Blue Cross Blue Shield Association Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, July 20 -- Kris Haltmeyer, vice president of legislative and regulatory policy for the office of policy and representation at the Blue Cross Blue Shield Association, 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 LongTerm 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 10, 2020, and posted on July 15, 2020:

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The Blue Cross Blue Shield Association (BCBSA) appreciates the opportunity to provide comments on the FY 2021 Inpatient Prospective Payment System (IPPS) Proposed Rule. (85 Fed.Reg 32460).

BCBSA is a national federation of 36 independent, community-based and locally operated Blue Cross and Blue Shield (BCBS) companies (Plans) that collectively provide healthcare coverage for one in three Americans. For more than 90 years, Blue Cross and Blue Shield companies have offered quality healthcare coverage in all markets across America - serving those who purchase coverage on their own as well as those who obtain coverage through an employer, Medicare and Medicaid. Today, BCBS Plans serve millions of Medicare beneficiaries in Medicare Advantage (MA) and Stand-Alone Part D (PDP) Options.

We support the Administration's goals of empowering consumers with greater access to information to help them make the best choices for their care and to evaluate the quality of their providers. BCBS companies have a long-standing commitment to improving the interoperability and transparency of healthcare information and believe the secure and seamless flow of meaningful data among patients, doctors, hospitals and insurance companies is essential to driving outcomes. However, we are concerned that the proposal for market-based rate data collection in this rule builds on what we believe is a flawed policy finalized in the Hospital Price Transparency Final Rule (84. Reg. 65524) and urge that it not be finalized.

As an initial matter, it is not clear that CMS has authority to collect, market-based payer-specific data. It is also particularly concerning that the Proposed Rule would require the submission of data in a format that could compel the disclosure of payer-specific negotiated rates--a result that raises First Amendment concerns and may not lead to the Administration's intended objective of lowering healthcare costs. Accordingly, we urge CMS to carefully consider both the legal problems with the Proposed Rule and whether alternative approaches may better accomplish its intended ends without risking the violation of First Amendment rights.

We support the Administration's stated goals in Executive Order 13890, which calls for improving the Medicare program by incorporating aspects of MA, which provides "efficient and value-based care through choice and competition." However, we do not believe that the policies proposed here will accomplish the goals of transitioning the fee-for-service system to market based pricing. Private payers leverage a wide range of alternate payment approaches, focused on high-quality outcomes and low total cost of care. These alternate payment approaches are often incomparable with the strict input cost approach of the MS-DRG system. We encourage CMS to instead find ways to reflect payer-based pricing that aligns the payer goals of improved outcomes and lower total costs of care.

We would like to highlight several key recommendations on the proposed market-based rate data collection and potential for change in methodology for calculating MS-DRG weights.

Market-Based Rate Data Collection

Issue #1: Public Availability of Market-Based Rate Data Collection

CMS proposes that hospitals would be required to report certain market-based payment rate information on their Medicare cost reports for cost reporting periods ending on or after Jan. 1, 2021:

(1) The median payer-specific negotiated charge that the hospital has negotiated with all Medicare Advantage payers (also referred to as MA organizations), by MS-DRG

(2) The median payer-specific negotiated charge the hospital has negotiated with all of its third-party payers, which includes MA organizations and other private payers, by MSDRG CMS notes that the payer-specific charges used by hospitals would be the payer-specific negotiated charges for service packages that hospitals are required to make public under the requirements CMS finalized in the Hospital Price Transparency Final Rule (84 FR 65524) that can be cross-walked to Medicare's MS-DRGs. Therefore, CMS does not believe the additional calculation and reporting of median payer-specific negotiated charge will be burdensome for hospitals.

If the proposal to collect the market-based information on the hospital cost report is finalized, these data would become publicly accessible on the HCRIS dataset in a de-identified manner and would be usable for analysis by third parties.

Recommendation #1:

The Proposed Rule is an outgrowth of the Hospital Price Transparency Final Rule. BCBSA raised numerous statutory and constitutional concerns in our comments on the CY 2020 OPPS Proposed Rule, which remains subject to ongoing litigation, and many of those same concerns apply to the Proposed Rule. We urge CMS to carefully evaluate whether it has statutory authority to promulgate the Proposed Rule and whether the Proposed Rule is consistent with the First Amendment.

Rationale #1:

CMS has not provided any analysis on whether it has the authority to make whatever changes to its methodology that it may be contemplating, and it is not at all clear that the agency does. Accordingly, CMS should carefully analyze whether it has such authority, and if it believes it does, explain why, before CMS imposes an onerous new reporting burden. Without establishing the purpose of the new reporting burden, is not at all clear that CMS has the authority to collect the proposed data in the first place.

