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

WASHINGTON, July 18 -- William J. Fuchs, vice president for finance at Northwell Health, Westbury, New York, 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 14, 2020:

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Northwell Health welcomes the opportunity to comment on the Medicare Inpatient Prospective Payment System (IPPS) proposed rule for Federal fiscal year (FFY) 2021.

Northwell Health, Inc., together with its member corporations and affiliated entities, constitutes an integrated health care delivery system serving the greater metropolitan New York area, and is comprised of 19 hospitals, over 700 ambulatory and physician practice locations, long term care facilities, certified home health care agencies, as well as the Feinstein Institute for Medical Research, Donald and Barbara Zucker School of Medicine at Hofstra/Northwell and the Hofstra/Northwell School of Graduate Nursing and Physician Assistant Studies. Our comments are arranged by topic area below.

COLLECTION OF PAYER-SPECIFIC NEGOTIATED PRICES AND MARKET-BASED RATE SETTING

Under the final Outpatient Prospective Payment System rule for calendar year 2020, CMS adopted a policy to require hospitals to make the following publicly available, beginning Jan. 1, 2021:

* gross charges;

* payer-specific negotiated charge;

* de-identified minimum and maximum negotiated charge; and

* discounted cash price.

Northwell Health aligned our opposition to this policy with the American Hospital Association, arguing that CMS is exceeding its statutory authority by requiring hospitals to disclose privately negotiated prices. Northwell Health supports AHA's existing legal challenge on this matter as an amicus to the suit.

For FFY 2021, CMS is proposing to require hospitals to include on the annual Medicare cost report what the agency calls "market-based payment rate information."/1

Specifically, every hospital would be required to report "(1) The median payer-specific negotiated charge that the hospital has negotiated with all of its Medicare Advantage (MA) organizations ... 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 organizations, by MS-DRG."/2

The agency also requests comment on incorporating this information in the IPPS MS-DRG relative weights beginning in FFY 2024.

Northwell Health fully aligns its comments with AHA in our belief that both proposals are unlawful and we urge CMS not to finalize them.

CMS cites no authority to require hospitals to furnish median payer-specific negotiated charge information by MS-DRG. Instead, CMS relies exclusively on a rule the agency promulgated in 2019, denominated by CMS as the "Hospital Price Transparency Final Rule,"/3 to require disclosure of negotiated charge information by MS-DRG.

CMS explains that "[t]he payer specific negotiated charges used by hospitals to calculate these medians would be the payer-specific negotiated charges for service packages that hospitals are required to make public under the requirements we finalized in the Hospital Price Transparency Final Rule (84 FR 65524) that can be crosswalked to an MS-DRG. We believe that because hospitals are already required to publically report payer-specific negotiated charges, in accordance with the Hospital Price Transparency Final Rule, that the additional calculation and reporting of the median payer-specific negotiated charge will be less burdensome for hospitals."/4

The Hospital Price Transparency Final Rule is scheduled to go into effect Jan. 1, 2021, but it has been challenged by AHA and other hospitals on statutory, procedural and constitutional grounds. Although the district court denied hospitals' motion for summary judgment,/5 the hospitals have appealed that decision to the United States Court of Appeals for the District of Columbia Circuit. The appeal will be fully briefed by the end of August and the parties are requesting oral argument as soon after that as possible. Because the information to be furnished under the proposed rule would be derived from information collected under the Hospital Price Transparency Final Rule, the new information collection requirement suffers from the same legal infirmities: It is not authorized by statute and violates both the Constitution and Administrative Procedure Act. Moreover, if the Hospital Price Transparency Final Rule is found unlawful, then CMS' requirement for disclosure of median payer-specific charge information by MS-DRG would similarly be unlawful.

The same is true as to the potential approach to change the method of calculation for MS-DRG relative weights beginning in FFY 2024. CMS says that it is considering adopting in the FFY 2021 IPPS final rule a "change to the methodology for calculating the IPPS MS-DRG relative weights to incorporate this market-based rate information, beginning in FY 2024 . . ."/6

But if it is unlawful to require disclosure of median payer-specific negotiated charge information by MS-DRG, then CMS could not use that information to change relative weights.

