November 20, 2019
Health Care Alert
Health Care Alert
Author(s): Harsh P. Parikh
This alert was co-authored by Gabriela Illa.
Despite staunch opposition from the industry, the Department of Health and Human Services (HHS), Centers for Medicare and Medicaid (CMS) issued final regulations on price transparency last week. The new rule broadly requires hospitals to make public their prices for hundreds of items and services, including their payer-specific negotiated rates with commercial, Medicare, and Medicaid managed care payors. At the same time, the nation’s hospital trade associations declared that they will challenge the requirements in federal court. We answer key questions about the new price transparency rules below:
There were two rules issued last week: (1) final rule requiring hospitals to disclose prices, by the Department of Health and Human Services (HHS), and (2) proposed rule governing employer sponsored health plans that requires disclosure of out-of-pocket costs, jointly issued by HHS, the Department of Labor, and the Department of the Treasury. This alert focuses on the final rule governing hospitals.
While the regulations advance the president’s Executive Order on price transparency, the Affordable Care Act (ACA) provides the statutory basis for the agency actions. Specifically, the new regulations are promulgated pursuant to Section 10001 of the ACA, which requires hospitals to “establish (and update) and make public… a list of the hospital’s standard charges for items and services provided by the hospital.” The ACA authorizes HHS to develop guidelines for the required disclosure of standard charges.
All hospitals in the United States. Typically, CMS regulations are limited to health care providers that receive federal funding, such as through the Medicare and Medicaid programs. The newly finalized regulations, however, are based on the ACA provisions aimed at bringing down the cost of health care. Accordingly, the rule applies to all institutions that are licensed as hospitals under state law. Federally operated hospitals, such as Department of Veterans Affairs (VA) hospitals, are exempt from the transparency requirements.
Hospitals have 13 months to comply with new price transparency requirements. The federal regulations become effective January 1, 2021.
Hospitals must disclose two types of information: standard charges and charges for selected “shoppable services.” First, hospitals must establish and make public a list of all items and services they provide. CMS defines hospital items and services to include supplies, procedures, room and board, facility fees, and services of employed physicians and non-physician practitioners. Bundle payment arrangements are covered by the final rule. Hospitals must list a description of each item or service along with its corresponding billing code (e.g., MS-DRG, CPT code, DHPCS code).
In addition, the rule requires hospitals to make public standard rates for a list of up to 300 “shoppable services” that are commonly provided to the hospital’s patient population. CMS defines a “shoppable service” as one that can be scheduled by a health care consumer in advance, such as a doctor’s visit or an x-ray. CMS may preselect as many as 70 services as part of this list. Emergency services are not “shoppable services.”
The following rates must be disclosed to the public for all charges:
Yes. Under the new rule, hospitals must disclose to the public their contracted reimbursement rates with private payers, including Medicare Advantage and Medicaid managed care plans.
CMS requires that the standard charge information must be 1) made available online, 2) free of charge, 3) accessible without having to submit personal identifying information, 4) in a machine readable format, and 5) updated at least once annually.
The regulations do not include a requirement for the format of disclosure of “shoppable services.” But a hospital may meet this requirement by maintaining an easily accessible, internet-based price estimator tool that provides consumers with estimates of their payment obligation for at least 300 “shoppable services.” Similar to the format and accessibility requirements for hospital standard charges, the data for shoppable services must use plain-language descriptions, be free of charge, lack password protections, and be updated annually.
The federal government will evaluate hospital compliance through individual complaints, analysis of noncompliance, and hospital website audits.
Hospitals deemed non-compliant may be provided a written warning, required to submit a corrective action plan, and be subject to civil monetary penalties up to $300 for each day of noncompliance. The final rule provides hospitals with certain due process rights, including an opportunity to request a hearing before an administrative law judge and appeal the imposition of fines.
Yes. A coalition of hospitals and hospital associations has voiced opposition and indicated that they will challenge the rule in federal court. It should be noted, however, that at least some provisions of the final rule will likely be implemented. Notably, CMS intends that all five definitions of “standard charges” are severable from the rest of the rule such that if a court were to invalidate the inclusion of one individual definition (i.e., negotiated charges), the remaining definitions would remain and other aspects of the rule would continue to go into effect.
Our team will continue to monitor developments on the federal government’s efforts to mandate price transparency.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
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