The Proposed Rule suggests that the burden it will impose is minimal because the payer specific charges would be the same charges that "hospitals are required to make public under the requirements [CMS] finalized in the Hospital Price Transparency Final Rule."/1

The Hospital Price Transparency Rule, however, remains subject to ongoing litigation and is vulnerable on multiple grounds, including unanswered statutory authority questions and serious First Amendment concerns. Many of those same First Amendment concerns apply with full force to the Proposed Rule since that rule likewise would require providers to make public their median payer-specific negotiated rates. Although the market-based rate information available through cost reports would, in theory, be de-identified because it reflects a median, in certain consolidated and/or less competitive markets, it may be possible to reverse engineer to an individual payer-specific negotiated rate. Compelling the disclosure of negotiated reimbursement rates raises First Amendment concerns, so the Proposed Rule would have to satisfy strict scrutiny. There are serious doubts that it could do so.

a. First Amendment Concerns

To pass First Amendment scrutiny, the rule must "be designed carefully to achieve the [government's] goal."/2

The Supreme Court has explained that "[c]ompliance with this requirement may be measured by two criteria."/3

First, the rule must directly and materially advance the government's asserted goals. Second, the restriction must be no more burdensome than necessary to satisfy those goals./4

For the reasons summarized below, CMS should carefully evaluate whether each requirement is met.

1. Directly and Materially Advance Asserted Goals

With regard to the first criterion, courts will strike down regulations that fail to directly and materially advance the stated interests involved./5

Even where the asserted goal is "laudable," if the "link between the [rule] and [the goal] is, at most, tenuous" or "highly speculative," "[s]uch conditional and remote eventualities simply cannot justify" the encroachment on the First Amendment./6

Accordingly, to satisfy this requirement, CMS must show "that the measure ... would 'in fact alleviate' the harms it recited 'to a material degree.'"/7

CMS has stated the Hospital Price Transparency Rule is intended to "drive down the cost of health care services" and "improv[e] consumer health care affordability."/8

However, CMS has acknowledged it lacks certainty regarding the impact of compelling the disclosure of negotiated rates. Specifically, CMS has said "the impact resulting from the release of negotiated rates is largely unknown" and it "lack[s] data to quantify the effects of [its] proposals."/9

In fact, CMS itself has already recognized "the public display of de-identified negotiated rates ... may have the unintended consequence of increasing health care costs of hospital services in highly concentrated markets or as a result of anti-competitive behaviors."/10

Similarly, the Federal Trade Commission (FTC) recently opposed legislation with nearly identical disclosure requirements based on concerns that such disclosures "could ultimately raise the prices that [] consumers pay for health care services."/11

In short, CMS' stated goal of reducing costs appears at odds with the government's prior statements.

That concern is just as pronounced with the respect to the Proposed Rule. First, with health plans moving from fee-for-service payments to value-based contracts, which rely on risk-based and performance-based incentives, in many instances it is uncertain if hospitals could provide the meaningful information CMS claims to need to inform its decision-making. But even if they could, there is no evident reason why CMS would need to have that information provided in a manner that could make negotiated rates available to the public--particularly when, as discussed below, there are alternative options CMS could utilize to minimize the risk of reverse-engineering provider-specific rates.

This uncertainty regarding whether the rule will achieve its intended effect raises First Amendment issues./12

Indeed, in National Association of Manufacturers, the court explained that even where testimony and sources contended the rule would help achieve the government's goal, the rule could not pass First Amendment scrutiny where the government entity failed to "prove [the rule will work] to the degree required under the First Amendment to compel speech."/13

CMS should consider whether the Proposed Rule's payer-specific negotiated rate disclosure requirement is likely to withstand First Amendment scrutiny in light of the government's apparent uncertainty, as reflected in its own prior statements.

2. No More Burdensome Than Necessary

The second criterion under First Amendment analysis examines whether the regulation "is no more extensive than necessary to further the [government's] interest."/14

To satisfy this element, courts require the government come forward with "evidence that less restrictive means would fail."/15

Here, any defense of the rule would be considerably undermined by the fact that there are other alternative price transparency measures that would appear to advance CMS' goals while minimizing the risk of forcing disclosure of payer-specific negotiated rates./16

CMS should carefully consider all other transparency measures - including those recommended below - to ascertain whether there are less burdensome means of achieving the desired goals./17

Recommendation #2:

Consistent with the alternatives described in our previous comments, BCSBA recommends CMS consider requiring hospitals to report a "median range," reflecting the interquartile range (25th to 75th percentiles) of payer-specific negotiated charges by MS-DRG.

