Negotiation Skills Have an Impact on Health Plan Terms

A clear sense of current market trends, cost of care, and demonstrated efficiencies that reduce cost are essential elements of contract negotiation preparations.

Negotiation leverage, in terms of hospital control, comes from several sources. The most recognized driver is market power based on geographical area or demographic factors. However, hospital/payer relationships, service offerings needed in the community, and negotiation skill and/or negotiation philosophy are other important drivers.

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Understanding Why Hospital Costs are Increasing – It Depends on the Metrics

Obtaining an accurate perspective on the meaning and relative impacts of cost and payment increases in the healthcare industry depends on the specific metrics that provide the basis for the analysis.

To no one’s surprise, health care was a primary political issue in the Fall midterm elections. Everyone knows that our country spends more on health care as a percentage of GDP than other developed countries. The primary question that the industry has long grappled with is whether we, as a nation, spend more on health care because we consume much more than anyone else or just spend more for the services that we consume.

To read the full article, from HFM Magazine, click here.

Addressing The Latest CMS Update On Price Transparency Disclosures

Earlier this month, the CMS issued another responses to frequently asked questions on its website.  Knowledge of – and access to – this latest posting have been limited, however, there is important information administrators have been learning from this latest update.  The information in this latest update were largely not part of the original final rule language, nor part of the first responses to frequently asked questions posted earlier in the fall.  In all, there have been three pieces of guidance on the new charge disclosure requirement:

  1. The original FY19 IPPS Final Rule language which reads:
    “as one step to further improve the public accessibility of charge information, effective January 1, 2019, we announced the update to our guidelines to require hospitals to make available a list of their current standard charges via the Internet in a machine readable format and to update this information at least annually, or more often as appropriate. This could be in the form of the chargemaster itself or another form of the hospital’s choice, as long as the information is in machine readable format.”
  2. The first responses to frequently asked questions posted at the end of September 2018 (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FAQs-Req-Hospital-Public-List-Standard-Charges.pdf)
  3. This latest responses to frequently asked questions posted in December 2018 (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/Downloads/Additional-Frequently-Asked-Questions-Regarding-Requirements-for-Hospitals-To-Make-Public-a-List-of-Their-Standard-Charges-via-the-Internet.pdf)

 

While all points are important to know, we believe there are three key updates that could impact the way hospitals choose to comply with the new charge disclosure requirement.  We provide a brief discussion of the three key points below:

 

1. DRUGS/SUPPLIES:
Over the past several months, there have been a number of questions surrounding the disclosure of drug and supply charge information. While the CMS still does not address HOW to disclose this information, they have confirmed that the charges for these items MUST be disclosed.  There was some earlier discussion around the industry that hospitals might not have to disclose these items if they are truly not part of the chargemaster, as is inferred in the first responses to frequently asked questions.  So, the key takeaway is that these items should be disclosed, but, hospitals still have the ability to determine how to disclose charge information.  For information on options to disclose, we refer to our earlier post which contains the table below.  We have modified the table slightly to remove the point that a hospital could defend not including these items if they are truly not part of the hospital’s CDM.

 

2. ADDITIONAL MSDRG DISCLOSURE:
Likely the most confusing point is a reference to an additional charge disclosure at the MSDRG level. The exact language is provided below:

Q. In addition to establishing (and updating) and making public a list of the hospital’s standard charges for all items and services provided by the hospital, what hospitals are required to establish (and update) and make public a list of their standard charges for each diagnosis-related group established under section 1886(d)(4) of the Social Security Act?

A. All hospitals operating within the United States are required establish (and update) and make public a list of their standard charges for all items and services provided by the hospital. Under current guidelines, subsection (d) hospitals are additionally required to establish (and update) and make public a list of their standard charges for each diagnosis-related group established under section 1886(d)(4) of the Social Security Act.

The format for standard charges for each diagnosis-related group is the hospital’s choice. CMS posts information regarding inpatient charges for subsection (d) hospitals at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient.html.  Subsection (d) hospitals may, but are not required to, use this format with respect to the additional requirement that the hospital establish (and update) and make public a list of the hospital’s standard charges for each diagnosis-related group established under section 1886(d)(4) of the Social Security Act.

How does this information impact the way a hospital reports charge information?  We previously presented a “Compliance Continuum” to help hospitals understand their options for disclosing charge data based on the rule’s language and subsequent responses to frequently asked questions.  The continuum is presented below, for reference.

