CMS Proposes Changes to Hospital Price Transparency Rules, Increased Penalties

Baker Donelson

Baker Ober Health Law

On August 4, 2021, the Centers for Medicare & Medicaid Services (CMS) published proposed changes to enforcement of the hospital price transparency rules that went into effect earlier this year. The proposed changes, part of the 2022 outpatient prospective payment system proposed rule (the Proposed Rule), address CMS regulations published in November 2019 that require hospitals to publicly report information regarding their standard charges, including privately negotiated charges with commercial health insurers, effective January 1, 2021. The proposed changes include increased penalties for noncompliance and additional guidance on methods through which hospitals must make standard charges available. Hospitals should monitor CMS rulemaking and may need to consider changes to how they are reporting charge information if the agency finalizes the changes, which would be effective January 1, 2022.

Current Hospital Reporting Requirements and Penalties

The hospital price transparency rules apply to all Medicare and non-Medicare hospitals, except those that are federally owned, and includes all entities and locations operated under the same state license, as well as services provided through a hospital's employed physicians and non-physician practitioners.

It imposes two requirements on hospitals:

  1. establish, update, and make public a list of all standard charges for all items and services; and
  2. make public a consumer-friendly list of standard charges for a limited set of "shoppable services."

A more detailed summary of the reporting requirements is available here.

Under current regulations, the ultimate penalty for noncompliance may include the imposition of civil monetary penalties (CMPs) of up to $300 per day if a hospital fails to respond to a request for a corrective action plan or fails to comply with the terms of a corrective action plan. CMS announced in December 2020 that the agency would begin to audit a sample of hospitals to ensure compliance, beginning in January 2021, and investigate complaints of noncompliance submitted to CMS. CMS reportedly began issuing warning letters to hospitals in April 2021. During a recent webinar, CMS indicated the agency has not yet issued CMPs related to noncompliance with the hospital price transparency rules.

Proposed Changes to Penalties for Noncompliance

Based on the agency's experience thus far in enforcing the rules, CMS proposes to amend the regulations outlining penalties for noncompliance. Specifically, CMS highlights a concern over an apparent "trend towards a high rate of hospital noncompliance" identified by CMS through reviews of hospital websites and studies suggesting a "high rate" of hospital noncompliance. CMS identifies a particular concern over noncompliance among large hospitals.

To address this concern, CMS proposes that, beginning January 1, 2022, the penalty amount for each day the agency determines a hospital is not in compliance would be scaled and would vary based on hospital size. CMS would base the penalty amount based on a hospital's number of beds, per the hospital's most recently available Medicare cost report (or based on documentation submitted to CMS when cost report data is not available or for non-Medicare hospitals). For hospitals with 30 or fewer beds, the penalty amount would remain unchanged, with a maximum penalty amount of $300 per day. For hospitals with between 31 and 550 beds, the penalty would be the number of beds times $10, with a maximum daily penalty amount of $5,500. For hospitals with more than 550 beds, the maximum penalty would be $5,500 per day. The proposed penalties are outlined below:

Number of Beds

Penalty Applied Per Day

Total Penalty Amount for Full Calendar Year of Noncompliance

30 or less $300 per hospital $109,500 per hospital
31 up to 550 $310 to $5,500 per hospital (number of beds times $10) $113,150 to $2,007,500 per hospital
>550 $5,500 per hospital $2,007,500 per hospital

See Table 63, 86 Fed. Reg. 42018, 42315 (Aug. 4, 2021).

CMS considered alternative approaches to addressing their compliance concerns, including an across-the-board increase in the amount of penalties for hospitals of all sizes. However, the agency proposed a scaled approach based on hospital size, in part, to avoid overly penalizing smaller hospitals. In considering the scaled approach, CMS also entertained relying on hospital revenue to account for the financial impact of CMPs on a hospital. However, the agency suggests a hospital's bed count is more closely tied to the number of patients impacted by a hospital’s noncompliance.

CMS is seeking comments on other factors that could be used to scale a CMP amount, including various measures of revenue. CMS also seeks feedback on whether the agency should take into account the nature, scope, and severity of noncompliance when imposing CMPs. CMS also asks for comments on using 30 as the number of beds to set the minimum penalty amount and on setting $5,500 as the maximum penalty for hospitals with more than 550 beds.