We also encourage CMS to implement guardrails to protect against reverse engineering in consolidated and/or less competitive markets. For example, CMS could require that at least five health plans are reflected in the median range or that hospitals operating in areas with limited competition do not report a median range.

Rationale #2:

Not only would such alternatives ameliorate the First Amendment concerns; they also may guard against unintended consequences of a rule that makes payer-specific negotiated rates easy to reverse engineer. As the FTC has flagged, payer-specific rate information has the potential to be used by the hospital systems to negotiate for unreasonably high prices. The FTC has noted that when providers know "who the other bidders are [to be included in a health plan's list of preferred providers] and what they have bid in the past, they may bid less aggressively, leading to higher overall prices." Indeed, since health plans are required to comply with state network adequacy laws, which establish minimums for various provider type and/or time and distance standards, large, dominant provider systems already understand they have leverage simply through agreeing to participate or not with a health plan. This is evident in the negotiating tactics of the dominant anesthesiologist group in Texas refusing to contract with Humana, resulting in Humana receiving a significant fine from the state for not meeting network adequacy standards and being required to develop a corrective action plan to address the shortage. This leverage would be increased for large hospital systems if they also have the specific rate information on what other hospitals in their markets are paid. However, if hospitals are only able to see a median range in the market, their ability to unfairly pit payers against one another to compete for the hospital's network participation would be reduced.

Further, given the myriad of complicating factors that would likely limit the ability to compare the prices at one hospital with the prices at a separate hospital, the public may reach wildly inaccurate conclusions which, in turn, could result in inappropriate negative reactions to specific hospitals.

Methodology for Calculating MS-DRG Relative Weights

Issue #1: Calculation of MS-DRG Relative Weights

CMS is seeking comment on a potential change to the methodology for calculating the IPPS MS-DRG relative weights to incorporate the market-based rate information, beginning in FY 2024.

Recommendation #1:

BCBSA opposes this change and recommends CMS consider alternative approaches to meet their goals of incorporating market-based pricing in fee-for-service Medicare.

Rationale #1:

Setting aside whether CMS has legal authority to do so, we do not believe that basing MS-DRG relative weights on market-based rate information will provide valuable or accurate information.

Our specific concerns are:

* Payers often negotiate with hospitals for different sets of input resources during an inpatient stay compared to both FFS and other payers, which would limit the ability to compare relative rates across the MS-DRG system. The payment system used by Medicare FFS for inpatient hospitals relies on relative differences between MSDRGs. As such, there must be a common definition for the types of services covered as part of payment. Private plans often pay for significantly different sets of services, despite relatively similar care. Some payers 'carve out' costs associated with devices or drugs and utilize separate benefit managers to achieve more favorable pricing for these items./18

For example, a number of payers have started utilizing Device Benefit Managers (DBMs) to help control the overall costs associated with high-cost implantable devices./19

Payers negotiate a payment rate with hospitals that excludes the implantable device, and instead pay the DBM directly for the device. In these instances, the negotiated charge between the payer and the hospital will be substantially lower than the implied inputs for Medicare FFS payment. Other payers may 'carve in' costs associated with certain physicians, such as hospitals, radiologists or surgeons, leading the negotiated charge for the MS-DRG to be higher than the implied inputs for Medicare FFS payment.

* Requiring hospitals to tie and display private payer payments at the MS-DRG level may lessen incentives to enter alternative payment models (APM). Recent estimates suggest that over 50 percent of payments to providers from Medicare Advantage plans take some form of APM./20

Payers note that one of the biggest barriers to APM adoption is provider willingness to take on financial risk./21

If hospitals under APMs are required to calculate and display an MS-DRG equivalent payment rate, it could cause them to reconsider accepting lower base payments in the APM. In addition, the APM-based rate may not reflect the actual market-based dynamics of hospital prices, but instead reflect the broader incentives that APMs introduce into the healthcare system. These differences could distort the relative differences in prices across the MSDRG system, limiting the link to market-based dynamics.

* Median-negotiated charges may not capture the impact of other tools employed by payers to constrain total costs. While Medicare FFS generally allows any provider to perform any service, private payers utilize networks and other utilization management tools to control total spending. Some payers negotiate lower payments with specific hospitals for specific types of care, and then use utilization management tools to encourage plan enrollees to receive care at these locations. For example, 65 percent of MA beneficiaries are in a limited network plan including HMOs, which generally negotiate for lower prices at in-network providers and then use other tools to encourage enrollees to receive care at these providers. Providers generally only agree to these lower rates if they are ensured higher volume. Because the negotiated price data CMS collects from hospitals will not have the volume associated with each location and payer, its ability to explain the drivers of payment variation will be limited. This could result in payment comparisons that inaccurately attribute aspects of the negotiation and/or payer process as reflecting the resource needs of care.

