Avera Health Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, July 23 -- Deb Fischer-Clemens, senior vice president of public policy at Avera Health, Sioux Falls, South Dakota, has issued a public comment on the Centers for Medicare and Medicaid Services' proposed rule entitled "Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals". The comment was written on July 9, 2020, and posted on July 17, 2020:

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On behalf of Avera, a Catholic health system with over 300 facilities located in southeast South Dakota and the surrounding region, we are pleased to submit these comments on the referenced Centers for Medicare & Medicaid Services' (CMS) proposed rule published in the Federal Register on May 29, 2020, (85 Federal Register 32460). We appreciate the ongoing efforts of CMS to administer and improve the payment systems for acute inpatient hospital services, especially considering the agency's many competing demands and limited resources. Avera offers the following comments on the proposed rule.

Market-Based Medicare-Severity Diagnosis-Related Group (MS-DRG) Relative Weights

In the FY 2021 IPPS proposed rule, CMS proposes that hospitals would be required to report:

1. the median payer-specific negotiated charge that the hospital has negotiated with all of its Medicare Advantage (MA) plans, by MS-DRG; and

2. the median payer-specific negotiated charge the hospital has negotiated with all of its third-party payers, which would include MA plans, by MS-DRG.

Hospitals would be required to report this information on their Medicare cost report for cost reporting periods ending on or after January 1, 2021, for potential use in setting the IPPS MS-DRG relative weights beginning in FY 2024.

In the FY 2020 outpatient prospective payment system rule, CMS adopted a policy that requires hospitals to report gross charges and payer-specific negotiated charges for all items and services and for 300 shoppable services to be posted on the hospital website in a consumer-friendly manner. Avera opposed this policy as burdensome, of questionable legality and utility, and potentially in conflict with other federal policies. CMS finalized this policy over the universal objections from the hospital community. Now CMS proposes to add to hospital burdens by requiring the reporting of additional information--ostensibly to set the IPPS relative weights based on negotiated rates instead of hospital reported cost and charge data beginning in FY 2024. For all of the reasons that Avera opposed requiring hospitals to report negotiated charges last year, Avera opposes this proposal as well.

Avera has additional concerns that CMS has not articulated a sufficient policy basis for using Medicare Advantage (MA) or third party negotiated rates as a substitute for hospital data to calculate the IPPS relative weights that makes the burden of this additional reporting worthwhile. The last major change to the IPPS relative weights occurred in FY 2007 when CMS adopted cost-based weights in place of charge-based relative weights (71 Federal Register 47963). CMS adopted this change in response to a 2005 Medicare Payment Advisory Committee (MedPAC) recommendation./1

MedPAC found that charge-based relative weights did not sufficiently recognize cost differences among different types of cases and recommended replacing the system with cost-based relative weights that would be more accurate.

There is no analogous independent analysis or recommendation supporting the current proposal to use payer-specific negotiated rates in determining cost-based relative weights. The only basis for replacing the relative weights appears to be an assertion in Executive Order 13890 Protecting and Improving Medicare for Our Nation's Seniors that use of MA rates by the commercial market could "encourage more robust price competition, and other inject market pricing into Medicare FFS reimbursement." However, the proposal does not meet the EO's intent as it would only change a single element that goes into determining an IPPS payment--the relative weight--and nothing else. Payment would remain on a fee-for-service basis and, in the aggregate, payments will neither increase nor decrease. All that will change will be the relative distribution of payments.

As the CMS proposal will only add reporting burden for hospitals without leading to any improvement in how Medicare's IPPS rates are determined, Avera opposes CMS' proposal and asks that it be withdrawn.

FY 2021 MS-DRG Documentation and Coding Adjustment

The proposed rule would make an adjustment to IPPS payment rates of +0.5 percentage points as the fourth step in a six-year process of restoring prior year downward adjustments to IPPS payment rates required by the American Taxpayer Relief Act of 2012 (ATRA), the Medicare Access and CHIP Reauthorization Act of 2015 and the 21st Century Cures Act.

