,’ is welcome and appropriate during these difficult times for healthcare providers,” Stodolak said.

The proposed rule, weighing in at a robust 1,914 pages, was outlined in a 5,600-word press release issued by CMS this week.

“The proposed policies in the IPPS and LTCH PPS rule builds on key priorities to close healthcare equity gaps and support greater access to life-saving diagnostics and therapies during the public health emergency (PHE) and beyond,” the announcement read. “The rule’s provisions seek to sustain hospital readiness to respond to future public health threats, enhance the healthcare workforce in rural and underserved communities, and revise scoring, payment, and public quality data reporting methods to lessen the adverse impacts of the pandemic and future unplanned events.”

In one of many provisions, CMS proposed to extend New Technology Add-on Payments for 14 technologies that otherwise would be discontinued in during the 2022 fiscal year (FY), as well as to extend the New COVID-19 Treatments Add-on Payment (NCTAP) for eligible products through the end of the fiscal year in which the COVID-19 PHE ends – marking another development lauded by the AHA.

“This will help hospitals and health systems continue to treat COVID-19 patients and save lives,” Nickels’s statement continued. “We are also pleased CMS is proposing to implement the 1,000 new Medicare-funded medical residency positions that were added by Congress last year, and we look forward to reviewing this proposal in more detail. The AHA has long advocated for increasing the number of Medicare-funded residency slots to help ease current physician shortages and bolster the foundation of our healthcare system.”

“Finally, we are heartened CMS recognizes the COVID-19 pandemic has resulted in non-representative performance in its hospital quality measurement and value programs, requiring temporary policy adjustments. We will work with the agency to ensure its finalized policies assess hospitals in a fair and transparent manner.”

Other key provisions of the proposed rule included the following:

Proposed Changes to Payment Rates under IPPS
Officials said that the proposed increase in operating payment rates for general acute-care hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR) users weighs in at approximately 2.8 percent. CMS warned that hospitals also may be subject to other payment adjustments under the IPPS, including:

  • Payment reductions for excess readmissions under the Hospital Readmissions Reduction Program (HRRP);
  • Payment reduction (1 percent) for the worst-performing quartile under the Hospital-Acquired Condition (HAC) Reduction Program; and
  • Upward and downward adjustments under the Hospital Value-Based Purchasing Program.

“Before taking into account Medicare disproportionate share hospital (DSH) payments and Medicare uncompensated care payments, the proposed increase in operating payment rates, increases in capital payments, increases in payments for new medical technologies, increases in payments due to implementation of the imputed floor, and other proposed changes will increase hospital payments in FY 2022 by $3.4 billion, or 2.8 percent,” the CMS press release read. “CMS projects Medicare DSH payments and Medicare uncompensated care payments to decrease in FY 2022, compared to FY 2021, by approximately $0.9 billion. Overall, CMS estimates hospitals payments will increase by $2.5 billion.”

Hospital Readmissions Reduction Program 
For the HRRP, which incentivizes hospitals to limit readmissions by monetarily penalizing those that don’t, CMS said it is:

  • Proposing to adopt a measure suppression policy and proposing to suppress the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following the Pneumonia Hospitalization measure (NQF No. 0506), beginning with the FY 2023 program year;
  • Modifying the remaining five condition-specific readmission measures to exclude COVID-19-diagnosed patients from the measure denominators, beginning with the FY 2023 program year;
  • Seeking public comment on closing the national health equity gap through possible future stratification of results by race and ethnicity for condition/procedure-specific readmission measures, and by expansion of standardized data collection to additional social factors, such as language preference and disability status;
  • Soliciting public comment on mechanisms of incorporating other demographic characteristics into analysis that address and advance health equity, such as the potential to include administrative and self-reported data to measure co-occurring disability status; and
  • Proposing to update regulatory text to reflect the renaming of the Hospital Compare website (now referred to as “Care Compare.”)

Use of the FY 2019 Inpatient Hospital Utilization Data Instead of FY 2020 Data Due to the PHE
Citing a goal to “use the best available data overall” when setting inpatient hospital payment rates, CMS acknowledged that 2020 was, well, not normal – and data collected throughout the year lost some measure of usefulness as a result.

