AHA Slams CMS for Advancing Hospital Price Transparency Rule

May 13, 2020 - A leading hospital group criticized CMS for its latest efforts to move forward with hospital price transparency requirements that will require hospitals to disclose their privately negotiated rates to the public.

Within the 1,602-page proposed Inpatient Prospective Payment System (IPPS) rule released Monday, CMS expressed its intention to still require hospitals to release pricing information next year, including private payer reimbursement rates. The agency also included a proposal to use the data to determine relative Medicare reimbursement rates for hospital procedures.

“We are very disappointed that CMS continues down the unlawful path of requiring hospitals to disclose privately negotiated contract terms,” said Tom Nickels, the executive vice president of the American Hospital Association (AHA).

The association, which represents about 5,000 hospitals and other providers nationwide, has already sued CMS’ parent department, HHS, over the 2019 hospital price transparency rule, arguing that requiring the disclosure of privately negotiated rates is beyond HHS’ statutory authority and violates the First Amendment.

Judge Carl J. Nichols of the US District Court for the District of Columbia heard oral arguments via video conference last week where the AHA, along with other industry groups and health systems, contended that hospital pricing information is not commercial speech and therefore, does not have to follow the same regulations as advertisements, ads, flyers, and other forms of commercial speech do.

But CMS seems to not want to back down from its hospital price transparency rule. Less than a week after the oral arguments, the proposed IPPS rule unveiled its ideas for using private negotiated rates and other pricing information to calculate Medicare reimbursement rates in the future.

“Recognizing that chargemaster (gross) rates rarely reflect the true market costs, we believe that by reducing our reliance on the hospital chargemaster, we can adjust Medicare payment rates so that they reflect the relative market value for inpatient items and services,” CMS wrote in the proposed IPPS rule.

To achieve its goals, the agency plans to require hospitals to report median payer-specific negotiated inpatient services charges for Medicare Advantage organizations and third-party payers on their Medicare cost reports starting after Jan. 1, 2021. CMS will then use the data to set future inpatient Medicare reimbursement rates.

But Nickels contended in the AHA’s statement on the proposed rule that publicizing privately negotiated rates under the new hospital price transparency requirements will not advance CMS’ aim of paying market rates that reflect the cost of delivering care to beneficiaries.

“These rates take into account any number of unique circumstances between a private payer and a hospital and simply are not relevant for fixing Fee-for-Service Medicare reimbursement,” Nickels stated.

A study published in the May edition of Health Affairs found that average commercial prices for inpatient and outpatient facility services were about double Medicare fees, while commercial prices for professional services were about 60 percent higher.

The study confirmed that prices charged for healthcare services in the commercial market were high and vary significantly within and between market areas, indicating potential problems with price regulation policies. Researchers found that average hospital revenue would fall about 35 percent if commercial prices were limited to Medicare rates.

In a comment on the proposed rule, CMS Administrator Seema Verma said that the proposed IPPS rule “focuses on what matters most to help hospitals conduct their business and receive stable and consistent payment.”