The proposed rule does not indicate CMS made recoupment adjustments totaling 3.9 percentage points but only intends to return 2.96 percentage points of those adjustments to IPPS rates by FY 2024. Of this 0.94 percentage point difference, 0.7 percentage points is a result of a change in CMS' estimates of the adjustment necessary in FY 2017 to complete recoupment of the $11 billion required by ATRA. The remaining 0.24 percentage point difference was required by Congress in the Medicare Access and CHIP Reauthorization Act of 2015 and the 21st Century Cures Act.

Avera believes that the additional 0.7 percentage point reduction in IPPS rates within CMS' authority is both unfair and harmful to hospitals. In prior comments, CMS was asked to restore fully and permanently this 0.7 percentage point adjustment to IPPS rates by FY 2024. Absent a willingness to undertake this action, 622 hospitals filed a lawsuit against CMS on November 19, 2019, seeking through litigation what CMS can and should do on its own. Avera again respectfully requests CMS indicate in the FY 2021 IPPS final rule that it will restore the additional 0.7 percentage point reduction it made to IPPS rates in FY 2017 by FY 2024.

FY 2021 Outlier Threshold

CMS proposes an FY 2021 outlier threshold of $30,006, a 13 percent increase over the FY 2020 outlier threshold of $26,552. Avera remains concerned about the high level of the outlier threshold and the rate at which CMS proposes to increase it in FY 2021 compared to FY 2020. We understand that a small proportion of exceptionally costly cases may be resulting in increases to the outlier threshold.

The Department of Health and Human Services Office of the Inspector General (OIG) indicated in a 2013 report that 16 MS-DRGs accounted for over 41 percent of outlier payments./2

The OIG recommended that CMS examine whether MS-DRGs associated with high rates of outlier payments warrant coding changes or other adjustments. Consistent with the OIG's findings, Avera requests that CMS examine the reasons for the continuing rise in the outlier threshold and whether there are any interventions it can take to ensure that outlier payments remain equitable and continue to protect hospitals from high cost cases where Medicare's IPPS payments are insufficient to adequately compensate the hospital.

Chimeric Antigen Receptor (CAR) T-Cell Therapy

CMS proposes to create a new MS-DRG 018 (CAR T-cell Immunotherapy) for cases involving CAR-T therapy for FY 2021. To determine the relative weight for MS-DRG 018, CMS proposes to exclude clinical trial cases where the CAR-T product is furnished to the hospital at no cost. Further, CMS proposes to pay hospitals for clinical trial cases where the hospital does not have a cost for the CAR-T product at 15 percent of the full payment.

Cases where CAR-T cell therapy is furnished are currently included in MS-DRG 016 with bone marrow transplants. CMS indicates that CAR-T cell therapy patients are clinically distinct from bone marrow transplant cases and nearly five times as expensive. While there are not many CAR-T cases, CMS believes their unique clinical characteristics and high costs merit creation of a separate MS-DRG. Avera agrees that these findings warrant creation of a separate MS-DRG for CAR-T cell therapy cases. Avera support CMS' proposal.

CMS further indicates that the cost of the CAR-T product itself averages $373,000 and that hospitals participating in clinical trials are furnished with the CAR-T product at no cost as part of participating in a clinical trial. Consistent with recommendations on the FY 2020 IPPS proposed rule, CMS proposes to exclude clinical trial cases where the hospital does not have a cost for the very expensive CAR-T product from the relative weight determination. This proposal will avoid determining an IPPS payment that averages very high cost cases outside of a clinical trial with clinical trial cases that do not have a $373,000 cost and result in a more accurate payment. Avera supports this proposal.

Finally, CMS estimates that the CAR-T cell therapy product represents approximately 85 percent of the total costs of CAR-T cases on average. For this reason, CMS proposes to pay hospitals for clinical trial cases where the hospital does not incur the cost of the CAR-T product at 15 percent of the full IPPS payment. This proposal is sensible and follows that if the full IPPS payment includes the cost of the CAR-T product, clinical trial cases without this cost should be paid only for its costs exclusive of the nonCAR-T product. Avera supports this proposal.

Allogeneic Hematopoietic Stem Cell Acquisition Costs

For cost reporting periods beginning on or after October 1, 2020, as required by Medicare statute, CMS proposes that allogeneic hematopoietic stem cell acquisition costs be paid on the basis of reasonable costs rather than through the IPPS. Avera understands that hospitals have historically been underpaid for stem cell acquisition costs under the IPPS resulting in access problems to this potentially life-saving service for patients. Avera supports reasonable cost payment for allogeneic hematopoietic stem cell transplants.

