Update on Hospital Price Transparency Rules Effective January 1, 2021

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In November 2019, the Centers for Medicare and Medicaid Services (CMS) published the Final Rule implementing Section 2718(e) of the Public Health Service Act, aimed at making hospital pricing for common services more transparent and more accessible for patients.  The Final Rule went into effect January 1, 2021, which means hospitals are now required to comply with the Rule. For more detail on those requirements, click here.

On December 18, 2020, CMS posted a Special Edition Bulletin providing some clarification into the monitoring and enforcement of the price transparency rule, and reiterating to hospitals that it will, in fact, be enforced, despite pushback from the industry. 

Beginning this month, CMS plans to audit a sample of hospitals for compliance, and will investigate complaints submitted of non-compliance. If CMS concludes a hospital is non-compliant with one or more of the requirements to make “standard charges” public, they will take the following actions generally in order:

  1. Provide written warning notice to the hospital
  2. Request a Corrective Action Plan if non-compliance constitutes a “material violation” of one or more requirements
  3. Impose a civil monetary penalty of up to $300 per day (without any cap specified in the Final Rule), and publicize the penalty on the CMS website, if the hospital fails to create or fails to comply with a requested Corrective Action Plan.

Also on December 18, 2020 the U.S. Court of Appeals for the District of Columbia struck down an appeal filed on behalf of the American Hospital Association and other related groups challenging the Final Rule, upholding an earlier decision of the United States District Court issued in June 2020.  The Association generally argues that determining what negotiated rate applies to a particular patient for a particular item or service is “exceedingly complex” and will cost too much for hospitals in terms of time and dollars spent. Instead, the Association argues, hospitals should only be required to continue publishing the hospital chargemaster as a “jumping-off point,” even though few consumers pay the price on that list. Recognizing the general intent of the Public Health Service Act is to “[b]ring down the cost of health care coverage,” the Court of Appeals for the District of Columbia dismissed the appeal and rejected the Association’s arguments, saying they “missed the mark.”

However, the American Hospital Association continues to push back.  On December 21, it filed a motion with the Court of Appeals requesting emergency relief from the upcoming audits and enforcement promised by CMS. In its Initial Policy Priorities letter to president-elect Biden’s administration, it requested that Biden specifically “[r]escind provider requirements to publicly disclose negotiated rates that do nothing to help patients understand their costs, could result in anticompetitive actions on the part of health plans, and according to the Federal Trade Commission, could result in high costs for patients.” The Association also filed a letter with the U.S. Department of Health and Human Services (HHS) urging HHS “to exercise enforcement discretion with respect to the hospital price transparency rule,” citing strain on hospitals due to COVID-19 along with gaps in federal guidance as reasons. It is unclear at this time whether the Association will appeal the Court of Appeals decision to the United States Supreme Court.

The Rule, which only became effective on January 1, 2021, is still in the early days of implementation.  According to recent news articles from PoliticoPro and Modern Healthcare (subscription required to view), early reports may be indicating that hospitals have been slow to come into compliance based on concerns about a lack of clarification on the requirements and difficulties associated with COVID-19. If this trend continues, it remains to be seen how CMS will react with respect to enforcement and further action.

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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