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

WASHINGTON, July 17 -- Ebenezer Erzuah, executive director of reimbursement at WellStar Health System, Marietta, Georgia, 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 7, 2020, and posted on July 14, 2020:

* * *

On behalf of Wellstar Health System and its member facilities (Cobb Hospital, Douglas Hospital, Kennestone Hospital, Paulding Hospital, Atlanta Medical Center, North Fulton Hospital, Spalding Regional Hospital Sylvan Grove Hospital, West Georgia Medical Center and Windy Hill Hospital), I wish to take this opportunity to comment on the Centers for Medicare & Medicaid Services' (CMS) proposed rule for federal fiscal year (FFY) 2020 Inpatient Prospective Payment System (IPPS), published May 11, 2020 in the Federal Register. The proposed rule as published increases nationwide IPPS payment rates by 3.10% ($4 billion) and the LTCH payment rates would decrease by .9% ($37 million). The stated increase is significant and greatly appreciated. We also appreciate the elimination of the 2% automatic across-the-board budget cuts or sequester for the period May 1, 2020 - December 31, 2020 via the CARES Act and we respectfully advocate that it be permanent. For Wellstar Health System, the effect of the 2% sequester is significant.

The adequacy of medical payments to cover the cost of services provided to Medicare patients is crucial for ensuring the future viability of "disproportionate share" hospitals (DSH) such as Cobb Hospital, Douglas Hospital, Kennestone Hospital, Atlanta Medical Center, North Fulton Hospital, Spalding Regional Hospital and West Georgia Medical Center. Specifically, WellStar Health System has had to endure the unfavorable impact of the lack of Medicaid Expansion in the State of Georgia and the impending statutory reduction to the Medicaid Disproportionate Share (DSH) payments. The Medicaid DSH payments alone is projected to reduce Medicaid payments to Wellstar hospitals by $14 million in FFY 2021. In FY 2019, Medicare payments to Wellstar Health System facilities (including its Medical Group Practices) fell substantially short of covering the operational costs associated with Wellstar caring for Medicare Beneficiaries even though we are nationally benchmarked as a very cost-effective healthcare organization. In fact, Wellstar's Medicare reimbursement is projected to be over $237 million less than the cost of providing services to Medicare beneficiaries. Upon review of the proposed changes to the 2021 Inpatient Prospective Payment System (IPPS), Wellstar Health System submits the following comments for your consideration:

(1) PRICE TRANSPARENCY - PROPOSAL TO REQUIRE HOSPITALS TO REPORT MEDIAN PAYER-SPECIFIC NEGOTIATED CHARGES BY MS-DRG

(Federal Register Pages 32790 - 32797)

In its FY 2021 Inpatient Prospective Payment System (IPPS) proposed rule, CMS proposes 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 MSDRG relative weights beginning in FY 2024. Wellstar Health System believes that both proposals are unlawful and urges CMS to delay their finalization.

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 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."/4

The Hospital Price Transparency Final Rule is scheduled to go into effect on Jan. 1, 2021, but it has been challenged by the 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 2020, 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's 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 FY 2024. CMS says that it is considering adopting in the FY 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 costs is a better measure of hospital resources used. Instead, the agency appears to conflate market price with cost.

The rationales CMS uses for basing MS-DRG relative weights on price (e.g., promoting transparency, bringing down the cost of health care, wanting to move beyond the chargemaster, etc.) have 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 "advance[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).

Wellstar Health System ( in coordination with the AHA) is 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 hospital price transparency final 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 Wellstar Health System and the AHA's concerns about CMS's 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 MS-DRG reflect resources used, and (3) stakeholders have had another opportunity to comment on the proposal.

(2) WAGE INDEX - PROPOSAL TO CONTINUE TO ADDRESS WAGE INDEX DISPARITIES BETWEEN HIGH AND LOW WAGE INDEX HOSPITALS

(Federal Register Pages 32900 - 32904)

Section 1886(d)(3)(E) of the Act directs the Secretary to adjust the proportion of the national prospective payment system base payment rates that is attributable to wages and wage-related costs by a factor that reflects the relative differences in labor costs among geographic areas. It also directs the Secretary to estimate from time to time the proportion of the hospital costs that are labor-related and to adjust the labor proportion of hospital costs attributable to labor and labor- related cost. Section 403 of Public Law 108 -173 amended section 1886(d)(3)(E) of the Act instituted a fixed ratio (62%) for hospital labor and labor related cost. From time to time the Secretary has used this awesome responsibility to implement changes that offer a couple of labor and labor related share that hospitals within a core-based statistical area can use if the applied labor-related ratio resulted in a higher payment. CMS via a series of wage index related studies and updates determined the wage -related cost of hospitals to be 68.3. Using the regulatory discretion under the Law, hospitals with wage index lower than 1.0000 will be assigned the lower labor-related adjustment ratio of 62%.

In the FY 2021 Medicare IPPS proposed rule, the Secretary (CMS) is using the powers provided under Section 1886(d)(3)(E) of the Act to continue to address wage index disparities between high and low wage index hospitals by proposing to increase the wage values for hospitals with wage index value below the 25th percentile wage index value. In addition, CMS proposes to offset the expected increase to the IPPS payments due to this provision by decreasing the wage index for hospitals with wage index values above 75th percentile wage index values across all hospitals. The budget neutrality adjustment is applied to the wage index and not the IPPS standardized amount. As part of the proposed transition budget neutrality adjustment the CMS is proposing to place a 5 percent cap on any decrease in a hospital's wage index from the hospital's final wage index in FFY 2019. their hiring patterns and distorting labor markets. Acumen's (consulting firm) independent report on health care funding did support the revision of the Medicare wage index and advocated for the implementation of the MedPAC recommendations.