Disproportionate Share Hospitals (DSH)

Determining the Aggregate Pool of Uncompensated Care Payments

Since FY 2014, hospitals that qualify for Medicare DSH payments receive two separately calculated payments. The first payment equals 25 percent of the amount they would have received under the Medicare DSH formula required by statute prior to the Affordable Care Act.

The second payment is based on the remaining 75 percent of the total Medicare DSH payments that would have been paid under the old formula (Factor 1), adjusted by the change in the number of uninsured individuals since FY 2013 (Factor 2). The amount received by a given hospital from this aggregate pool of uncompensated dollars is based upon that hospital's share of national uncompensated care costs using Worksheet S-10 of the Medicare cost report.

CMS estimates that the amount available to distribute as uncompensated care will decrease from $8.35 billion in FY 2020 to $7.82 billion in FY 2021, a decrease of 6.4 percent or nearly $534 million. To arrive at its estimate CMS uses two data sources that do not take into account the impact of the COVID-19 public health emergency (PHE). The calculation of funds available to distribute as uncompensated care, once determined, is not changed to reflect subsequent updates to the data sources. For this reason, it is critical that CMS' estimates accurately reflect the latest information available.

Factor 1 is determined by taking Medicare DSH payments from FY 2017 and applying increase factors to estimate FY 2021 DSH payments and multiplying the result by 0.75. The increase factors account for the IPPS update, changes in fee-for-service discharges, case mix and an "other" or residual of all other factors affecting Medicare DSH payments including changes in Medicaid enrollment. The "other" factor is 0.9961 for FY 2020 and 1.00225 for FY 2021 in the FY 2021 IPPS proposed rule suggesting a small reduction for FY 2020 and a small increase in FY 2021 in the composite of the residual factors that includes Medicaid enrollment.

Avera believes Medicaid enrollment in FY 2020 and FY 2021 will increase as a result of the COVID-19 PHE. Unemployment began increasing in March of 2020 as a result of businesses being required to close to mitigate the spread of the COVID-19 virus. Economic dislocation is expected to continue into FY 2021./3

The Urban Institute estimates that between 12 and 21 million people will gain Medicaid coverage as a result of losing employer sponsored insurance (ESI) due to the economic dislocation of the COVID-19 PHE./4

Kaiser Family Foundation estimates that of the 27 million people losing ESI as of May 2, 2020, nearly half (12.7 million) are eligible for Medicaid./5

The proposed rule indicates that "OACT [the Office of the Actuary] intends to use more recent data that may become available for purposes of projecting the final Factor 1 estimates for the FY 2021 IPPS/LTCH PPS final rule." (85 Federal Register 32748). When updating its estimate for the final rule, Avera requests OACT consider the impact of the COVID-19 PHE on Medicaid enrollment for determining Factor 1 of the uncompensated care determination.

Factor 2 is determined by comparing estimates of the number of uninsured for FY 2021 to the number of uninsured in calendar year 2013, before the Affordable Care Act went into effect. OACT uses estimates of the uninsured from the National Health Expenditure Accounts (NHEA) based on the latest historical data through 2018 (85 Federal Register 32751). In an explanatory document on CMS' website dated March 24, 2020, OACT indicates:

The models used to project trends in health care spending are estimated based on historical relationships within the health sector, and between the health sector and macroeconomic variables. Accordingly, the spending projections assume that these relationships will remain consistent with history, except in those cases in which adjustments are explicitly specified/6 (emphasis added).

Avera believes that such relationships in FY 2020 and FY 2021 will not be consistent with recent historical relationships. Prior years included consistent economic growth from the end of the great recession in 2009 through February of 2020. As stated previously, the COVID-19 PHE has resulted in a sudden and severe economic dislocation beginning midway through FY 2020 that is expected to continue through FY 2021.

In selecting use of the NHEA to determine Factor 2, OACT states:

Timeliness and continuity are important considerations because of our need to be able to update this estimate annually. Accuracy is also a very important consideration and, all things being equal, we would choose the most accurate data source that sufficiently meets our other criteria. (85 Federal Register 32751).

