Hospital Price Transparency Final Rule Sparks Fines for Noncompliance

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The Centers for Medicare and Medicaid Services (CMS) imposed its first fines as of June 7, 2022, totaling over $1 million, on two Georgia hospitals within the Northside Hospital System for failing to comply with CMS’ Hospital Price Transparency Final Rule. These fines represent the start of  CMS’ stepped up efforts to enforce the Price Transparency requirements, as it has issued more than 350 warning notices to hospitals with more surely to come. The federal Hospital Price Transparency Final Rule aims to increase healthcare price transparency and facilitate patient price shopping online.

As of early June, CMS had issued 352 warning notices to hospitals and 157 corrective action plan requests, the agency said in an email. More than 170 hospitals have received case closure notices, meaning issues have been resolved.  CMS’ written warnings outline specific issues for the noncompliant hospital to address. 

CMS’ imposition of fines was contemporaneous with a recently published study by the Journal of the American Medical Association (JAMA) which evaluated adherence to the Price Transparency Rule in the six to nine months after the Rule became effective. According to the JAMA study, CMS’ hospital price transparency compliance push is falling short, particularly the requirement for hospitals to disclose prices in a machine-readable format.

WHAT TO KNOW ABOUT THE HOSPITAL PRICE TRANSPARENCY FINAL RULE

As of January 1, 2021, hospitals are required to post machine-readable, consumer-friendly files of the rates they negotiate with payers, gross charges and discounted cash prices for 300 "shoppable services." CMS has announced 70 mandatory “shoppable” services which must be reported by hospitals.  These services include:

  • Psychotherapy Consultations;
  • Preventive Medicine Services;
  • Routine Labs;
  • CT/MRI services;
  • Mammography Services;
  • Obstetrical Care; and
  • Surgical Services. 

Hospitals possess more discretion, however, in selecting what services are identified in the remaining 230 disclosures.  Notably, the 230 services must be services that are commonly provided to the hospital’s patient population and selected from the following categories of “shoppable” services:

  • evaluation and management;
  • laboratory and pathology;
  • radiology; and
  • medicine/surgery services. 

Under the Rule, for hospitals with 30 or fewer beds, the minimum civil monetary penalty for failure to comply is $300 per day.  For hospitals with more than 30 beds, the minimum civil monetary penalty for failure to comply is $10 per bed per day, capped at $5,500 per day. Thus, yearly noncompliance penalties can range from $109,500 to more than $2,000,000. 

For purposes of complying with the Price Transparency Rule, hospitals must include five types of standard charges for the 300 “shoppable services.” 

A hospital may meet the requirements of displaying its shoppable services by means of a price estimator tool if it provides estimates for shoppable services provided by the hospital, allows healthcare consumers to obtain an estimate of what they will pay for the shoppable services, and allows consumers to search for shoppable services by service description, billing code, and payor.

If a hospital does not use a price estimator tool, it may meet the Rule’s requirement by disclosing its Standard Charge information, which requires a hospital to make public the Standard Charges for as many of the 70 CMS-specified shoppable services that are provided by the hospital, a description of each shoppable service, the billing code for those services, and more.

WHAT THE JAMA STUDY FOUND

The JAMA study had many noteworthy findings, including:

  • Fewer than 6% of hospitals obeyed the price transparency rule during the early months of implementation.
  • Hospitals in unconcentrated healthcare markets were more likely to comply with the rule compared with their counterparts in highly consolidated markets.
  • Hospitals with relatively lower revenue per patient-day, in markets with a lower hospital concentration, and those in urban areas, were more likely to be transparent.

The JAMA study also found that larger systems have said the fines for noncompliance are relatively low and the possible impact on competitive harm could have a far more significant effect. The sensitivity to restrictions in managed care contracts and what hospitals would potentially have to give up in negotiations is an issue that is currently unknown.  Further, anecdotal evidence indicates that hospital revenue cycle teams are confused as to what constitutes a “shoppable service.” 

WHAT HOSPITALS AND HEALTH SYSTEMS CAN DO TO REMAIN COMPLIANT WITH THE REGULATIONS

Regulators have pledged to increase the penalties and have sent hospitals warning letters and corrective action mandates, but fines have only just begun. To promote further compliance, commentators expect CMS to aggressively issue fines and to increase the amount of the fines to a point where they are too large to ignore.

Currently, hospitals’ non-compliance may reflect hospital executives’ concerns about the administrative work required to set up the price transparency database, their rivals undercutting them on publicly disclosed prices and the legal ramifications if a patient bill doesn't match the disclosed data. Given the fine limitations, there are also relatively small consequences for hospitals that ignore or only partially comply with the Rule.  These consequences include allowing CMS to publish a list of hospitals that are penalized by CMS for failure to comply.

Right now, hospital executives, in conjunction with their legal counsel, should proactively plan how to achieve their goals, the legal ramifications of any failure to comply with the Rule, and, if needed, how to challenge any asserted penalties.

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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