Medicare to Increase Inpatient Spending by $3.5B in FY '21

The final rule also re-emphasizes CMS's push for "pricing strategies based on real world market forces" under the Medicare Fee For Service program.

Medicare spending on acute inpatient hospital services will increased by about $3.5 billion (2.7%) in fiscal 2021, the Centers for Medicare & Medicaid Services said.

The increases were included in the 2021 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) final rule, which was released Wednesday.

The new final rule applies to about 3,200 acute care hospitals and approximately 360 long-term care hospitals across the nation.

The final rule also re-emphasizes CMS's push for "pricing strategies based on real world market forces" under the Medicare Fee For Service program.

"Medicare generally pays hospitals a rate that is weighted by the relative cost of providing certain services based on a patient's diagnosis," CMS said. "These weights are currently based in large part on the charges that hospitals report to the federal government, which often have little relevancy to the actual rates paid by insurance companies."

Hospitals already are required to report negotiated rates under a Trump administration price transparency mandate. CMS is now finalizing a mandate for hospitals to report the median rate negotiated with Medicare Advantage Organizations for inpatient services to use instead of the charge-based data, starting in 2021.

CMS said it will use the pricing data to calculate inpatient hospital payments beginning in 2024.

Ashely Thompson, senior vice president for public policy at the American Hospital Association, said hospitals are "deeply disappointed that CMS continues to require hospitals and health systems to disclose privately negotiated contract terms with payers."

"By continuing to focus on negotiated rates rather than expanding access to a patient’s out-of-pocket costs, the Administration fails to meet the goal it set for itself – assisting consumers in becoming more prudent purchasers of healthcare," she said.

"Additionally, this policy will require hospitals to divert critically needed resources during this historic pandemic to administrative tasks that will not benefit patients," she said. "We do not believe CMS has the authority to compel the disclosure of these terms and our legal challenge remains ongoing.

The final rule also creates a Medicare Severity Diagnostic Related Group (MS-DRG) that "provides a predictable payment to help adequately compensate hospitals for administering Chimeric Antigen Receptor (CAR) T-cell therapies," CMS said.

FDA-approved CAR-T-cell cancer therapies use patients' genetically modified immune cells to treat specific types of cancer.

Thompson said hospitals "appreciate the agency's focus in addressing cost issues for life-saving CAR T therapy," but suggested that the funding was inadequate.

"We remain concerned that the policy the agency has put forth in this final rule is not adequate to address the extraordinary level of resources necessary to provide CAR T therapy to patients," she said. "We continue to urge CMS to consider an alternative method of determining the cost of CAR T therapy, as well as to consider carving out these very costly new technologies from the MS-DRG and paying for them on a pass-through basis."