It appears from this latest language that the CMS wants a “CDM-type” disclosure (like the “Minimum CDM” or “Expanded CDM” options) PLUS a disclosure of average charges by MSDRG (like the “Encounter Charges” option).  We believe that this latest language has been presented by the CMS in an attempt to cover the original ACA transparency language that included mention of diagnosis-related groupings.  That language is actually what caused us to believe that “encounter level disclosures” would be sufficient on their own. While that likely could still be argued, it would seem to us that the CMS would now like to see both.  We do emphasize, however, that “encounter level charges” disclosures still meet all four keys to compliance:

  1. TYPE OF INFORMATION:A hospital must show standard charges via the chargemaster (CDM) or another form of the hospital’s choosing – however – all items and services must be represented
  2. AVAILABILITY OF INFORMATION:Information must be made available on the internet – however – participation in a state online transparency initiative does not exempt a hospital from the requirement
  3. FORMAT OF INFORMATION:Data must be machine readable and not provided solely in a .pdf
  4. UPDATES OF INFORMATION:At least annually

We believe both could be useful as the CMS has used the language “in addition.”  As a result, presenting a Minimum CDM/Expanded CDM disclosure PLUS a MSDRG encounter disclosure would seem to cover all possibilities.  Some of this is still debatable, though, which is a point we will revisit in a moment.

One final point on the MSDRG disclosure.  There have been some questions regarding the references the CMS makes in its answer and we thought it could be helpful to address those (in italics below):

A. All hospitals operating within the United States are required establish (and update) and make public a list of their standard charges for all items and services provided by the hospital. Under current guidelines, subsection (d) hospitals are additionally required to establish (and update) and make public a list of their standard charges for each diagnosis-related group established under section 1886(d)(4) of

the Social Security Act.  **This is a reference to the establishment of a DRG-based payment system.  So, CMS is just indicating that they’d like to see the charges disclosed by MSDRG.

The format for standard charges for each diagnosis-related group is the hospital’s choice. CMS posts information regarding inpatient charges for subsection (d) hospitals at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient.html.  Subsection (d) hospitals may, but are not required to, use this format with respect to the additional requirement that the hospital establish (and update) and make public a list of the hospital’s standard charges for each diagnosis-related group established under section 1886(d)(4) of the Social Security Act.**The link takes the user to a download of hospital charges by MSDRG from the Medicare PUF data.  We believe they are attempting to say that a hospital could use this as a template for disclosure, but, is not required to do so if some other format of average charge by MSDRG is used.  Essentially, the hospital simply needs a reference of some kind (either the MSDRG number, description, or both) and an average charge.  We believe that whatever format is selected, it could be useful to include some qualifying statement that actual patient charges could differ based on unique patient utilization of services.

 

3. PENALTIES FOR NON-COMPLIANCE

Unfortunately, there have been some “scare-tactic” emails regarding penalties for non-compliance – or – not complying with a prescribed “proprietary” methodology put forth by some companies.  We believe these emails are intended to drive business – not to truly educate providers on what the new language says and does NOT say. As far as penalties, the CMS does address this in the latest document:

Q. What happens if a hospital does not make public a list of its standard charges via the Internet?

A. The hospital will not be in compliance with the law. In the FY 2019 IPPS/LTCH proposed rule (83 FR 20549), CMS sought comment on the most appropriate mechanism for CMS to enforce price transparency requirements. As indicated in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41686), specific additional future enforcement or other actions that we may take with the guidelines will be addressed in future rule making.

 

Let’s be clear: hospitals need to comply with the law.  However, we believe the CMS understands there is some latitude here for complying given that they’ve provided language that permits hospitals to use disclosure formats of their choosing.  These requirements will most likely be refined in the years ahead.  In fact, in March, the current Administrator of the Centers for Medicare and Medicaid Services, Seema Verma said “we are just beginning on price transparency. We know that hospitals have this information and we’re asking them to post what they have online.”

 

While there are no penalties prescribed, we believe there are three critical points:

  1. Hospitals should NOTtake this as a “free pass” to not comply.
  2. Hospitals should NOTbecome overly worried about disclosure formats – so long as the four compliance keys are met and the hospital can reasonably defend its approach.
  3. Hospitals SHOULDput forth a good faith effort to provide the information that has been requested. If the CMS can see hospitals are trying to meet the requirements, it’s likely that future penalty language can be avoided or mitigated.

We hope this information is helpful and welcome any questions or comments. As always, we will continue to monitor communication and provide relevant updates as appropriate.

FY 2019 IPPS Final Rule: Questions on Drugs and Supplies

We had several questions following our webinar on the FY 2019 IPPS Final Rule regarding drugs and supplies. We created a matrix to help you understand the options based on billing methodology.

If you’d like to watch the full webinar, you can see it here!

Data Sample: 2-Year Change in Discharges

Equivalent discharges™, our replacement measure for “adjusted discharges,” continues to gain acceptance as the new standard for volume measurement as it isn’t influenced by pricing changes and calculates a volume value specific to inpatient and outpatient areas.  The latest research shows that positive growth occurred in all but three states/territories (HI, MD, PR).  The national average has continued to increase, as well; climbing from 1.5% growth in our 2015 study to 5.8% in our current study.  Our top five states are primarily in the West, which as a region saw the highest growth.  Metro areas among the top five appear to be among areas that have seen population growth.  Still, while volume growth could be good economically for hospitals with fee-for-service reimbursement, areas that have been able to contain equivalent discharge growth might be better positioned in value-based structures.  If payment moves in that direction, we could see more emphasis on restricting volume growth.

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