On July 19, 2021, the Centers for Medicare & Medicaid Services (“CMS”) issued a proposal that would significantly increase the fines that would be imposed on hospitals for price transparency violations. This proposal, included in the “2022 Outpatient Prospective Payment System/Ambulatory Surgery Center Payment System proposed rule,” aims to promote competition.[1] The proposal is, in part, a response to complaints and reports that hospitals are not in compliance with the new CMS price transparency rules that became effective January 1, 2021. These CMS price transparency rules require all hospitals operating within the United States to publish the public cash prices and payor-negotiated rates for the services they provide, when available. The requirements do not apply to ambulatory surgery centers or physicians not directly employed by a hospital.

As it stands, the maximum fine for violation of the CMS price transparency rules is $300 per day, or $109,500 per year, for a hospital with more than 30 beds. This federal proposal would dramatically increase this maximum penalty to as much as $5,500 per day, or over $2 million per year, for a Medicare-enrolled hospital with more than 30 beds. For these Medicare-enrolled hospitals, the bed count is based upon the “number of beds” available for use by patients at the end of the cost-reporting period listed in the hospital’s Medicare cost report data. For hospitals lacking sufficient data or non-Medicare hospitals, CMS proposes to use documentation provided by the hospital to determine the number of beds. If a hospital does not provide CMS with this documentation, that hospital would be penalized at the highest rate permitted. If finalized, these increases would become effective on January 1, 2022. Hospitals seeking to avoid substantial fines should begin taking steps to comply with these CMS transparency rules prior to that effective date.

The U.S. Department of Health & Human Services believes that these harsher penalties will dissuade hospitals from concealing the costs of services and procedures. However, hospitals and health systems likely believe that these proposed enhanced penalties are premature. There is a strong industry push for more guidance on the new price transparency requirements as hospitals struggle to gain clarity regarding precisely what is required of them. Industry leaders have stated that, without further guidance, perfect compliance remains impossible.[2]

The current CMS price transparency regulations fail to provide guidance for disclosing rates for procedures that are commonly priced as part of a bundle of services, such as knee replacements. The federal price transparency regulations also fail to clarify how hospitals should account for quality payments or bonuses, and whether hospitals can continue to tack these payments onto service prices. These federal price transparency regulations lack guidance on accounting for value-based payments. These value-based payments are based upon patient outcomes and are not generally tied to specific services. They also may involve a capitated per-person, per-month payment structure.

Beyond permitting the imposition of fines, the price transparency rules also call for CMS to publish a list of hospitals that are penalized by CMS for failure to comply. Considering the lack of clarity and guidance regarding these new rules, prematurely publishing which hospitals have been subjected to fines could unfairly penalize hospitals in the process of addressing compliance requests and taking corrective actions.

In the proposal, CMS is currently seeking comment on alternative or additional criteria that could be used to scale financial penalties, such as hospital revenue; the nature, scope, severity, and duration of noncompliance; and the reason for noncompliance.

In addition, CMS is inviting public input on a variety of topics to consider in future rulemaking, including (1) online price estimator tools, (2) “plain language” descriptions of available services, (3) identification of exemplar hospitals, and (4) standardization of machine-readable files. 

The proposed rule in its entirety can be found here, with public comment due on September 17, 2021.

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