Proposed Changes to Requirements for Posting Standard Charges Online

CMS proposes several changes to the rules governing the accessibility of price information hospitals must make publicly available. Under current regulations, hospitals must include five types of standard charges in a machine-readable file posted in a publicly available internet location that is displayed prominently and clearly identifies the hospital location associated with the charge information. The regulations require updated postings at least once annually. Hospitals must make the machine-readable file easily accessible, without barriers, and must ensure that the data may be digitally searched.

In the Proposed Rule, CMS raises concerns that, based on the agency's review of hospital websites, hospitals are not making the standard charges file accessible without barriers. Examples of methods used by hospitals that present barriers to accessing the pricing information include:

  • use of anti-automation tools that prevent search engines from identifying information and make it difficult for the public to be able to find a web page housing hospital pricing data;
  • requiring website users to prove they are humans to access pricing data, such as through the use of CAPTCHA and reCAPTCHA web applications (e.g., requiring users to type text or select certain images to access the page);
  • use of terms and conditions or legal disclaimers that require users to take actions prior to viewing the contents of the webpage; and
  • use of Application Programming Interfaces (APIs) that obscure access to the data in a machine-readable file.

CMS proposes amending the regulations to indicate that making the standard charge information publicly available without barriers includes, but is not limited to, "ensuring the information is accessible to automated searches and direct file downloads through a link posted on a publicly available website." CMS specifies the proposed change is intended to prohibit practices such as the failure to include a link for downloading the machine-readable file, use of "blocking codes" or CAPTCHA, and requiring agreement to terms and conditions or the submission of other information to access the pricing data.

CMS notes the list of examples of prohibited practices included in the Proposed Rule is not an exhaustive list. CMS also seeks feedback on other practices that impose barriers to accessing the data that should be prohibited. The agency is also soliciting comments on what it means for hospitals to post the machine-readable file "prominently," indicating the agency is considering imposing standard requirements for how hospitals should post the file online.

CMS also asks for feedback on improving standardization of the machine-readable file, including whether CMS should require a specific data format across all hospitals, additional data elements, or use of certain disclosures.

Clarifications and Requests for Feedback on Posting of Charges for Shoppable Services

Current regulations also require hospitals to make public standard charges for "shoppable services," including as many of the 70 shoppable services specified by CMS that are provided by the hospital and as many additional shoppable services selected by the hospital, for a combined total of at least 300 shoppable services. Under current regulations, CMS will deem a hospital to meet the requirement if the hospital maintains an internet-based price estimator tool that meets certain criteria.

CMS indicates in the Proposed Rule that some hospitals are using price estimator tools that do not meet the criteria outlined in the regulations. For example, some tools produce average payment amounts instead of a single estimated payment amount specific to the individual user. CMS reiterates that, for hospitals that choose to comply with the requirement to post standard charges for shoppable services through use of a price estimator tool, the tool must produce a price estimate that is "tailored" to an individual user and the estimate must specify the amount the hospital anticipates the individual would pay for a shoppable service, absent unusual or unforeseen circumstances. CMS is seeking comments on whether to add additional requirements for the use of price estimator tools, beyond the "minimum requirements" outlined in the current regulations.

The agency also observes that some hospitals may not be using "plain language" to describe each shoppable service for consumers, as dictated by the regulations, and CMS asks for comments on whether the regulations should require plain language standards and, if so, what they should be.

Proposed Exemption for State Forensic Hospitals

CMS proposes to deem state forensic hospitals as having met the requirements of the price transparency rules. The agency recognizes the regulations do not apply to federally owned hospitals, because these facilities do not serve the general public, and CMS now recognizes state forensic hospitals should be exempted from the rules for similar reasons.

Hospital Implications

CMS's proposals to revise the hospital price transparency rules and increase penalties for  noncompliance follow a series of reports and media coverage suggesting a high rate of  noncompliance among hospitals. Members of Congress from both parties have also called for CMS to revisit its price transparency enforcement tools, including the amount of the CMPs to impose against noncompliant hospitals. CMS and other stakeholders have expressed a particular concern related to the accessibility of the pricing data and whether hospitals must take additional steps to make the data accessible "without barriers."

Given these concerns, hospitals should monitor CMS rulemaking for new requirements that may warrant changes to how hospitals post their charge information. Hospitals should also anticipate increased CMS scrutiny of hospital compliance even before the rule is finalized. CMS is expected to issue a final Outpatient Prospective Payment System rule in November with policies that will take effect January 1, 2022. Comments in response to the Proposed Rule are due by September 17, 2021.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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