Health systems explore decoupling hospital chargemaster from Medicare payments

At least five health systems have joined an alliance to lobby for and explore Medicare payment methodology changes that would link certain reimbursement to direct costs rather than chargemaster rates, the Healthcare Financial Management Association confirmed to Becker's Hospital Review.

The Chargemaster Alternatives for Medicare Payment Alliance — organized by the HFMA and Leavitt Partners, a Salt Lake City-based healthcare intelligence business — includes Altamonte Springs, Fla.-based AdventHealth, Danville, Pa.-based Geisinger Health System, St. Louis-based SSM Health, Livonia, Mich.-based Trinity Health and Arlington-based Texas Health Resources.

An issue for the alliance is Medicare payments dependent on chargemaster rates, or the highest price they charge for services before any negotiations with health plans or other discounts apply.  

For certain payments, particularly "outlier" payments to health systems for high-cost patients, Medicare uses chargemaster rates as part of the payment methodology, said Rick Gundling, a vice president at HFMA. However, the alliance is exploring and lobbying for one potential alternative to Medicare payment policies that would use  the actual costs incurred by the health system for providing their services instead of a charge converted by an estimate of cost.

"Now outlier payment is based off the charges after a threshold, and then Medicare multiplies it by a cost-to-charge ratio to get an estimate of cost," said Mr. Gundling. "Say [the chargemaster rate] for something is $100 and it costs $60 [to provide]. The cost-to-charge would be 60 percent, so then that's how they would estimate. But if drop your charge $75, the cost-to-charge ratio would have to come up."

He said the alliance believes health systems should not receive lower Medicare payments because they change their chargemaster. The alliance also wants any methodology change to be implemented in a budget-neutral way.

"We don't want it to be more expensive for Medicare. We don't want hospitals to take a payment reduction just because the methodology changed," said Mr. Gundling.

He said the alliance is exploring how different hospital types would be affected if changes occur, and addressed the issue in comments to CMS regarding price transparency provisions in the Medicare Outpatient Prospective Payment System proposed rule.

A CMS spokesperson said the agency is "carefully reviewing all comments received, and … does not comment further during the rulemaking process."


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Hospitals increasingly serious about cost transformation, survey finds

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