2015 inpatient PPS rates rule also expands price transparency

The Centers for Medicare and Medicaid Services has issued its hospital inpatient prospective payment system (PPS) and long-term care hospital PPS proposed rule for fiscal year 2015, and included in the rule is a requirement that hospitals begin publically posting what they charge for services by October 1.

The rule’s primary purpose is, of course, to set payment rates for next year. According to preliminary analysis by the American Hospital Association, the rule includes an initial market-basket update of 2.7 percent for hospitals that submitted quality measures data and achieved meaningful use criteria for electronic health records (EHR) last year. Hospitals that did not submit quality data or did not achieve the meaningful use criteria for EHRs will see a one-quarter reduction in this initial market basket rate; and those that neither submitted quality data nor met meaningful use criteria will see a one-half reduction in the initial market basket update.

For all PPS hospitals, there is an additional Affordable Care Act (ACA) mandated productivity cut of 0.4 percent a market basket cut of 0.2 percent. Furthermore, the rule proposes a 0.8 percent cut to help fulfill the American Taxpayer Relief Acts’ requirement that the agency recoup costs related to certain documentation and coding changes. Finally, the rule reduces payments to Medicare Disproportionate Share Hospitals by 1 percent.

But along with setting and lowering prices, the rule also has some long-awaited directions for hospitals on how to comply with government-mandated price transparency. Technically, hospitals should have begun posting their prices already, but without guidance on what to post and how to post it, this requirement of the ACA has not been enforced. The IPPS rule offers the needed guidelines to make this provision go into effect.

According to the rule, hospitals need to share their charges but not their actual payments, which typically are lower as payors negotiate steep discounts off hospital chargemaster list prices. The charges can be posted as a public a list — a requirement already in effect in California where the state posts hospital chargemasters on its website — or as a set of directions for the public on how to ask for and receive a list of those charges directly from the hospital.

CMS expects that the charge lists would be updated at least once a year, if not more frequently, and encouraged hospitals to “undertake efforts to engage in consumer friendly communication of their charges to help patients understand what their potential financial liability might be for services they obtain at the hospital, and to enable patients to compare charges for similar services across hospitals.”

There is some concern that publishing the chargemaster prices will confuse consumers as these prices are not the actual prices paid by insurers or the government and may be inflated. However, CMS countered that they were still valuable as a source of pricing data for the public.

“We believe that hospital charges nevertheless remain an important component of our healthcare system. For example, hospital charges are often billed, in full, to uninsured patients who cannot benefit from discounts negotiated by insurance companies. Hospital charges also vary significantly by hospital, making it challenging for patients to compare the cost of similar services across hospitals,” the rule notes.

The proposed rule will be published in the May 15 Federal Register and CMS will accept comments on it through June 30.