In addition, it would be arbitrary and capricious to use median payer-specific negotiated charge information by MS-DRG to change relative weights. As set forth in Section 1886(d)(4)(A) of the Act, relative weights are intended to reflect "the relative hospital resources used with respect to discharges classified within that group" and not the relative price paid. CMS currently uses "a cost- based methodology to estimate an appropriate weight for each MS-DRG."/7

In proposing to use median payer-specific negotiated charges to set MS-DRG relative weights, CMS has not adequately explained why it thinks market price rather than cost is a better measure of hospital resources used. Instead, the agency appears to conflate market price with cost.

CMS' rationale for basing MS-DRG relative weights on price (e.g., promoting transparency, bringing down the cost of healthcare, wanting to move beyond the chargemaster, etc.) has nothing to do with whether median payer-specific negotiated charges are a measure of "hospital resources used" as the Medicare statute requires.

Rather, CMS proposes to use this information to "advanc[e] the critical goals of [Executive Orders] 13813 and 13890, and to support the development of a market-based approach to payment under the Medicare FFS system."/8

But that is not the statutory test. Simply put, we believe CMS has not adequately explained why basing IPPS MS-DRG relative weights on market price would result in relative weights being based on hospital resources used. As such, it would be arbitrary and capricious to adopt this proposal. See Motor Veh. Mfrs. Ass'n v. State Farm Ins., 463 U.S. 29 (1983).

We are hopeful that the appeals court will rule on the challenge to the Hospital Price Transparency Final Rule before the end of this year. Should the Rule be found unlawful, CMS would have no legal basis for requiring hospitals to disclose their median payer-specific negotiated charges by MS-DRG.

If, despite our concerns about CMS' proposals to collect data and base IPPS MS-DRG relative weights on median payer-specific negotiated charges, the agency nevertheless elects to finalize them, it should not do so unless and until (1) the court upholds the Hospital Price Transparency Final Rule, (2) the agency has adequately explained the basis for concluding that payer-specific negotiated charges by MSDRG reflect resources used and (3) stakeholders have had another opportunity to comment on the proposal.

MEDICARE AREA WAGE INDEX

CBSA changes

Generally, the Office of Management and Budget issues modifications to statistical areas every 10 years based on the results of the decennial census; however, sometimes minor updates and revisions are done between decennial census updates based on Census Bureau population estimates.

Northwell Health is deeply concerned about CMS' proposal to implement CBSA boundary changes outlined in the Sept. 14, 2018, OMB Bulletin No. 18-04 due to data reliability and the timing and magnitude of the changes.

The redefinition of the New York-Jersey City-White Plains, NY-NJ CBSA and establishment of the new Poughkeepsie-Newburgh-Middletown CBSA will cause major Medicare reimbursement reductions across many hospitals and other providers in New York and New Jersey. Many of these hospitals and health systems were among those hardest hit by the COVID-19 crisis and these institutions have faced devastating losses of revenue and extraordinary costs. While the CARES Act Provider Relief Fund has helped to mitigate some of these losses, the funding equates to recoupment of cents on the dollar.

Pursuing substantial CBSA changes will unnecessarily further erode the fiscal status of many of these providers. The COVID-19 pandemic has also shifted labor market conditions, places of work and commuting patterns and raises data reliability concerns regarding the 2018 OMB bulletin.

If CMS adopts these changes, until full and complete 2020 Census data are available, we urge the agency to:

* provide an extraordinary stop-loss policy (above and beyond the 5% stop-loss policy) for hospitals negatively affected by these CBSA changes by applying a 2.5% cap on AWI decreases until CBSA definitions are fully updated based on the 2020 Census; and

* reopen the FFY 2021 the Medicare Geographic Classification Review Board AWI reclassification window for hospitals negatively impacted by the new CBSA boundaries with reclassifications for this special window, effective Oct. 1.

Low AWI policy

Northwell Health opposes CMS' low AWI policy because it does not appropriately address the fundamental problems with the current AWI system. Specifically, CMS' policy:

* does not follow statutory requirements for adjusting the AWI;

* undermines the intent of the AWI, which is to address real differences in labor costs; and

* does not meet the agency's stated objectives (improving Medicare payment to rural hospitals while allowing these hospitals time to increase wages to improve their AWI).

Northwell Health urges CMS to eliminate this policy this year; minimally, this policy should sunset after FFY 2023 as adopted by the agency.

