Two major policy developments emerged from this week’s release by the Centers for Medicare & Medicaid Services (CMS) of the FY22 proposed rule governing payment for hospital outpatient services and ambulatory surgical centers.
First, CMS proposes to dramatically increase the financial penalties assessed to hospitals that fail to adequately reveal prices for their services, a requirement first put in place by the Trump administration. According to a report by the consumer group Patient Rights Advocate, only 5.6 percent of a random sample of 500 hospitals were in full compliance with the transparency requirement six months after the regulation came into effect, with many instead choosing to pay the $300 per hospital per day penalty associated with noncompliance. The new CMS regulation proposes to scale the assessed penalties in accordance with hospital size, with larger hospitals liable for up to $2M in annual penalties, a substantial increase from the earlier $109,500 maximum annual fine. In a press release, the agency said it “takes seriously concerns it has heard from consumers that hospitals are not making clear, accessible pricing information available online, as they have been required to do since January 1, 2021.” In a statement, the AHA stated that it was “deeply concerned” about the proposal, “particularly in light of substantial uncertainty in the interpretation of the rules.” The penalty hike is a clear signal that the Biden administration plans to put teeth behind its new push for more competition in healthcare, which was a major focus of the President’s recent executive order. We’d expect to see most hospitals and health systems quickly move to comply with the transparency rule, given the size of potential penalties.
More heartening to hospitals was CMS’ proposal to roll back changes the Trump administration made, aimed at shifting certain surgical procedures into lower cost, ambulatory settings. The agency proposed halting the elimination of the Inpatient Only (IPO) list, which specifies surgeries CMS will only pay for if they are performed in an inpatient hospital. Citing patient safety concerns, CMS noted that the phased elimination of the IPO list, which began this year, was undertaken without evaluating whether individual procedures could be safely moved to an outpatient setting. Nearly 300 musculoskeletal procedures have already been eliminated from the list, and will now be added back to the list for 2022, keeping the rest of the list intact while CMS undertakes a formal process to review each procedure. Longer term, we’d anticipate that CMS will look to continue the elimination of inpatient-only restrictions on surgeries, as well as pursuing other policies (such as site-neutral payment) that level the playing field between hospitals and lower-cost outpatient providers.
For now, hospitals will enjoy a little more breathing room to plan for the financial consequences of that inevitable shift.