NASH Comments on Proposed Medicare Outpatient Payment Regulation (part 1 of 4)

The National Alliance of Safety-Net Hospitals has submitted extensive comments to the Centers for Medicare & Medicaid Services about its proposed changes in the Medicare outpatient prospective payment system for 2020.

In its letter to CMS, NASH focuses on four issues:

• CMS’s price transparency proposal
• Reimbursement for 340B-covered prescription drugs
• Medicare site-neutral payment policy
• Proposed updates of the inpatient-only list of medical procedures

Today this blog features NASH’s comments about CMS’s price transparency proposal. Tomorrow, we present NASH’s views on reimbursement for 340B-covered prescription drugs; on Friday, we present NASH’s views on Medicare site-neutral payment policy; and on Monday we present NASH’s perspective on CMS’s proposal to permit Medicare to pay for certain medical services on an outpatient basis rather than limiting them to being performed only on patients admitted to a hospital.

See the complete NASH letter to CMS here.

The Price Transparency Proposal

NASH appreciates CMS’s interest in fostering greater consumer awareness of the prices hospitals charge for their services and in facilitating price shopping among consumers for non-emergency “shoppable” outpatient services. Despite this, NASH believes the price transparency requirements presented in the proposed regulation reflect an imperfect understanding of how hospitals charge and are paid for their services, how patients find their way to doctors and hospitals, and how providers interact with health insurers. Most important, we do not believe the proposed requirements, even if implemented perfectly by every hospital in the country by January 1, 2020, would be at all helpful to consumers shopping for the best prices for the outpatient care they need.

Problems Inherent When Listing Service “Prices”

Our first concern is that the proposed means of achieving price transparency for shoppable outpatient services, by requiring hospitals to post their gross charges (from their chargemaster) and their payer-specific charges (as negotiated with the insurers with which they work), does not reflect an adequate understanding of how hospitals work with insurers to charge for their services. Specifically:

Hospitals do not bundle services the same way Medicare does and often bundle them differently with different insurers, creating apples-to-oranges comparisons that would be of little value to consumers – and that could even be misleading to consumers.
Some private payers discount multiple surgeries in different ways.
While Medicare pays for services using HCPCS codes, DRGs, and APCs, such codes often are not used as the basis for payments between hospitals and commercial insurers.
Some insurers reimburse hospitals based on Medicare APCs, which include an entire logic of bundled or incidental codes, which means that the incidental code, when billed in another context, might be payable separately. Other private insurers might pay for the same services based on a percentage of a hospital’s charges on a line-by-line basis.
A few insurers’ radiology payments bundle professional services into their payments to the hospital but most do not.
Hospitals may charge for each item and service but each item and service is not necessarily associated with an HCPCS code, DRG, NDC, or APC, as the proposed regulation anticipates – nor do hospitals and insurers necessarily negotiate prices for each individual item and service.
As a result of hospitals and insurers not necessarily negotiating prices for each individual item and service, this proposed regulation may be requiring hospitals to publish data that does not exist.
Within individual DRGs or APCs, hospitals do not provide a standard set of items and services. Their standard services could differ from patient to patient, depending on patients’ needs; from insurer to insurer, depending on the outcome of rate negotiations between individual hospitals and individual insurers; and from hospital to hospital, because such matters are not standardized, freeing hospitals to make their own decisions about how to set their prices and negotiate payments with insurers.
Some insurers bundle the cost of implants and drugs into outpatient case rates while others do not, preferring hospitals to bill separately for those implants and drugs.
Physician services may or may not be included by some hospitals in their standard service packages.
Because private safety-net hospitals need to engage in more cost-shifting than the typical community hospital to compensate for the losses they incur caring for large numbers of uninsured and Medicaid patients, their commercial rates may be higher than those other hospitals. This could lead people to see these price differences and assume they would have to pay more for the services of such hospitals – which in most cases they would not. Thus, posting such prices without appropriate context could damage the very private safety-net hospitals that society has a great stake in protecting.

The Underestimated Cost of Posting Hospital Prices

In the proposed regulation, CMS estimates that posting the required information should take hospitals approximately 12 hours and cost them about $1000 in staff time. NASH believes this grossly underestimates the work involved in such an undertaking. One NASH member, for example, reports that in one calendar quarter of 2019 it interacted with 250 distinct insurers (including Medicare), and in the case of 41 of those insurers, that interaction involved just one patient. That means this hospital would need to post charge and price data for at least 250 insurers, a meaningful proportion of which have members the hospital only rarely serves.