The Medicare AWI is an adjustment applied to all hospitals nationwide that raises or lowers Medicare payments to account for real geographic differences in labor costs. The intent of the AWI is to adjust Medicare payments to appropriately reimburse hospitals for the services they deliver.

CMS' low AWI policy is aimed to help rural hospitals; yet, none of New York's rural hospitals -- which face the same fiscal challenges as rural hospitals across the nation -- benefit from this policy.

There is no doubt that underlying inequities and shortcomings remain in the current system. As a result, the Medicare AWI does not adjust Medicare payments accurately, leaving many hospitals across the country and many in New York with consistently low AWIs.

Northwell Health urges CMS and Congress to focus AWI changes on minimizing AWI "cliffs" while retaining reclassification options, lessening the lag in hospital wage data used to construct the AWI, ensuring new funding/waiver of budget neutrality requirements and ensuring that adequate transition policies accompany any systematic changes to the AWI system.

MEDICARE DISPROPORTIONATE SHARE HOSPITAL

S-10 cost report data

For FFY 2021, CMS is proposing to continue distributing a large share of Medicare DSH funding using one year of partially audited uncompensated care data (FFY 2017 data) reported by hospitals on Worksheet S-10 of the Medicare Cost Report. As raised in our comments last year, shifting the basis of data used to distribute DSH funding from the traditional three-year average of data that helps smooth UC reporting fluctuations to a single year's worth of data can lead to potential anomalies and undue fluctuations. However, if CMS moves forward with its proposal we would recommend that the agency monitor payments over time and, if necessary, consider using more than one year of data after FFY 2021. Doing so would allow the agency to utilize audited data for all DSH hospitals over time.

Northwell Health urges CMS to implement comprehensive audits for all hospitals' S-10 cost report data similar to the audits performed for AWI data. CMS partially audited 2015 and 2017 S-10 data and is in the process of collecting 2018 data for all hospitals. It's extremely important that CMS complete the 2018 S-10 audits for all hospitals to ensure data validity and to have a better understanding of the S-10 reporting challenges facing providers so the agency can provide additional clarification or modifications.

As CMS continues to move toward auditing all hospitals' S-10 data, we recommend the agency consider the following to further streamline the process nationally:

* establish a standardized process across auditors, including standard timelines for information submission and acceptable documentation to meet information requirements;

* consider targeting particular data elements for audit;

* develop a transparent timeframe for the audit, with adequate lead time and communication to providers about expectations; and

* establish a process for timely appeals.

Holding to our position that CMS has an obligation only to use data it knows to be accurate when expending Medicare funds, Northwell Health strongly opposes any policies that redistribute billions in Medicare DSH uncompensated care payments based on partially audited and narrowly defined S- 10 UC data. While Northwell Health agrees that the 2017 S-10 UC data are more reliable, we continue to believe auditing S-10 data for all DSH hospitals is most appropriate and we once again strongly oppose breaking the standard of using a three-year average of data to distribute Medicare DSH funding. Northwell Health strongly urges CMS to monitor the data over time and, if necessary, consider implementing a single year of data only after the agency has a full year of audited S-10 data for all hospitals and has reviewed the volatility.

DSH uncompensated care pool

The Medicare DSH uncompensated care pool leverages several factors to estimate DSH expenditures in a given federal fiscal year. Estimating the percent of uninsured (Factor 2) is a significant factor in determining the size of this funding pool. For FFY 2021, CMS estimates that the uninsured rate for the historical, baseline year of 2013 was 14% and for calendar years 2020 and 2021 is estimated to be 9.5%.

The COVID-19 pandemic has increased the number of uninsured individuals and it is clear that the agency's preliminary estimates do not consider the effect the COVID-19 pandemic has had on health insurance coverage. Northwell Health implores that CMS appropriately set the DSH uncompensated care pool by improving its uninsured estimates to be reflective of the impact of the COVID-19 pandemic. Anything short of adjusting for this reality will undervalue the DSH uncompensated care pool and reduce Medicare funding across eligible DSH hospitals.

