On August 2, 2021, the Centers for Medicare and Medicaid Services (CMS) issued its hospital inpatient prospective payment system (IPPS) Final Rule for fiscal year 2022. In addition to a number of other changes, the Final Rule repeals a price transparency requirement for hospitals, obligating hospitals to report certain contract terms with Medicare Advantage plans for cost reporting periods ending on or after January 1, 2021.
Final Rule
In the Final Rule, CMS outlined the strong opposition to the requirement, objecting to the burden it would place on hospitals, the impact to market competition, and the usefulness of the data generally. Commenters noted they did not believe the policy would inform Medicare beneficiaries with cost and quality information that would promote choice or encourage cost-conscious decisions to lower overall health care costs. These commenters argued that the policy would instead result in shifting payments from one service to another, rather than promoting price transparency and controlling overall costs.
However, CMS also noted many commenters supported the rule. Such commenters expressed concern that removing the requirement would continue CMS’s reliance on hospital chargemaster and would remove a significant enforcement mechanism to promote price transparency. Proponents of the requirement argued that the requirement would “help lower costs, improve competition and empower patients.”
Nevertheless, CMS finalized in the Final Rule its proposal to repeal the requirement that a hospital report on its Medicare cost report the median payer-specific negotiated charge that the hospital negotiated with all of its MA organization payers, by MS–DRG. CMS agreed that they needed to “further consider the questions raised regarding the ability for [the] data to represent market-based pricing given the relationship between Medicare FFS and MA organization rates, and therefore the usefulness and appropriateness of this data for Medicare FFS ratesetting purposes.”
While CMS reemphasized the importance of price transparency for health care consumers, CMS noted that the repeal would not affect the separate price transparency requirements CMS finalized under the Hospital Price Transparency final rule or the Transparency in Coverage final rule. CMS also cited to the July 9, 2021 Executive Order (EO) on Promoting Competition in the American Economy. This EO directed the Department of Health and Human Services to support existing price transparency initiatives for hospitals, other providers and issuers, along with any new price transparency initiatives or changes made necessary by the No Surprises Act or any other statutes.
This repeal has been met with praise by the American Hospital Association (“AHA”), which released a statement lauding removal of the requirement. AHA stated that they appreciated “CMS listening to [AHA’s] concerns by repealing the requirement that hospitals and health systems disclose privately negotiated contract terms with payers on the Medicare cost report.” While AHA acknowledges that the rule intended to better align fee-for-service Medicare payments with market rates, it asserts that “privately negotiated rates take into account a number of unique circumstances between a private payer and a hospital and are not an appropriate benchmark for fee-for-service Medicare payments.”