Another NASH member shared agendas for two meetings for relevant staff to discuss the price-posting requirements from the 2019 outpatient prospective payment system regulation. Those staff meetings, held in the fall of 2018 to address new requirements that were less demanding than those proposed for 2020, both involved 32 participants, many of whom were there to report on work already undertaken to meet the 2019 requirements and others who left the meeting with new assignments. This contrasts sharply with the proposed rule’s assertion that compliance would require the participation of just one lawyer, one operations manager, one business specialist, and one computer systems administrator. This member’s business services team, in fact, estimated that compliance with this requirement, if adopted as proposed, would necessitate the year-round services of two full-time employees.

This suggests that CMS has significantly underestimated the time and cost involved in posting the proposed information. This is a legitimate concern for hospitals – as it should be for CMS as well in light of its frequent, publicly articulated commitment to reducing the paperwork burden on health care providers so those providers can focus on providing care rather than on paperwork.

The Problem Posed by Sharing Proprietary and Confidential Information

The rates set between hospitals and insurers are not objective, universal measures: they are the product of careful, deliberate, and at times contentious negotiations between the parties. As a result of these negotiations, some hospitals gain more advantageous rates than others. As tempting as it might be for hospitals to learn if their competitors are doing “better” than they are in rate negotiations, it is more important to them to keep the results of their own negotiations confidential. Coca-Cola is not required to share its soft drink recipe with its competitors and NASH believes it would be inappropriate, and possibly even foster a form of collusion, to require hospitals to share so publicly their rate information – proprietary information – with their competitors. Doing so also could violate confidentiality agreements between the negotiating parties.

The Biggest Challenge: The Required Information is Not Useful

The underlying rationale for this price transparency proposal appears to be that if consumers have more information they will be more likely to make better, more informed health care purchasing decisions. In the case of this particular proposal, however, NASH believes that more information will not be better information and that it will not lead to better, more informed purchasing decisions.

Without question, NASH’s biggest objection is that after all of the work hospitals would have to do to meet this proposed regulation’s requirements and after all of the “shopping” consumers might do once such information becomes available, we are convinced that consumers will find this information to be of little value. In the experience of hospitals, the reality of this situation, as opposed to the theory underlying it, is that patients are not interested in whether the shoppable service they need “costs” $10,000 or $15,000 – not interested because they have health insurance and know they will not be paying that $10,000 or $15,000 cost. In the experience of hospitals, patients are interested only – only – in what their out-of-pocket costs will be, which means their co-pays and deductibles for the outpatient service in question. In short, the “price” that this entire undertaking seeks to provide to consumers is not viewed by those consumers as a price at all and is irrelevant to them. This is comparable to a consumer purchasing a mattress with a list price of $3000 for a sale price of $1250. No one cares that the list price is $3000; all that matters is that the mattress can be purchased for $1250.

Instead, the overwhelming majority of patients who contact hospitals about costs prior to receiving outpatient services inquire only – only – about their anticipated out-of-pocket costs. Months can go by without patients referring to or asking about a hospital’s charges or its prices, let alone about its chargemaster; in fact, the word “chargemaster” is unknown to the vast majority of health care consumers. NASH encourages CMS officials to spend a few days in a hospital billing office and sit with customer service representatives as they field calls from patients who are considering procedures or have procedures scheduled. When you do, you will find that these patients virtually never inquire about a procedure’s price or cost; they are interested only in its cost to them, which is very different – and which will not be included in the vast amount of data this proposed regulation would compel hospitals to publish for consumer use. This has certainly been the experience of NASH members in California and Connecticut, where hospitals are already required to post extensive price and charge data on their web sites and where those hospitals tell us they seldom are asked by patients about their actual charges.

In the end, NASH believes, there are virtually no true “consumers” for this data at all, with the possible exception of competitors eager to learn if they are doing better, or doing worse, than nearby hospitals when negotiating rates with health insurers (or, for that matter, insurers eager to learn if they are overpaying or underpaying compared to other insurers). In the end, the time patients might spend visiting hospital web sites to research the cost of outpatient care and talking to hospital billing offices about their potential out-of-pocket costs would unquestionably be better spent talking to their insurers because those insurers, rather than hospitals, are more likely to have the answers to these questions and ultimately are the best source of information about the out-of-pocket costs patients can expect to incur when seeking medical care. This information is controlled and managed by insurers, not providers, so it is insurers that would be a more appropriate focus of CMS’s laudable effort to provide information that would be relevant to consumers and help inform their health care purchasing decisions.