Oct 24, 2019

Hospitals lobbying to change Medicare's pay formulas

Texas Health Resources is part of a new lobbying alliance. Photo: Texas Health Resources

Several hospital systems are lobbying Medicare to stop basing certain payments on their sticker prices, also known as "chargemasters" — prices the Trump administration has required them to disclose publicly.

The intrigue: Hospitals aren't advocating for lower Medicare payments. They want to reduce the prices they list publicly, while retaining the same Medicare revenues.

How it works: Hospitals have a chargemaster that lists the rack rates of every service, test and procedure.

  • Those prices are relevant for people who are uninsured and for people who get out-of-network services, but they don't reflect the net price that's negotiated with private health insurers.
  • However, Medicare bases a handful of hospital payments based on those chargemaster prices — including things like "outlier" payments for patients who are extraordinarily expensive.

​Driving the news: Six hospital systems — Advent Health, Baptist Health, Geisinger, SSM Health, Texas Health Resources and Trinity Health — and the Healthcare Financial Management Association, a trade organization for hospital executives, are each paying $2,000 a month to fund the Chargemaster Alternatives for Medicare Payment Alliance.

  • They essentially want Medicare to do away with payment formulas that take those list prices into account.
  • Rick Gundling, a vice president at HFMA, said in an interview the changes would allow hospitals to "rationalize their charge structure" and "allow for better transparency."
  • The hospital systems either did not respond to requests for comment or did not make executives available for interviews.

The bottom line: Hospitals don't like having to post their high chargemaster rates. It's embarrassing, but they also argue the rates are misleading because they don't reflect patients' out-of-pocket costs.

  • If hospitals convince Medicare to calculate outlier and other niche payments on costs instead of charges, and guarantee the payments won't go down, they would get a PR win for potentially lowering some list prices and a financial win for not sacrificing revenue.

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The big picture: The rules — one final and one proposed — could have a huge impact on the health care system, and will surely be fought by the industry — including in court.

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