Inpatient Prospective Payment Systems (IPPS) Calls for Hospitals to Report Market Based Payment Rates

Recently, the Centers for Medicare and Medicaid Services (CMS) filed the Inpatient Prospective Payment Systems (IPPS) Final Rule for 2021. One of the more controversial provisions in the IPPS Final Rule finalizes CMS’ proposal, with modification, to require hospitals to report certain market-based payment rate information on their Medicare cost report for cost reporting periods ending on or after January 1, 2021.

Hospital Reporting

Specifically, this includes requiring hospitals to report on the Medicare cost report, the median payer-specific charge that the hospital has negotiated with all of its Medicare Advantage organization (MAO) payers, by Medicare Severity Diagnosis Related Groups (MS-DRGs). The payer-specific negotiated charges used by hospitals to calculate these medians would be the payer-specific negotiated charges for service packages that hospitals are already required to make public under the requirements finalized in the Hospital Price Transparency Final Rule and, therefore, CMS argues that “the additional calculation and reporting of the median payer-specific negotiated charge will be less burdensome for hospitals.” In addition, CMS also finalized the market-based MS-DRG relative weight methodology, which incorporates this market-based rate information, to inform its calculations for inpatient hospital rates beginning in 2024.

The hospital industry remains strongly opposed to the proposal. After the release of the IPPS Final Rule, the American Hospital Association (AHA) released a statement expressing their “deep disappointment” that “CMS continues to require hospitals and health systems to disclose privately negotiated contract terms with payers.” The AHA instead urged CMS to focus on patients’ out-of-pocket costs, to assist “consumers in becoming more prudent purchases of health care.” Additionally, the AHA argued that the policy “will require hospitals to divert critically needed resources during this historic pandemic to administrative tasks that will not benefit patients.” The AHA noted that they do not believe CMS has the authority to compel the disclosure of these terms, and their legal challenge remains ongoing.

The AHA also released a statement regarding the price transparency push before the IPPS Final Rule was released, arguing that the “disclosure of privately negotiated rates will not further CMS’s goal of paying market rates that reflect the cost of delivering care.” Instead, the AHA asserted that the MAO rates “take into account any number of unique circumstances”, and therefore are not relevant for “fixing Fee-for-Service Medicare reimbursement.”