What Providers Should Take Away from New Rule on Reporting Prescription Drug + Health Care Spending

The Biden administration issued an interim final rule requiring private insurers to report prescription drug costs to the federal government. Published Nov. 17, 2021 with a request for comments, the Prescription Drug and Health Care Spending[1] rule is the fourth in a series of regulations under the No Surprises Act (NSA) and Consolidated Appropriations Act of 2021 (CAA) according to the Centers for Medicare & Medicaid Services (CMS) fact sheet. See Ensemble’s analyses of the previously issued rules in our News + Insights section.

What You Need to Know

The Prescription Drug and Health Care Spending rule implements NSA and CAA provisions relating to increased transparency by requiring certain information about prescription drug and health care spending to be submitted annually by group health plans and health insurance issuers offering group or individual health insurance coverage, as well as Federal Employees Health Benefits carriers.

Plans and issuers must begin submitting required information from calendar year 2020 to the Department of Health and Human Services, Department of Labor and Department of the Treasury (the Departments) by Dec. 27, 2021. Information each year thereafter will be due on June 1. The Departments are deferring enforcement action for 2020 and 2021 information until Dec. 27, 2022 to allow insurers to come into compliance. Comments on the interim final rule are due by Jan. 24, 2022.

The rule doesn’t directly impact hospitals and other providers because it places the reporting requirements on payors. Providers should take note of the Departments’ expressed desire in tracking hospital and provider costs for purposes of informing policymaking in the future to affect those costs.

Payors will be required to report on the following:

  • General information on plans or coverage, including the number of participants, beneficiaries or enrollees and each state in which the plan or coverage is offered
  • Prescription drug spending using several different metrics, such as the 50 most frequently dispensed brand prescription drugs and the 50 most costly prescription drugs by annual spending
  • Prescription drug rebates, fees and any other remuneration paid by drug manufacturers and any impact it has on premiums and out-of-pocket costs
  • Total spending on health care services by the plan or coverage broken down by the type of costs (including hospital costs; health care provider and clinical service costs for primary care and specialty care separately; costs for prescription drugs; and other medical costs, including wellness services). Reporting on health care spending must also include information on premiums and out-of-pocket costs paid by participants, beneficiaries and enrollees and the amounts paid on their behalf by employers.

The Departments will use the data to generate and publish public reports no later than 18 months following the initial data submissions and then biannually. The reports will examine prescription drug reimbursement and pricing trends and the impact of prescription drug costs on premiums. The reports will be aggregated in such a way that no drug- or plan-specific information is made public.

Reporting on Health Care Spending

The health care spending rules require payors to submit total annual spending[2] on hospital costs and health care provider and clinical service costs for primary care and specialty care separately. In the Regulatory Impact Analysis, the Departments explain this data will help identify “factors contributing to changes in plan expenditures…which may inform future policymaking that addresses health care costs.” The Departments continue:

The dataset will also allow the Departments and OPM to identify other major drivers of increases in health care spending, including hospital costs, primary and specialty health care provider and clinical service costs, and other medical costs. . . Policymakers will be able to use the information provided . . . to set policies that may result in lower premiums, reduced out-of-pocket costs and decreased labor costs. Policymakers will also be able to use this information to set policies that may promote transparency and more competition in health care and prescription drug markets, consistent with the goals of Executive Order 14036.

Our Take

NSA Deference to Payors + Importance of Provider Advocacy

As we’ve argued in previous posts, the burdens associated with implementation of the NSA have so far fallen disproportionately on providers.[3] A bipartisan coalition of 152 lawmakers in Congress agrees and recently submitted a joint complaint letter[4] to the Departments concerning the Independent Dispute Resolution (IDR) process and how the NSA IFR Part II[5] may incentivize insurance companies to set artificially low payment rates.

The Association of Air Medical Services recently filed suit[6] against the Departments to vacate the IFRs because of its reliance upon the Qualifying Payment Amount (QPA), or median in-network rate, in the IDR process. The American Society of Anesthesiologists recently expressed grave concern[7] about the “strong-arm tactics” being used by BlueCross BlueShield of North Carolina to reduce in-network rates.