“Ordinarily, the best available full year of data to approximate the expected FY 2022 inpatient hospital utilization would be data from FY 2020. However, the FY 2020 data reflects changes in inpatient hospital utilization driven by the COVID-19 PHE,” CMS said. “The continuing rapid increase in vaccinations, coupled with the effectiveness of the vaccines, leads us to believe that there will be significantly lower risk of COVID-19 infection and fewer hospitalizations for COVID-19 in FY 2022 than occurred in FY 2020.” 

As such, officials said, the proposed rule includes a goal to use FY 2019 data to approximate the expected FY 2022 inpatient hospital utilization.

Hospital Value-Based Purchasing (VBP) Program
For the VBP Program, which is funded by reducing participating hospitals’ base operating DRG payments each fiscal year by 2.0 percent and redistributing the entire amount back as value-based incentive payments, CMS proposes to:

  • Suppress the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), Medicare Spending Per Beneficiary (MSPB), and five healthcare-associated infection (HAI) measures for the FY 2022 program year;
  • Suppress the Pneumonia (PN) 30-Day Mortality Rate (MORT-30-PN) measure for the FY 2023 program year; and
  • Remove the Patient Safety and Adverse Events Composite (CMS PSI 90) measure beginning with the FY 2023 program year. (“CMS continues to consider patient safety a high priority, but because the CMS PSI 90 measure is also used in the HAC (Hospital-Acquired Condition) Reduction Program, CMS believes removing this measure from the Hospital VBP Program will reduce the provider and clinician costs associated with tracking duplicative measures across programs,” the agency explained.)

“As a result of the above proposed measure suppressions for the FY 2022 program year, CMS believes that calculating a total performance score (TPS) for hospitals using only data from the remaining measures, all of which are in the Clinical Outcomes Domain, would not result in a fair national comparison,” CMS’s press release read. “Therefore, CMS is also proposing to not calculate a TPS for any hospital based on one domain, and to instead award to all hospitals (a) value-based payment amount for each discharge that is equal to the amount withheld. CMS is also proposing to calculate measure rates for all measures and to publicly report those rates where feasible and appropriately caveated.”

Long Term Care Hospital Quality Reporting Program (LTCH QRP)
For the LTCH QRP, CMS is proposing to:

  • Adopt the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure;
  • Update the denominator for the Transfer of Health (TOH) Information to the Patient-Post Acute Care (PAC) quality measure;
  • Publicly report quality measures with fewer than standard numbers of quarters due to COVID-19 PHE exemptions;
  • Publicly report compliance with Spontaneous Breathing Trial (SBT) by the second day of a LTCH stay, beginning with the March 2022 Care Compare refresh (or as soon as technically feasible);
  • Publicly report the Ventilator Liberation Rate for the PAC LTCH QRP measure, beginning with the March 2022 Care Compare refresh (or as soon as technically feasible);
  • Implement Fast Healthcare Interoperability Resources (FHIR) in support of Digital Quality Measurement in Quality Programs – Request for Information (RFI); and
  • Implement Closing the Health Equity Gap in Post-Acute Care Quality Reporting Programs – Request for Information (RFI).

Interim Final Rule with Comment (IFC)
Along with the IPPS/LTCH PPS proposed rule, CMS is issuing an IFC to amend current regulations at § 412.230 to allow hospitals with a rural redesignation to reclassify through the Medicare Geographic Classification Review Board, using the rural reclassified area as the geographic area in which the hospital is located. “These regulatory changes align our policy with the decision in Bates County Memorial Hospital v. Azar, 464 F. Supp. 3d (D.D.C. 2020),” CMS said.

Clarification of Extraordinary Circumstances Exceptions (ECE) Policy due to PHE
CMS is also clarifying in the rule, with respect to the HRRP and HAC Reduction Program, that an approved Extraordinary Circumstances Exceptions (ECE) would not “except” a facility from the quality program, but instead that the facility would be “excepted” from reporting data for the approved data-reporting period.

To view the proposed rule in its entirety, go online to


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