Further, OACT states "we may also consider the use of more recent data that may become available for purposes of estimating the rates of uninsurance used in the calculation of the final Factor 2 for FY 2021." (85 Federal Register 32751) Avera urges OACT to update Factor 2 with more timely and accurate data to reflect the increase in FY 2020 and FY 2021 in uninsured patients.

Distributing Uncompensated Care Payments

For FY 2021, CMS proposes to use one year of audited Worksheet S-10 data from FY 2017 for distributing uncompensated care payments. In the past, Avera has commented that CMS should only use audited cost report data in the distribution of uncompensated care payments. Avera thanks CMS for being responsive to our concerns regarding auditing Worksheet S-10 data. Avera supports CMS using FY 2017 audited Worksheet S-10 data in the uncompensated care distribution.

In the past, CMS used three years of data to distribute uncompensated care payments. Using three years of data lessens instability and mitigates wide swings in hospital payments from year to year. CMS proposes to use only one year of data citing unique issues with the timing of changes to cost reporting instructions and the schedule for auditing data. As CMS moves past these issues, Avera requests that CMS consider basing the uncompensated care distribution on two years of Worksheet S-10 data in FY 2022 and three years of Worksheet S-10 data in FY 2023 to mitigate large year-to-year changes in a hospital's uncompensated care payments.

Definition of Uncompensated Care

CMS does not propose any changes to its definition of uncompensated care from prior years. Under this definition, CMS would recognize non-Medicare bad debt and charity care. However, CMS would not recognize payment shortfalls from public health programs like Medicaid, the Children's Health Insurance Program and state and local indigent care programs. Avera believes that uncompensated care should also include the unreimbursed costs of public health care programs, including Medicaid, the Children's Health Insurance Program and state and local indigent care programs. This approach would be a fairer way to allocate uncompensated care dollars to hospitals, especially given that analyses we have reviewed suggest that hospitals located in states that opted out of Medicaid expansion do significantly better under the CMS proposed approach than hospitals located in states that have expanded Medicaid.

Broadening the definition to include Medicaid shortfalls and other forms of unreimbursed costs of other public health care programs would help make the allocation more equitable.

Puerto Rico, Tribal and Indian Health Service Hospitals

For Puerto Rico, Tribal and Indian Health Service (IHS) hospitals, CMS is not using Worksheet S-10 to determine their uncompensated care payments. Rather, because of special reporting issues that make Worksheet S-10 inaccurate for these hospitals, CMS proposes to continue to using low-income patient days as a proxy for uncompensated care in FY 2021 for these hospitals. Avera supports this proposal.

CMS also discusses potentially removing Tribal and IHS hospitals from the uncompensated care distribution beginning FY 2022. Instead of paying Tribal and IHS hospitals 25 percent of Medicare DSH and uncompensated care, Medicare would pay Tribal and IHS hospitals 100 percent of Medicare DSH.

Given the unique nature of Tribal and IHS hospitals in serving a vulnerable Native American community with special health care needs, Avera supports CMS adopting this idea beginning in FY 2022.

Changes to the Wage Index

Beginning in FY 2020, CMS began increasing the wage index values for hospitals with a wage index in the lowest quartile by one-half the difference between a low wage index hospital's wage index and the 25th percentile. CMS applies a budget neutrality adjustment that lowers payments to all hospitals nationwide. CMS proposes to continue this policy for the second of four years. Avera believes that CMS is correct to be analyzing revisions to the wage index as concerns about its equity and accuracy have long been documented. While Avera would prefer that CMS not reduce payments to all hospitals when it addresses the inequity the wage index produces for low wage hospitals, Avera recognizes that CMS' authority may be limited to make the increase in low wage indexes non-budget neutral.

In addition, CMS is proposing to make significant changes to labor market areas based on Office of Management and Budget changes to core-based statistical area (CBSA) delineations. Generally, changes to CBSA delineations between decennial censuses are very minor and do not significantly change hospital wage indexes. However, the changes CMS is proposing for FY 2021 are an exception and may result in significant wage index changes for some hospitals.