Kaiser Health News recently interviewed[8] HHS Secretary Xavier Becerra about providers’ concerns that the regulations favor insurers and will drive payment rates down, potentially forcing providers out of networks and even out of business. Secretary Becerra rejected those complaints and defended the regulations, saying he did not foresee a wave of closures or diminished access for consumers. He further suggested that providers are overcharging, gouging and not offering fair prices for their services. The Secretary pointed to a recent HHS report on surprise medical bills[9] that found health care costs rising in states that use a “baseball-style” system in which the arbiter chooses between the offers presented by the provider and the insurer.

“When the arbitration process is wide open, no boundaries, at the end of the day health care costs go up, not down,” Becerra said of the methods doctors prefer. “We want costs to go down. And so we want to set up a system that helps provide the guideposts to keep us efficient, transparent and cost-effective.”

“While the administration chose a benchmark that physician and hospital groups don’t like, the law does specify that other factors should be considered, such as a provider’s experience, the market and the complexity of a case. Becerra said those factors help ensure arbitration is fair.”

“What we simply did was set up a rule that says, ‘show the evidence,’” Becerra said. “It has to be relevant, material evidence. And let the best person win in that fight in arbitration.”

The Secretary’s comments may leave providers disquieted because they suggest the Departments have made up their minds that providers inappropriately overcharge for their services and no changes will be made to the rules following the notice and comment rulemaking process. We argue it’s a legitimate and foreseeable concern that directing IDR entities to begin with the assumption that the QPA is the appropriate payment amount is the establishment of a de-facto benchmark rate and it may incentivize payors to artificially lower the payment rates.

We encourage providers to continue voicing their concerns in future policymaking and rulemaking opportunities that may unfairly impact their reimbursement rates and, consequently, their ability to continue serving their patients and communities. While it may be a shared goal among providers, payors, consumers and regulators to reduce the costs of health care, reducing health care costs should be accomplished equitably and not at the expense of providers and their patients and communities.

Avoid performance disruption by getting ahead of the requirements and preparing now for what’s to come in January 2022. If you’re concerned about the lack of resources your team has to devote to reviewing the No Surprises Act and its corresponding regulations, our team of credentialed revenue cycle experts is here to help. Customer service is at the heart of Ensemble’s ethos and we’re ready to help you prepare for the operational impact associated with the No Surprises Act.

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[1] https://www.federalregister.gov/documents/2021/11/23/2021-25183/prescription-drug-and-health-care-spending

[2] “Total annual spending” largely tracks the definition of “incurred claims” at 45 CFR § 158.140 with some specific exclusions but including cost sharing. See 86 FR at 66670. For prescription drugs, total annual spending is net of prescription drug rebates, fees, and other remuneration. Id. The Departments said this will allow them “to undertake more meaningful and accurate comparisons of the costs of different prescription drugs, by capturing the actual costs for different plans and issuers, as well as for the participants, beneficiaries, and enrollees, as applicable, of different plans and issuers.” Id.

[3] See Ensemble’s articles on the NSA IFRs Part I and Part II: Balance the Burden of the No Surprises Act and Four Key Updated Requirements to the No Surprises Act  & How to Take Action.

[4] https://wenstrup.house.gov/uploadedfiles/2021.11.05_no_surprises_act_letter.pdf

[5] https://www.federalregister.gov/documents/2021/10/07/2021-21441/requirements-related-to-surprise-billing-part-ii

[6] https://aams.org/news/586986/AAMS-Sues-Federal-Government-Over-Rules-Favoring-Insurers.htm

[7] https://www.asahq.org/about-asa/newsroom/news-releases/2021/11/bcbs-abuses-no-surprises-act-regulations

[8] https://khn.org/news/article/xavier-becerra-surprise-billing-rules-hhs-report-price-negotiation-arbitration/

[9] https://aspe.hhs.gov/reports/evidence-surprise-billing