Minnesota Hospital Association Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, July 20 -- Joseph A. Schindler, vice president of finance the Minnesota Hospital Association, St. Paul, Minnesota, 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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On behalf of our 129 member hospitals and health systems, the Minnesota Hospital Association (MHA) offers the following comments and suggestions regarding the Centers for Medicare & Medicaid Services' (CMS) proposed rules for 2021 Inpatient Prospective Payment Systems for Acute and Long-Term Care Hospitals (Proposed Rule).

MHA generally supports the recommendations and detailed comments submitted by the American Hospital Association (AHA). Rather than duplicating AHA's analysis and suggestions, MHA's comments will focus on the topics of most concern to Minnesota's hospitals and health systems.

Specifically, we are providing comments and recommendations in the following areas:

* Continuation of Low Wage Index Hospital Policy

* Proposed DSH Payment Adjustment and Additional Payment for Uncompensated Care - Improvements to the Worksheet S-10

* Medicare Bad Debt

* Hospital Inpatient Quality Reporting (IQR) Program

* Proposed Changes to the MS-DRG Diagnosis Codes

* Proposed Policy Change Related to Medical Residents Affected by Residency Program or Teaching Hospital Closures

* General Request for Forbearance of Enforcements During the COVID-19 Pandemic

* Market-Based MS-DRG Relative Weight Proposed Data Collection (price transparency)

Continuation of the Low Wage Index Hospital Policy

CMS proposes to continue its policy to increase wage index values for low-wage hospitals which was finalized in FY 2020 to be effective for four years. Specifically, for hospitals with a wage index value below the 25th percentile, the agency would increase the hospital's wage index by half the difference between the otherwise applicable wage index value for that hospital and the 25th percentile wage index value for all hospitals. According to CMS, the 25th percentile wage index for FY 2021 would be 0.8420. The agency proposes to continue to make this policy budget neutral by adjusting the national standardized amount for all hospitals.

MHA has concerns that bringing up the lower quartile penalizes states like Minnesota. CMS or Congress should add 'new' money if they want to fund this proposal rather than penalizing hospitals and health systems that have wage rates that are appropriate for their labor markets.

The suggested approach attempts to remedy Medicare's low payment rates and perceived inequities in its payment formula for certain hospitals by further reducing payments to other hospitals. This approach would not solve the fundamental problems with Medicare payment rates. In other words, budget-neutral solutions to a system that is underfunded across-the-board only shifts the degree of under funding and inequities; it does not solve or mitigate the inequities.

MHA does not support the CMS proposal to make across the board adjustments for hospitals in the lowest AWI quartile.

Proposed DSH Payment Adjustment and Additional Payment for Uncompensated Care

Under the DSH program, hospitals receive 25% of the Medicare DSH funds they would have received under the former statutory formula. The remaining 75% flows into a separate funding pool for DSH hospitals. This pool is reduced as the percentage of uninsured declines and is distributed based on the proportion of total uncompensated care each Medicare DSH hospital provides.

For FY 2021, CMS estimates that the total amount of Medicare DSH payments that would have been made under the former statutory formula is $15.359 billion. Accordingly, CMS proposes that hospitals would receive 25% of these funds, or $3.840 billion, as DSH payments.

The remaining $11.519 billion would flow into the 75-percent pool, which is then adjusted to reflect changes in the percentage of uninsured. CMS determined that the percentage of uninsured for FY 2021 would be 9.5%; thus, after inputting that rate into the statutory formula, it proposed to retain 67.86% - or $7.817 billion - of the 75-percent pool in FY 2021. This would result in a decrease of about $534 million in uncompensated care payments in FY 2021 compared to FY 2020.

MHA strongly urges CMS to reconsider the total amount of Medicare DSH payments that are owed under federal statute. In its calculation, CMS grossly underestimates the economic damage of the COVID-19 pandemic and the rate of the uninsured, which is a critical aspect of the agency's funding methodology. According to the Federal Reserve Chair, we are currently in "the biggest economic shock, in the U.S. and in the world, really, in living memory" (citation). Chair Powell also stated that the U.S. only might have hit bottom at 14.7% unemployment, and that there is a great amount of uncertainty in future forecasting. Moreover, the unemployment rate is known to not appropriately factor in many categories of workers and analysts believe the true rate could be well into the 20% range.

