Hospitals to receive $3.5 billion pay boost for inpatient Medicare services

Hospitals will get a 2.7% pay boost in fiscal year 2021 for inpatient Medicare services amounting to $3.5 billion, according to CMS’ finalized inpatient prospective payment system rule released late Wednesday.

The final rule, which affects around 3,200 acute-care hospitals and about 360 long-term care facilities, will increase operating and uncompensated care payments for Medicare beneficiaries by $3 billion. There will also be a net increase of $506 million related to adjusted capital payments and new technology add-on payments, which compensate hospitals for cases involving high-cost technologies, CMS said.

“President Trump is committed to ensuring that seniors on Medicare have access to the latest life-saving diagnostics and therapies,” CMS Administrator Seema Verma said in prepared remarks. “This rule is another critical step in our effort to modernize the program and strip away bureaucratic barriers between our seniors and the latest innovative treatments.”

The agency will begin to collect data on the median rate hospitals negotiate with Medicare Advantage organizations next year as it aims to wean off basing reimbursement on the weighted relative cost of services by 2024. Hospitals unsuccessfully tried to block HHS from forcing them to reveal those negotiated rates.

CMS opted to not include all third-party payers given the “variety of ways hospitals and other third-party payers negotiate charges,” the agency said. The closer relationship between MA organization rates and Medicare fee-for-service rates mitigate some of those concerns, CMS said.

Some hospitals argued that MA pricing data was not representative of the resources they use. CMS disagreed, saying that charges that hospitals negotiate with MA organizations capture the relative resources used in order to maximize profits and remain viable.

“By using market-based data, we believe that we can reduce our reliance on the hospital chargemaster and utilize this data in Medicare payment methodologies so that payments more closely reflect the true market cost,” the agency replied, noting that chargemaster gross rates rarely reflect true market costs.

Under the rule, two dozen technologies will be eligible to receive add-on payments beginning Oct. 1, which is projected to increase spending by $874 million, nearly a 120% increase over fiscal year 2020.

A handful of “breakthrough” medical devices and Food and Drug Administration Qualified Infectious Disease products will now qualify for additional payments; eight of the 18 technologies that currently qualify for higher payments will no longer be eligible. CMS hopes to bolster public health by expanding the add-on payment alternative pathway for antimicrobial drugs approved under FDA’s Limited Population Pathway for Antibacterial and Antifungal Drugs.

CMS’ final rule also creates a new Medicare Severity Diagnostic Related Group for administering Chimeric Antigen Receptor T-cell therapies, which use a patient’s genetically modified immune cells to treat specific types of cancer.

The rule reaffirms the benefits of transformational therapies like CAR T-cell therapy, the Biotechnology Innovation Organization said.

“Medicare reimbursement should not serve as a barrier to life-saving treatments, and the final policy announced today validates this basic principle,” the biotech trade association said in a statement. “It’s vital the Trump administration continue to build on these steps to ensure that seniors benefit from the next generation of innovative cures and treatments, including CAR T-cell therapy.”

In addition, the agency adjusted the Medicare wage index, which pulls market-specific wage and cost-of-living data from hospitals’ Medicare cost reports to set hospital payments. Short of a complete overhaul as suggested by HHS’ Office of Inspector General, CMS is adjusting the labor market area delineations, increasing wage index values for hospitals in low-wage areas in a budget-neutral framework and tweaking the “rural floor” provision to try to reduce wage index disparities. While the labor market area reconfiguration will positively or negatively affect payment rates for some hospitals, CMS will implement a 5% cap on annual wage index decreases to try to limit the impact.

Many hospitals supported the wage index boost for hospitals in low-wage areas, noting the cyclical effect of hospitals with relatively high wages that continue to receive higher reimbursement, and the corresponding “death spiral” where low-wage index hospitals are forced to keep wages low due to Medicare reimbursement that lags their counterparts.


Tags: covid-19, pandemic

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