CHIMERIC ANTIGEN T-CELL THERAPY

CAR T-cell therapy is a type of immunotherapy in which a patient's own cells are removed, genetically modified and then infused back into the patient to help fight his or her cancer. CAR T-cell therapy is highly specialized and only available at a limited number of cancer centers but has proven to be extremely successful in the battle against cancer. These treatments are very expensive and currently paid as a new technology add-on payment, which only covers a fraction of the costs providers incur for this type of therapy treatment.

Based on stakeholder input and more data for CAR T-cell therapies, for FFY 2021 CMS is proposing to create new Medicare Severity Diagnosis Related Group for the CAR T-cell therapy with a relative weight of 37.1412, which better reflects the high cost of the therapy. CMS also proposes to exclude clinical trial claims from the calculation of the average cost.

Payments for CAR T must be set solely for non-clinical trial cases in order to accurately capture the price. Northwell Health appreciates that CMS is excluding the cost of drugs that are not factored into a case treated through a clinical trial in the CAR-T in payment rate to ensure reimbursement is adequate.

While Northwell Health believes CMS' proposal to create a new MS-DRG is a more sustainable payment path to help address the extraordinary high costs of CAR T, we still have concerns that translating charges to costs will create charge compression issues that won't accurately capture costs for these expensive life-altering cancer treatments. Therefore, we urge the agency to consider alternative reimbursement mechanisms outside of the MS-DRG system that would fully recognize the magnitude of costs associated with the CAR T-cell therapy.

Northwell Health supports consideration of the alternative suggestions made by AHA in last year's comments to better determine the CAR T-cell therapy costs using the therapy's average sales price as a proxy for its cost (using a cost-to-charge ratio of 1.0) or using the CAR T acquisition cost as reported by hospitals.

MEDICARE BAD DEBT POLICY

CMS is proposing to amend the existing bad debt regulations to incorporate the agency's bad debt policies included in the program instructions of the Provider Reimbursement Manual. CMS cites its authority under the Medicare statute to adopt retroactive rules, stating that it would be contrary to the public interest to not apply its proposed changes retroactively. Northwell Health opposes making these proposals effective retroactively.

120-day collection period

CMS proposes to codify the reasonable collection effort requirements in the PRM by requiring providers to bill beneficiaries no later than 120 days after the date of the Medicare remittance advice or the date of remittance advice from the beneficiary's secondary payer, whichever is later.

This change is one of the few that would not be applied retroactively but instead would be effective after Oct. 1. CMS is also proposing to reset the clock, meaning the 120-day collection period would restart each time a patient makes a partial payment. This new requirement would place an additional administrative burden on hospitals that already have policies in place to help them determine whether a patient is able to make a partial payment and those that are not able to pay anything else. Furthermore, this requirement would delay the account receivable/bad debt cycle, which is already a long process, since collections from prior cost report bad debts are applied to future period hospital financial data and cost reports.

Northwell Health urges CMS to reconsider this policy change and allow hospitals that undertake a reasonable collection effort that is aligned with their written policies, regardless if a partial payment is made, to be able to cease collection efforts and write off the bad debt as uncollectible.

Definition of indigence

Currently, providers determine indigence solely on signed declarations of a patient's inability to pay medical bills and/or deductibles and coinsurance amounts (see below). CMS is proposing to align with the PRM Chapter 3, so that providers would apply customary methods in determining whether a patient is indigent by taking into account a patient's total resources which includes, but is not limited to, an analysis of assets, liabilities, income and expenses and that no other source other than the patient would be legally responsible for the patient's medical bill. In addition, CMS is also requiring that providers maintain and furnish the proper documentation to support a patient's indigence, which is currently not required in the PRM.

CMS' proposal is troublesome and conflicts with existing and well established financial assistance laws in states like New York. The state's Hospital Financial Assistance Law allows hospitals to determine whether a patient is indigent and would qualify for financial assistance in several ways. In addition to asking a patient for his or her financial information and supporting documentation, hospitals are also allowed to accept a patient's self-attestation of income and may even determine indigence using presumptive eligibility based on soft credit checks and/or socio-economic data for the community in which the patient resides.

New York's HFAL also limits hospitals use of assets to determine eligibility for final assistance for uninsured patients at or below 300% federal poverty level unless they receive clearance from the New York State Department of Health. If DOH allows the hospital to have an asset test for financial assistance, certain assets are excluded, New York's HFAL states: "a general hospital reviews a patient's assets in determining payment adjustments such policies and procedures shall not consider as assets a patient's primary residence, assets held in a tax-deferred or comparable retirement savings account, college savings accounts, or cars used regularly by a patient or immediate family members."