This once in a hundred-year pandemic will have lasting ripple effects that will impact DSH hospitals in unforeseeable ways. Due to the limited availability of data points in this quickly changing time, CMS should be increasing its estimated uninsured rate in FY 2021 to reflect the overall rise of unemployment and its correlation to the uninsured rate in our employer sponsored system.

Additionally, the agency proposes to use a single year, FY 2017, of uncompensated care data from the Worksheet S-10 to determine the distribution of these uncompensated care payments for FY 2020. Previously, the agency would average the past three years. CMS indicates that this change could result in more accurate data as FY 2015 data was audited and FY 2017 was the first year in which cost reporting instructions were modified for W/S S-10.

Despite the fact that some audits have occurred on FY2017 cost report data, the vast majority of hospitals would not have had their S-10 cost report data audited. This could lead to vast disparities in the allocations of DSH funding.

MHA is concerned with CMS' proposed distribution of UCC DSH funds. Specifically, we are concerned that a small number of hospitals could receive excessive UCC payments. While not disagreeing with the use of W/S S-10 data to calculate Factor 3 of the UCC distribution, we are concerned that there may be unintended consequences of utilizing only S-10 data.

The potential unintentional result of the proposed change is that the UCC payment would exceed the DRG reimbursement, which may exceed the statutory intent of the UCC being a supplemental payment benefit. Additionally, it would result in disproportionate benefit to a small set of hospitals. As an alternative, we suggest that the agency impose a cap, perhaps at 100% of the DRG value. This would ensure a more appropriate and equitable distribution of DSH funds across safety net hospitals.

Improvements to the Worksheet S-10

As mandated by Affordable Care Act, CMS is required to allocate Medicare DSH funds based on an "empirically justified" formula that was originally based on a combination of Medicaid and Medicare supplemental Security Income days as well as uncompensated care cost. Initially, hospitals would receive 25 percent of their Medicare DSH funds under the old formula and 75 percent into a separate uncompensated pool. Over time, CMS transitioned to using the cost report's Worksheet S-10 data on hospital charity care and bad debt to determine the amount of uncompensated care each hospital provides, in place of the pre-ACA formula. However, in past rulemaking the agency has indicated that there are concerns with variations and the completeness of this data, including in its auditing process.

Recommendation

In response to the agency's concerns, we share the following feedback and recommendations:

* Reporting irregularities - An American Hospital Association analysis of FY 2014 data found that a number of hospitals had uncompensated care costs on line 30 of the Worksheet S-10 that totaled more than 50 percent of their total expenses for the facility as a whole. One of these hospitals had uncompensated care costs that were over 800 percent of its total expenses. Another had bad debt expenses that were more than 2000 percent of its total expenses.

- Recommendation - no hospital should receive an add-on payment that exceeds its base reimbursement.

* Review burden - the data request by CMS and implemented by MACs and their subcontractors result in excessively burdensome reporting requirements. In no exaggeration, large DSH hospitals are to report hundreds of thousands of unique charity care claims during the year, with corresponding revenue and transaction codes (contractual allowances, payments, refunds, etc.). This can result in upwards of 10,000,000 lines in an excel spreadsheet, double the previous amount.

- Recommendation - no hospital should receive an add-on payment that exceeds its base reimbursement.

* Equity Issues in Audit Process - For FY 2021, CMS audited 65% of DSH eligible hospitals for determining Factor 3 for UCC. Presumably, the audits are targeted at the highest UCC recipients, which has some merit. However, in a fixed pool scenario, the main problem with lack of 100% audit is that hospitals with erroneous data and relatively small factor 3 ratios benefit at the expense of hospitals which are audited with relatively high factor 3 ratios. There seems to be no oversight for DSH hospitals in the bottom third of UCC distribution.

- Recommendation - CMS should strongly reconsider its use of the Worksheet S-10 until it starts auditing all hospital data. The auditors should pull a random sample of claims and look for anomalies in that fashion.

* Auditor Education - the audit process allows for little time for auditor education. Many of CMS's contractors and subcontractors do not fully understand the expectations for reporting and often MACs follow different interpretations of the rules. For example, cost report instructions state to report the co-insurance and deductibles related to charity care for patients qualifying for patient financial assistance. Some MACs interpret this language as to disallow "co-payments" that are charity care. However, co-payments and co-insurance essentially serve the same purpose, patient liability, and in fact, are both used and allowed for the reporting of bad Medicare debts.