In the past, CMS adopted changes to the wage index based on revised CBSA delineations over a two-year period by determining the 50 percent of the wage index based on the current delineations and 50 percent of the wage index based on the revised delineations (85 Federal Register 32706). In this year's proposed rule, CMS proposes to apply a five percent limit on reductions in a hospital's wage index in FY 2021 from FY 2020. Avera urges CMS to adopt a transition policy that minimizes annual reductions to the wage index.

Payments for Indirect and Direct Graduate Medical Education Costs

Hospitals receive Medicare payment for direct graduate medical education (DGME) and indirect medical education (IME) based on the full time equivalent (FTE) number of residents in training. The number of FTEs for determining DGME and IME payment has been capped since 1997. When a hospital or a specialty program closes, there are provisions in the regulations for temporarily modifying the caps of other hospitals to allow these hospitals to receive payment for training displaced residents until the residents can finish training. For the hospital to receive a temporary cap adjustment, these regulations required the resident to be training in the closing hospital on the day the program or the hospital closed.

CMS now realizes that this policy is too restrictive and proposes to apply the policy if the resident is present on the day the hospital or program announces it will be closing. The policy would also include residents that have matched into a program but not yet started training or are temporarily training in another hospital on a rotation. Avera supports this proposal and appreciates the flexibility CMS is offering to ensure that displaced residents can finished their post-medical school training to begin practicing medicine in a career of their choice.

Medicare Bad Debt Policy

Medicare bad debt is uncollectible deductible and coinsurance amounts owed but not paid by Medicare beneficiaries. Under specific circumstances, Medicare bad debt can be partially reimbursed to hospitals.

Section 413.89(e) of the regulation provides CMS general policy on when Medicare bad debt is reimbursable. More detailed guidance on Medicare bad debt policy has been in the Provider Reimbursement Manual (PRM), Chapter 3, section 308. These rules are complex and not always clear and have sometimes been the source of litigation. CMS is using this proposed rule to clarify certain Medicare bad debt policies that have been the subject of litigation, and generated interest and questions from stakeholders over the past several years.

CMS is proposing to promote many of the PRM policies to the Code of Federal Regulations. As most of these policies are long-standing, CMS proposes to make them effective retroactively. In some cases, CMS is proposing a policy change to adopt prospectively. In general, the policies CMS proposes provide helpful clarifications on CMS' bad debt policies. Avera appreciates CMS taking the time to provide much needed clarity on its Medicare bad debt policies and supports finalizing the changes.

The most complex of the policies put forth by CMS relates to dually eligible Medicare/Medicaid beneficiaries, particularly where a dually eligible beneficiary may not have full Medicaid eligibility. In these cases, hospitals are obligated to bill the beneficiary's state Medicaid plan to determine whether the state is responsible for paying Medicare deductibles and coinsurance. The state Medicaid plan would then be obligated to provide remittance advice indicating whether it is responsible for beneficiary cost-sharing. CMS reports that state plans do not always fulfill their obligation to provide remittance advice. Despite the provider taking the necessary action to seek payment of coinsurance and deductibles from the state, CMS indicates that the lack of remittance advice from the relevant state agency means the hospital cannot claim the unreimbursed amounts as bad debt.

This policy seems highly unfair and punitive to hospitals who have taken the necessary action to collect deductibles and coinsurance yet have been unsuccessful due lack of state cooperation. If the hospital can document that it has undertaken a reasonable collection effort to collect deductibles and coinsurance owed from the state and the state has not fulfilled its obligation to provide remittance advice or payment, Avera believes the hospitals should be able to claim the amounts as a bad debt eligible for Medicare reimbursement.

Hospital Quality Programs

Hospital Star Ratings

CMS had previously announced that it would update the Overall Hospital Quality Star Rating methodology in the FY 2021 IPPS proposed rule. However, given the ongoing COVID-19 PHE CMS has decided to delay changes until future rulemaking.

Avera urges CMS to not conduct its annual refresh of the Hospital Star Rating data in January until methodological changes have been put into place. We also encourage CMS to move forward with seeking input on changes to the star ratings and to consider other avenues for adoption, such as through a sub-regulatory process that takes into consideration stakeholder input. For example, in developing the existing star rating methodology, CMS used a sub-regulatory process. We also recommend that CMS develop a simplified methodology that is transparent and replicable, and that takes into account social risk factors.