* Operational factors limit the utility of trying to use negotiated charges as a reference point. First, it is unclear how CMS could set appropriate payment weights for new MS-DRGs under this proposal. Currently, when new procedures are introduced into the MS-DRG system, CMS uses the data submitted by hospitals to determine the resource costs associated with pre-determined inputs for inpatient care and set a national payment rate. It is unclear how CMS could use negotiated charges from private payers for new procedures absent a mandatory definition of the care, as the set of services for a new procedure would likely vary widely by payer and hospital. Second, because many payers use the Medicare fee schedule as starting points for negotiations, referencing the negotiated price from payers could become self-referencing and provide CMS with no new information.

Thank you for the opportunity to provide detailed comments and recommendations. We would be pleased to discuss our comments with you at your convenience. Questions regarding these comments may be directed to [email protected].

Sincerely,

Kris Haltmeyer

Vice President, Legislative & Regulatory Policy

Office of Policy & Representation

Footnotes:

1/ Id. at 32,464-65, referencing the Hospital Price Transparency Final Rule at 84 Fed. Reg. 65,524.

2/ Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of N.Y., 447 U.S. 557, 564 (1980). At a minimum, the proposed rule would be subject to intermediate scrutiny under Central Hudson. The rule would not receive more deferential review under Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985) for numerous reasons, including because the proposed rule does not regulate advertisements. Nat'l Ass'n of Mfrs. v. SEC, 800 F.3d 518, 522 (D.C. Cir. 2015) ("[T]he Supreme Court's opinion in Zauderer is confined to advertising.") Even if Zauderer's more deferential scrutiny applied, however, CMS should still carefully evaluate the First Amendment concerns.

3/ Cent. Hudson, 447 U.S. at 564.

4/ Id.

5/ Id. at 564-65 (collecting cases).

6/ Id. at 569.

7/ Nat'l Ass'n of Mfrs., 800 F.3d at526-27 (quoting Edenfield v. Fane, 507 U.S. 761, 771 (1993)) (emphasis added).

8/ See 84 Fed. Reg. at 39,573, 39,581.

9/ Id. at 39,632, 39,579.

10/ Id. at 39,580.

11/ June 29, 2015, FTC Letter re Amendments to the Minnesota Government Data Practices Act Regarding Health Care Contract Data at 7, available at https://www.ftc.gov/system/files/documents/advocacy_documents/ftc-staffcomment-regarding-amendments-minnesota-government-data-practices-act-regarding-healthcare/150702minnhealthcare.pdf.

12/ See, e.g., Edenfield, 507 U.S. at 771 (1993) (finding rule infringed on First Amendment because state board "has not demonstrated that ... the [rule] advances its asserted interests in any direct and material way"); Rubin v. Coors Brewing Co., 514 U.S. 476, 488 (1995) (holding rule violates First Amendment because it does not "directly and materially advance [the government's] asserted interest").

13/ Nat'l Ass'n of Mfrs., 800 F.3d at 526-27.

14/ Cent. Hudson, 447 U.S. at 569-70.

15/ Nat'l Ass'n of Mfrs. v. SEC, 748 F.3d 359, 372-73 (D.C. Cir. 2014) (citing Sable Commc'ns v. FCC, 492 U.S. 115, 128-32 (1989)), overruled on other grounds by Am. Meat Inst. v. U.S. Dept. of Agric., 760 F.3d 18 (D.C. Cir. 2014).

16/ Nat'l Ass'n of Mfrs., 748 F.3d at 372-73.

17/ See, e.g., Cent. Hudson, 447 U.S. at 570 (holding regulation violated First Amendment because government "has not demonstrated that its interest ... cannot be protected adequately by more limited regulation of appellant's commercial expression"); Nat'l Ass'n of Mfrs., 748 F.3d at 372-73 (holding rule violated First Amendment because agency "failed to explain why (much less provide evidence that) the [plaintiff's] intuitive alternatives to regulating speech would be any less effective").

18/ Lind, Keith. "Understanding the Market for Implantable Medical Devices". AARP Public Policy Institute. August 2017.

19/ Betz, Robert. "Best Possible Price: The Rise of Device Benefit Management and Their Use by Insurance Companies to Drive Down the Cost of Implantable Medical Devices". Journal of Healthcare Contracting. April 16, 2013.

20/ Health Care Payment Learning & Action Network. Measuring Progress: Adoption of Alternative Payment Models in Commercial, Medicaid, Medicare Advantage, and Traditional Medicare Programs. October 24, 2019

21/ Ibid

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

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