- Recommendation - CMS should adopt a standard template that must be used to complete Worksheet S-10. Additionally, while many auditors have a finance background, they may not be as educated on patient financial services. CMS should help provide general education on how hospitals implement and record transactions on charity care and financial assistance policies that promote a shared understanding. Moreover, CMS should engage MACs and hospitals prior to the release of substantive revisions to or guidance on cost report instructions to promote an ongoing dialogue on best reporting practices.

Medicare Bad Debt

The Medicare Provider Reimbursement Manual outlines actions that providers are encouraged or required to take in order for an unpaid amount to be considered a bad debt for Medicare purposes. CMS proposes to clarify, modify and codify into regulation the activities related to bad debt, in addition to proposing new requirements. MHA is concerned that CMS is proposing to retroactively apply a number of its bad debt policy proposals. Retroactive implementation of CMS's bad debt proposals is not warranted, and we urge CMS to withdraw retroactive policy implementation. We also have concerns with other proposals, including the proposed requirement for providers to take into account a beneficiary's total resources when determining whether the patient may be deemed indigent.

Hospital Inpatient Quality Reporting (IQR) Program

CMS is proposing to publicly report eCQM performance data for the first time, beginning with data reported for the CY 2021 reporting period, on Hospital Compare and/or data.medicare.gov, or any successor websites. Additionally, CMS proposes increasing the number of quarters hospitals are required to report eCQM data, starting with reporting two quarters in CY 2021, three in CY 2022 and the full year in 2023.

Publicly reporting eCQM data along with increasing the reporting period to two quarters will burden health care providers during the COVID 19 emergency. Since this data not being reported in the past, no benchmarking exists to understand how we compare with peers. To properly prepare for such changes, providers need capacity to analyze past performance on eCQM measures and then implement improvement initiatives where necessary. The additional quarter in the reporting period would push the deadline for this work up to July 2021.

MHA encourages CMS to consider CY 2021 a trial period to generate benchmark measures for peer comparison followed by publicly reporting data from CY 2022. MHA also requests CMS to consider delaying the increase in the reporting period by a year, to two quarters in 2022, three quarters in 2023 and a full year in 2024.

Proposed Changes to the MS-DRG Diagnosis Codes

In the FY 2020 IPPS/LTCH PPS proposed rule, CMS announced that given the long period of time that has elapsed since the original O.R. (extensive and non-extensive) and non O.R. designations were established, incremental changes that have occurred to these O.R. and nonO.R. procedure code lists, and changes in the way inpatient care is delivered, the agency planned to conduct a comprehensive, systematic review of the ICD-10-PCS procedure codes. This will be a multi-year project during which CMS also will review the process for determining when a procedure is considered an O.R. procedure.

CMS has typically evaluated procedures on the basis of whether or not they would be performed in an O.R. CMS believes that there may be other factors to consider with regard to resource utilization, particularly with the implementation of ICD-10. CMS is again soliciting public comments on what factors or criteria to consider in determining whether a procedure is designated as an O.R. procedure in the ICD-10-PCS classification system for future consideration.

MHA supports the agency's alignment of DRG's of operating room and outpatient procedures with those of the conditions they treat. MHA appreciates these continued efforts to put these items in a logical order, which may even lead to more insight about how much treatments really cost.

MHA also supports the CMS proposal to create new Medicare Severity Diagnosis Related Groups (MS-DRGs) for kidney transplants with hemodialysis and simultaneous pancreas/kidney transplants with hemodialysis. We recommend CMS finalize its proposals to establish the following new MS-DRGs: MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis); MS-DRG 650 (Kidney Transplant with Hemodialysis with MCC); and MS-DRG 651 (Kidney Transplant without Hemodialysis with MCC).

Proposed Policy Change Related to Medical Residents Affected by Residency Program or Teaching Hospital Closures

When a teaching hospital closes a residency program or the hospital closes entirely, Medicare regulations permit the hospital to temporarily transfer a portion of its hospital specific direct GME and indirect medical education (IME) FTE resident caps to other hospitals that are willing to accept and train the displaced resident(s). The proposed rule states that CMS has previously defined "displaced resident" as one that is physically present at the hospital training on the day prior to or the day of hospital or program closure. CMS proposes to modify this definition to be based on the day that the closure was publicly announced. In addition, CMS proposes to consider as "displaced" those residents that were not physically present at the closing program/hospital but had intended to train at - or return to training at - the closing program/hospital.