Wellstar Health System would like to respectfully state that even though this helps mainly rural hospitals in the South and Southeastern part of the country, none of the presented proposals addresses the fact that core-based statistical areas or hospitals that benefit from the current wage index model will continue to have the funds to pay higher wages and wage-related costs to their employees and this dynamic would result in higher reported wage related cost by these same hospitals.

RECOMMENDATION: Wellstar Health System appreciates the genuine effort by the Congress, CMS and related organizations to address the wage index disparities around the country. This disparity is even more glaring when you compare the wage index of some of the largest cities in the South and Southeastern part of the country to those in the Northeast, Midwest and West. Specifically, under the proposed rule, hospitals in the Atlanta CBSA will see a .8% reduction to the area wage index even though it is currently below 1.0000 and one of the lowest when compared to other large metropolitan areas with similar number of residents. We would respectfully like to restate that there is a significant wage index disparity between large urban areas that Federal agencies and national hospital associations conveniently ignore. As an example, the American Hospital Association Taskforce report on wage index states that:

"While promoting efficient, affordable and high-quality health care is a laudable goal, the Task Force agreed that the purpose of the wage index should continue to be to account for geographic differences in wages across labor markets. Promoting efficiency and value are laudable goals that Medicare and the hospital field should unequivocally strive to achieve".

The AHA Task Force statement also does not address the relevant issues which allows the current Medicare Area Wage Index scheme to continue to be an obstacle to providers in certain major metropolitan areas in the country to fairly compete for highly skilled health workers - since competition for these workers is national not local.

For this reason, Wellstar Health System would like to propose the creation of an Urban Medicare Wage Index Floor of 1.0000 for Core Based Statistical Areas (CBSAs) located in a metropolitan area with a population of at least 5 million per the latest US Census Bureau data and to be funded primarily from an adjustment to the AWI of other similar metropolitan areas with substantially higher wage index. This will be an immediate fix to the large urban wage index disparity issue without the unintended consequences of a total revamp of the current wage index system.

(3) PROPOSED UNCOMPENSATED CARE (UCC) PAYMENTS

(Federal Register Pages 32943 - 32946)

Section 3133 of the Patient Protection and Affordable Care Act, as amended by section 10316 of the same Act and Section 1104 of the Health Care and Education Reconciliation Act authorized the CMS to modify the methodology for computing the Medicare DSH payment adjustment. Beginning with discharges in FY 2014, hospitals that qualify for Medicare Disproportionate Share (DSH) under Section(d)(5)(F) of the Act receive 25% of the amount they would have received under the previous statutory formula for DSH payments. The remaining 75% of what would have been paid as DSH to eligible providers, reduced to reflect changes in the percentage of individuals who are uninsured, is then made available as additional payments to each hospital that qualifies for Medicare Empirical DSH payment adjustment. The allocation method to distribute the Uncompensated Care DSH amongst eligible hospitals is called Factor 3. Because of the lack of reliable uncompensated care data when the "new DSH" scheme was promulgated in Federal Fiscal Year 2014, CMS used hospital specific insured low-income patients (Medicaid days) data as proxy for uninsured cost even though Worksheet S-10 from the Medicare cost report had been determined as the best data source.

In the FY 2021 Proposed IPPS Rule, CMS projects it will distribute approximately $7.8 billion to disproportionate share hospitals in the Medicare uncompensated payments in FY 2021, roughly $500 million less than the amount paid in FY 2020.The agency proposes to use FY 2017 Worksheet S-10 data to determine the distribution of uncompensated care payments to all hospitals for FY 2021, except Indian Health Service (IHS) and tribal hospitals and Puerto Rico hospitals, which would use low-income insured days for FY 2021 instead of Worksheet S-10 data. Beyond FY 2021, all eligible hospitals would use the most recent available single year of audited Worksheet S-10 data.

RECOMMENDATION: Wellstar Health System affiliated hospitals would like to recommend that the CMS expand its Worksheet S-10 audit scheme to all uncompensated care payment eligible hospitals. Wellstar also recommends that CMS maintain the FFY 2021 Final Rule uncompensated care funding level at $8.3 billion (same as the amount stated via the FFY 2020 Final Rule) or more because of the COVID 19 pandemic and the associated high national unemployment and uninsured rate.

(3) PROPOSED LONG-TERM CARE HOSPITAL (LTCH) PPS PAYMENT ADJUSTMENT

(Federal Register Pages 32919 - 32938)

CMS via the FY 2021 Proposed IPPS Rule projects a decrease to the net LTCH payments by 0.9% (-$36 million) in FY 2021 compared to FY 2020, pay all LTCH siteneutral cases a the full site-neutral rate instead of a blended rate as required by law and rebase and revise the LTCH market basket to reflect more current LTCH costs.

RECOMMENDATION: Wellstar Health System recommends that the CMS revise the net LTCH payment decrease of 0.9% to an increase of 3.0% or more so that patients on ventilators as a result of the COVID 19 infections could be weaned off at the appropriate site of service - which is at the LTCH.

Wellstar Health System is committed to providing excellent, cost effective, compassionate and world class patient care to all patients including Medicare beneficiaries in the Atlanta Metropolitan Area and surrounding counties. Our willingness to comply with the provisions of the quality reporting standards and EMTALA regulation are proof of this commitment. We believe that our recommendations, if incorporated in the final FY 2021 IPPS rule will lead to an appropriate and equitable allocation of health care resources.

If you have questions or comments about the stated issues, please contact me at (470) 956 - 4981 or via email at[[email protected]].

Thank you for your attention to these matters.

Sincerely,

Ebenezer Erzuah

Executive Director Reimbursement

WellStar Health System

* * *

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). We note 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.

* * *

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

TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, [email protected], Springfield, Virginia; 703/304-1897; https://targetednews.com