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

WASHINGTON, July 17 -- Barney Osborne, vice president for finance and reimbursement at the South Carolina Hospital Association, Columbia, 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 10, 2020, and posted on July 14, 2020:

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On behalf of our member hospitals and healthcare systems, we appreciate the opportunity to comment on the 2021 Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System proposed rules.

REPORTING OF NEGOTIATED PAYMENT RATE DATA AND ITS USE IN SETTING MS-DRG RELATIVE WEIGHTS

CMS is proposing hospitals report what the agency calls certain "market-based payment rate information" on their Medicare cost reports for cost reporting periods ending on or after January 1, 2021. This rate data will be used in a potential change to the methodology for calculating the IPPS MS-DRG relative weights to reflect relative market-based pricing. Hospitals would be required to report the "median payer-specific negotiated charge, by DRG, for all of their third-party payers, including Medicare Advantage plans." CMS states that "we believe that because hospitals already are required to publicly 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."

As with the 2020 OPPS final rule we continue to question whether these requirements are CMS's authority to require and feel there are definite anti-trust issues related to revealing specific contractual payment data negotiated independently with healthcare third-party payers.

Likewise, we are concerned that the agency's potential incorporation of this information within the IPPS MS-DRG relative weights beginning in FY 2024 would also contradict independent payer confidentiality agreements. Along with the AHA, we believe that both proposals are unlawful and urge you not to finalize them.

We also continue to be concerned that CMS is again grossly underestimating the burden that will be created for hospitals to meet both requirements. We feel that CMS has insufficiently estimated the amount of time that will be required to meet these regulations and is downplaying the amount of effort this will require of hospitals. While it sounds rudimentary to require a list of hospital prices and payments, CMS does not address the tremendous amount of data that must be collected, organized, and properly formatted and presented within each report. Although it is true that fee-for-service (FFS) plan payments can all be posted alongside a hospital's chargemaster codes and descriptions, the complications in reporting all grouped charges is not appropriately addressed in the requirement.

Potentially, for some payer contracts, hospitals will not be simply limited to listing each payer contracted payment alongside a DRG; compliance may in fact require numerous additional steps. As some third-party payers do not contractually group charges by Medicare's own MSDRG structure, hospitals will have to segregate and calculate many charges by MS-DRG, APRDRG, traditional DRG, and even some vendor-specific grouper software. The rule further requires hospitals to post outpatient grouped rates which will require additional information for practically every hospital providing outpatient surgical services. There would be a further need to post-independent outpatient codes separately for items contracted individually on a FFS basis within the same grouped contracts.

Lastly, hospitals will also be required to determine an approach to provide the same data for hospital-owned physician practices. This can easily result in hospitals having to report chargemasters numerous times for each payer contract - often for as many as 200 payer contracts.

We feel, at a minimum, CMS should delay the application of both rules until a valid structure can be designed to meet all of these regulations in a manner that creates only a reasonable amount of time and cost to hospitals. We encourage CMS to work closely with hospitals and with the relevant financial software vendors to at least understand the enormity of these functions and develop a more reasonable determination of the time and cost required for a provider to comply.

MEDICARE BAD DEBT REPORTING

For years, CMS provided very broad instructions regarding the definition of bad debt as well as the requirements a hospital must follow to designate an account as uncollectible or "bad debt." These vague instructions have allowed major discrepancies in audit practices between national MACs, and even between audit groups within each MAC, let alone among MAC-contracted audit firms. In too many cases, providers have received inconsistent treatment and guidance from these various auditors, even when those separate auditors were concurrently addressing the same underlying question. South Carolina's hospitals applaud CMS's effort in the 2021 IPPS Proposed Rule to formalize bad debt guidance by defining several key indicators and providing more definitive audit regulations.

Medicare allows for provider reimbursement for beneficiaries' unpaid deductible and coinsurance amounts for covered services reimbursed by Medicare based on reasonable cost. In order to claim Medicare bad debt reimbursement, providers must first demonstrate that a reasonable effort to collect each beneficiary's unpaid balance was made. Under Medicare bad debt policy, a "presumption of non-collectability" states that if after reasonable effort has been made to collect a bill and that the debt remains unpaid for more than 120 days from the date the first bill is mailed to the beneficiary, the debt may be deemed uncollectible and be designated as uncollectible bad debt.

It has long been the practice of South Carolina's hospitals not to consider an account as uncollectible for at least 120 days. South Carolina hospitals further delay claiming an account as Medicare bad debt on the Medicare Cost Report until all other post-accounts receivable (AR) bad debt collection efforts have been exhausted and the account is formally returned to the hospital by the collection agency showing that efforts have been exhausted. By the time an account is considered bad debt on the Medicare Cost Report, an account has been pursued for collections for a period substantially exceeding the 120-day standard. These policies are applied consistently among all third-party payers.

In the 2021 IPPS Proposed Rule, however, CMS is proposing to further require that when a provider receives a partial payment within the minimum 120-day required collection period, the "120-day clock" is reset for that account and a new 120-day collection effort period begins. We fear that, as this change has never been applied to existing hospital accounts receivable systems, the process will have to be maintained manually for most providers, requiring hospital staff to invest significant time and effort. We further note that, as collections from prior year cost report bad debts are applied to future period hospital financial data and cost reports, this practice only serves to delay the already long AR/Bad Debt cycle. Additionally, continued collection efforts on accounts receiving only nominal payments can far exceed the amount of the payment itself.

Therefore, we request that CMS reconsider the new 120-day requirement on subsequent payments on Medicare accounts as they potentially provide only a very nominal return on the hospital's investment, while creating no monetary benefit to the Medicare program.

In the 2021 IPPS Proposed Rule, for cost reporting periods beginning on or after October 1, 2020, CMS proposes that Medicare bad debts be charged to an expense account for uncollectible accounts rather than to a contractual allowance account which has been a long-time industry standard. Palmetto GBA, the MAC for South Carolina jurisdiction, started enforcing this requirement months before the April 4, 2019 issuance of "MLN Connects" provided the new definition of a crossover as a bad debt. While it is a relatively simple system change, it is feared that this may have a much broader impact. Multiple South Carolina hospitals have reported that this rule has been applied retroactively to cost reporting periods prior to the April 4, 2019 CMS communication that formally introduced this requirement. SCHA believes that a provider cannot be expected to comply with a change in a long-standing audit standard for Cost Reports that were prepared long before a new interpretation of the requirement has been issued. We request that CMS be explicit in its finalization of this rule that this requirement is only effective for cost reporting periods beginning on or after October 1, 2019, and therefore will not be applied to any Cost Report periods prior to that date.

We are further concerned with how these general ledger and financial reporting changes may compound outside of Medicare Cost Reporting. There is much confusion related to how this change relates to the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606 and any impacts this may have on future hospital accounting audits. We encourage CMS to directly engage with the AICPA prior to finalizing this rule, to ensure that all CMS and FASB requirements are mutually consistent.

As always, we appreciate the opportunity to provide our comments on this proposed rule.

Thank you.

Sincerely,

Barney Osborne

Vice President, Finance and Reimbursement

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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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