Northwell Health opposes the agency's significant change for determining indigence and the supporting documentation in a patient's file because many providers have charity care or financial assistance policies in place that focus solely on a patient's income. Additionally, in states like New York, this policy change would conflict with our state legislation for determining financial assistance. In addition, Medicare Administrative Contractors and providers might not consider total resources as the same thing, causing inconsistencies in the system. If CMS moves forward with this proposal it should clarify what should be considered total resources so all MACs are consistent.

Northwell Health also opposes making this proposal effective retroactively. CMS' proposal does not codify existing policy, but instead makes changes that hospitals may not have been complying with in the past as the PRM is considered guidance and is not mandatory.

Burden

CMS asserts that these changes will not impose additional burdens on providers since the proposed changes merely reflect "longstanding" policies that have existed for decades in the PRM. However, as stated in our comments above, the requirement that providers factor a patient's resources and assets in determining a patient's indigence, is arguably a significant and substantive change from past policy and would place a tremendous undue burden on providers to comply. Northwell Health opposes any policy changes that are applied retrospectively and strongly urges CMS not to enforce the new definition of determining indigence based on a patient's resources.

Accounting Standard Update Topic 606

CMS is proposing to recognize Accounting Standards Update Topic 606 changes that were implemented in 2018 by modifying regulations effective for cost report periods, beginning on or after Oct. 1. Consequently, bad debt would no longer be reported separately as an operating expense in a provider's financial statements, but instead would be treated as an "implicit price concession" and included as a reduction in patient revenue. Implicit price concessions are uncollectible claims that providers intend to pursue for collection, but they don't expect to collect the full amount based on historical experience. Implicit price concessions are recorded in the provider's accounting records as a net patient service revenue. The failure to collect charges for services furnished does not add to the cost of providing the care, since these costs have already been incurred in the provision of the care.

Current revenue recognition guidance amounts initially recorded as revenue can be written off as bad debt when it is determined they will not be collected.

The Medicare DSH uncompensated care component is based on a qualifying hospital's bad debt and charity care as reported on Worksheet S-10 of the Medicare cost report. DSH hospitals will see a decrease in their bad debt expense and an increase in the implicit price concession if these proposed changes are finalized, which will have significant detrimental effects on hospitals' Medicare DSH payments.

Northwell Health urges CMS to provide clarification on the ASU Topic 606 standards and its implications on Medicare S-10 reporting and Medicare bad debt reporting. Specifically, for the Medicare cost report, implicit price concessions are the same as bad debt since both are considered uncompensated costs. Therefore, CMS should allow hospitals to include this on the bad debt line of Worksheet S-10 or add a new line to capture implicit price concessions for calculating Medicare DSH payments. In addition, if adopted, CMS should consider updating the Medicare cost report instructions and regulations to reflect these new industry standards.

CMS' proposal also could affect the way hospitals report their community benefits. While the IRS does not include bad debt in its formal part of its definition of community benefits, some hospitals include bad debt in broader groups such as charity care and Medicaid or Medicare shortfalls. These changes could impact patient collection practices and revenue cycle performance measurement significantly.

Again, thank you for the opportunity to comment on this proposed rule. If you have any question regarding our comments, contact William J. Fuchs, Vice President for Finance at [email protected] or (516) 876-6065

Sincerely,

William J. Fuchs,

Vice President, Finance

Northwell Health

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Footnotes:

1/ 85 Fed. Reg. 32,460, 32,464 (May 29, 2020).

2/ 85 Fed. Reg. at 32,791.

3/ 84 Fed. Reg. 65,524 (Nov. 27, 2019).

4/ 85 Fed. Reg. 32,460, 32,465 (May 29, 2020). [Northwell Health notes that, because there is no comparator in the statement, it is not clear what CMS means when it says that reporting median payer-specific negotiated charges is "less burdensome for hospitals."]

5/ American Hospital Assn, et al. v. Azar, No. 19-CV-3619 (D.D.C. June 23, 2020).

6/ 85 Fed. Reg. 32,460, 32,465 (May 29, 2020).

7/ Id. at 32,791.

8/ Id.

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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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