CMS should create a transparent model for star ratings that is reliable and can be effectively replicated. An effective quality measurement program enables hospitals to clearly understand where to focus and drive improvement. Avera believes the program would benefit from a simplified methodology using an explicit approach to enable hospital and patient understanding. CMS could consider modeling the star rating after a program such as the Hospital Value Based Purchasing (HVBP) program that incorporates both achievement and improvement, allowing low-performers to rise rather than stagnate at the bottom. HVBP has proved to be an effective vehicle because it is a well understood, tested method that addresses many of the flaws in the other programs. Converting HVBP performance to a star rating could ensure comprehension for hospitals and patients.

It is important to understand the numerous and variable risks associated with socio-demographic factors that are outside of the control of the provider that can effect outcomes. Any star rating should account for social risk factors in the methodology. As a first step, Avera supports peer grouping; however, we urge the agency to consider approaches to account for a broader set of social risk factors. Should CMS move forward with the incorporation of peer groups, the agency must also consider how to display such information to the public. Inclusion of a secondary peer-based five-star metric could add confusion to a program that is already difficult to interpret for the average consumer of this data. As such, CMS should continue to seek stakeholder feedback to evaluate how peer grouping could be implemented as well as the usefulness to the patient in having this information.

Electronic Clinical Quality Measures (eCQMs)

CMS proposes to transition the number of calendar quarters for which hospitals must report eCQMs under both the Inpatient Quality Reporting (IQR) Program and the Medicare Promoting Interoperability Program from one calendar quarter to a full calendar year. In addition, data on eCQM performance would be publicly reported beginning with the 2021 data submissions.

Avera is concerned that beginning public reporting of eCQMs with data submitted for 2021, which under the proposal would be for two calendar quarters, may not be sufficient to appropriately measure hospital performance. All measures currently displayed on Hospital Compare reflect hospital performance for 12 months or more. Before finalizing public reporting of eCQM data from 2021 or any year, CMS should provide analysis that demonstrates the underlying data would allow for valid and meaningful comparisons of eCQM performance across hospitals.

Medicare Promoting Interoperability Program Measures

Avera supports the proposal to continue the Query of Prescription Drug Monitoring Program (PDMP) measure as a voluntary measure for reporting in 2021. We agree with CMS that state PDMPs are still maturing, and as a result there is too much variation in how electronic health records are able to integrate PDMP queries.

Data Validation

Avera supports the proposal to combine validation of chart-abstracted measures and eCQMs and to reduce the number of hospitals randomly selected for validation. Data validation is important to the integrity of scoring for Medicare's hospital pay for performance programs and for meaningful public display of quality performance. Reducing the burden of validation will allow hospitals to focus quality-related resources on quality improvement and other activities of benefit to patients.

In closing, Avera appreciates the opportunity to share these comments in regard to the proposed FY 2021 IPPS rule. We look forward to working with you on these and other issues. If you have any questions about these comments or need more information, please do not hesitate to contact me at [email protected], or (605) 322-4668 or Danielle Hamann, Director of Public Policy, at [email protected] or (605) 322-4762.

Sincerely,

Deb Fischer-Clemens

Senior Vice President of Public Policy

Avera Health

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Footnotes:

1/ Medicare Payment Advisory Commission: Report to Congress on Physician-Owned Specialty Hospitals, March 2005.

2/ Daniel R. Levinson, Medicare Hospital Outlier Payments Warrant Increased Scrutiny, Office of the Inspector General, OEI-06-10-00520, November 2013.

3/ Federal Reserve Chairman Jerome Powell, 60 Minutes Interview, May 17, 2020.

4/ Bowen Garrett and Anuj Gangopadhyaya, How the COVID-19 Recession Could Affect Health Insurance Coverage, Urban Institute, May 2020.

5/ Rachel Garfield, Gary Claxton, Anthony Damico and Larry Levitt, Eligibility for ACA Health Coverage Following Job Loss, Kaiser Family Foundation, May 13, 2020.

6/ Office of the Actuary, Projections of National Health Expenditures and Health Insurance Enrollment: Methodology and Model Specification, page 1.

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The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2020-0052-0002

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