To apply for the temporary increase in the Medicare resident cap, the receiving hospital must submit a letter to its MAC within 60 days of beginning the training of the displaced residents.

The number of Medicare resident slots available to be transferred is capped at the number belonging to the closed hospital (or the hospital's closed program).

MHA supports the proposal to relax physical presence requirements so that medical residents can deal with hospital closures and continue their medical training as uninterrupted as possible. It certainly makes sense that there should be as little obstacles as possible in the way of completing residency training and becoming a practitioner.

General Request for Forbearance of Enforcements During the COVID-19 Pandemic The COVID-19 pandemic has taken an unprecedented toll on not only people, but also hospitals, health care workers, and state agencies. With so many individuals losing their employment due to the pandemic, a larger number of Medicaid enrollees will result. MHA did not agree with the Medicaid Fiscal Accountability Rule that was proposed prior to the pandemic and still believes it should be withdrawn. At the very least, this rule should not move forward during the pandemic until a clearer picture of the financial impact of COVID on health care facilities can be seen and hospitals have had sufficient time to regain their bearings.

Market-Based MS-DRG Relative Weight Proposed Data Collection

In its proposed rule, CMS proposes to collect, through the Medicare cost report, the median payer-specific negotiated charge that a hospital has negotiated with: 1) all of its MA payers and 2) all of its third-party payers, including MA payers, for each MS-DRG. This requirement would be effective for cost reporting periods ending on or after Jan. 1, 2021. In order to collect this information, CMS expects hospitals to use the single, machine-readable standard charge file, required in the final Hospital Price Transparency Rule.

To determine the MA median negotiated charge for an MS-DRG, CMS would require the hospital to first list the negotiated charge data for each MA discharge in a cost reporting period for a given MS-DRG. The hospital would then identify the median negotiated charge for that MS-DRG from the list, and include the median charge on the cost report. The process for determining the median negotiated charge for all third-party payers would be similar but would take into account all third-party negotiations. Charges negotiated outside of the MS-DRG system (e.g., per diem, All Patients Refined Diagnosis Related Groups (APR-DRGs)) would need to be cross-walked to MS-DRGs.

All of the information CMS proposes to have disclosed is already held by health insurance companies. More importantly, health insurance companies also have the information that individuals are most interested in receiving: what they personally will owe based on their specific policy, its benefits, its provider network and the status of their deductible. Thus, if CMS is genuinely interested in making meaningful price information available to consumers, it should redirect its price transparency disclosure requirements to the entities that hold this more relevant and actionable information. In fact, Medicare could lead the way for greater price transparency by providing this data for its own beneficiaries in a consumer-friendly way. And yet, Medicare and Medicaid fee-for-service payments are exempt from the proposal.

Further, CMS's proposal is fixated on hospitals, yet consumers are likely interested in services provided outside the hospital walls. While hospitals are a large component of overall healthcare costs, it would seem the more "shoppable" services are limited if hospital services are the only services accessible. Health plans and CMS have the most complete profile of hospital and nonhospital service costs.

Focusing CMS efforts and hospitals' time and resources on chargemaster-level transparency is a strategic mistake because it further locks in the flawed fee-for-service (FFS) reimbursement model rather than accelerating needed value-based payment methodologies. The more our current system invests in reporting, analyzing, refining, negotiating, explaining and relying on individual price points for each individual ICD-10 or CPT code, the more entrenched we become in FFS payment models. In recent years, CMS has led efforts to encourage payers and providers to shift away from FFS, which creates incentives for providers to deliver more and more services and for payers to delay or deny medically appropriate care, and toward value-based payments, which encourage providers to deliver the most appropriate care as efficiently as possible and payers to reward good outcomes rather than micromanage how care is delivered. MHA strongly supports this direction and urges CMS to keep its focus on that important work.

Unfortunately, flaws and misaligned incentives in the FFS system continue to capture the attention of the public, media and policymakers. It is understandable that CMS feels significant pressure to take quick, dramatic action to appear responsive. However, quick and dramatic actions rarely, if ever, produce positive outcomes when it comes to the complexities of health care financing and the difficult reforms CMS wants to lead. The proposed rule suggests one quick and dramatic action and, if finalized, it will become another example of how a kneejerk policy response to external political pressures of the moment stifle real, meaningful and beneficial progress in health care.

