CMS Proposes Ending Plan for Transparency of Certain Medicare Advantage Rates to Hospitals Under IPPS Payment Rule

CMS is proposing to abandon a plan to require hospitals to disclose certain negotiated rates it reaches with Medicare Advantage organizations in reports submitted to the federal government. The proposed rule further sets payments for inpatient hospital services. The rule also includes several provisions designed to help the program and its providers and suppliers deal with the COVID-19 public health emergency (PHE), including extending the New Technology Add-on Payments (NTAP) for 14 products for which the NTAP was scheduled to expire for fiscal year (FY) 2022. This rule also includes payment updates for the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) and updates to Medicare’s payments related to the acquisition of organs for transplantation.

Rule Specifics

In the proposed rule, CMS aims to increase payment rates by 2.8 percent for general acute care hospitals participating in the Hospital Inpatient Quality Reporting (IQR) Program and that are meaningful electronic health record users. The change reflects the projected hospital market basket update of 2.5 percent. This is reduced by a 0.2 percent productivity adjustment and increased by a 0.5 percent adjustment required by legislation. CMS anticipates the proposed changes will increase hospital payments in FY 2022 by $3.4 billion, although the administration expects a $0.9 billion decrease in Medicare Disproportionate Share Hospital payments and Medicare uncompensated care payments. CMS anticipates LTCH PPS payments to increase by 1.4 percent for FY 2022, or $52 million.

This rule also proposes to create a new quality measure for COVID-19 vaccination among health care personnel of providers covered by the rule. It also seeks public input on the use of Fast Health Interoperability Resources (FHIR) to support digital quality measures (dQM) and methods to assure health equity, emphasizing CMS’ intent to focus on these themes throughout its enterprise.

Other Changes

In last year’s IPPS payment rule, CMS finalized changes to its methodology of calculating Medicare Severity Diagnosis Related Group (MS-DRG) relative weights to incorporate market-based rates. CMS is proposing to walk back those changes, including associated reporting requirements. The policy, which was set to go into effect for FY 2024, will no longer go into effect if this proposal is finalized. Instead, CMS will continue to calculate MS-DRG relative weights, and thus provider payments, using its current cost-based analysis. The agency says that the repeal of the market-based methodology would result in no payment impact to hospitals while decreasing administrative burdens associated with reporting requirements. This is a major win for the hospital industry.

Additionally, in line with Executive Order 13985, “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” CMS is seeking public input on how it can address health disparities through program policy. CMS is also proposing to extend 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. CMS is also proposing to discontinue the NCTAP for discharges on or after October 1, 2021 for a product that is approved for new technology add-on payments beginning FY 2022

Finally, CMS proposes to implement provisions of the Consolidated Appropriations Act of 2021 relating to payments to hospitals for direct graduate medical education (GME) and indirect medical education (IME) costs. Most notably, the legislation requires the distribution of an additional 1,000 new Medicare-funded medical residency positions to train physicians, and CMS is proposing to distribute the slots to qualifying hospitals, as specified by the law, including those located in rural areas and those serving areas with a shortage of health care professionals. The 1,000 new slots will be phased in at no more than 200 slots per year beginning in FY 2023. CMS estimates that this additional funding will total approximately $1.8 billion from FY 2023 through FY 2031. CMS is proposing to prioritize applications from qualifying hospitals that serve geographic areas and underserved populations with the greatest need.