Instead of continuing the difficult work of developing and implementing new value-based payment models that better align patients', providers', payers' and policymakers' ultimate interests, the proposed rule's price transparency requirements would turn everyone's attention, time and resources backward to the FFS framework. Hospitals and health systems will spend exponentially more time and resources than the far-fetched estimates put forward in the proposed rule as they attempt to comply with the new requirements. Consultants and health care finance experts will begin collecting hundreds of millions of dollars from clients looking to analyze and manipulate the charge master pricing information to suit their particular clients' short-term interests. Payers and providers will pour more time and resources into contract negotiations based on FFS rates. And, unfortunately, patients will spend a few moments trying to find and discern the newly available information only to discover that it fails to provide them with the information they really need: "how much will the care I need cost me if I go to my provider of choice under my particular health plan given where I am with my out-of-pocket exposure?" All of this time, energy, money and frustration will be diverted from moving the health care system toward value to sinking more and more resources into a payment system CMS has long recognized as flawed. Quite simply, while politically appealing in the short-term, the proposed rule's price transparency provisions would be a detrimental and demoralizing set back to value based payment adoption.

In fact, the proposed rule is fundamentally incompatible with many value-based payment systems. A hospital participating in an accountable care organization (ACO) project, such as Minnesota Medicaid program's successful Integrated Healthcare Partnerships demonstration project, cannot accurately calculate its payment amount for a particular service because any price disclosed cannot account for any up- or down-side risk payments. Organizations taking on these kinds of risk arrangements or the uncertainty of new total-cost-of-care models will question the merits of continuing in those efforts if doing so makes their mandated disclosures significantly more cumbersome or, worse yet, inaccurate or misleading.

This setback to value-based payments would be even more disheartening because the proposed rule's approach will not provide valuable or meaningfully useful information to individual patients. Instead, people who look up hospitals' disclosures online will discover an overwhelming amount of confusing and incomprehensible information. Patients are most concerned about their financial responsibilities and the cost-sharing requirements of their specific insurance policies. Tens or hundreds of thousands of individually coded services multiplied by hundreds and hundreds of individual payer contracts is analogous to publishing the software code for Facebook in an attempt to increase consumer information regarding privacy policies. Is more information available? Sure. Is it comprehensible? No. Does it provide the information consumers need or want to make informed decisions? No.

MHA members are also concerned about the competitive distortions the proposed rule would make in health care markets. Hospitals often compete with other providers of the same or similar services, yet those providers would not be required to disclose their negotiated rates.

For example, a hospital would be required to post all of its negotiated rates for its orthopedic services, but the ambulatory surgery center competing with the hospital would keep its negotiated rates secret. This would put hospitals at even greater disadvantage. Given the expanding overlap of services available from different types of providers, MHA suggests that CMS apply any price transparency requirements to all providers of a given service, rather than this approach of imposing an administrative burden and competitive disadvantage to a class of providers across all of their services.

CMS should convene stakeholders and facilitate development of a consumer-friendly price transparency tool that calculates individual-specific out-of-pocket expenses for each health insurance plan. This would provide patients with the information they are looking for, they can understand, and that they can use effectively when making health care decisions. This approach would advance price transparency and improve the consumer experience.

MHA's members support price and quality transparency, and we have undertaken price transparency initiatives at the state level. If CMS decides to move forward with this FFSbolstering policy change, MHA respectfully suggests that the final rule contain an exemption for those hospitals and health systems who provide their own price transparency tools that calculate out-of-pocket expenses based on an individual's insurance policy.

Minnesota's hospitals are required by state law provide a good faith estimate to consumers who inquire about the cost of their medical service. MHA, like AHA, believes that insurance payers, not providers, are the most appropriate resource for individuals to find out about the cost of specific services. Payers are the best resource for price information relevant to consumers, since they have access to contracted payment rates for the specific providers and, most importantly, to the status of a consumer's deductible and out-of-pocket costs. Additionally, posting data on "shoppable" services would likely have minimal impact on health care costs or consumer behavioral since, according to AHA's research, only 7 to 33 percent of services are truly shoppable.

As always, we appreciate the opportunity to comment on CMS' proposed rules. If you have any questions, please contact me at (651) 659-1415 or [email protected].

Sincerely,

Joseph A. Schindler

Vice President, Finance

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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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