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:
What regulatory actions did the federal agencies take?
There were two rules issued last week: (1) final rule requiring hospitals to disclose prices, by the Department of Health and Human Services (HHS),[1] 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.[2] 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.
Who is subject to the new requirements?
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.[3] Federally operated hospitals, such as Department of Veterans Affairs (VA) hospitals, are exempt from the transparency requirements.
When does the final rule take effect?
Hospitals have 13 months to comply with new price transparency requirements. The federal regulations become effective January 1, 2021.[4]
What information do the price transparency regulations cover?
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:
- gross charge (the charge for an individual item or service that is reflected on a hospital’s list of established charges, absent any discounts);
- payer-specific negotiated charge (the charge that a hospital has negotiated with a specified third-party payer for an item or service);
- de-identified minimum negotiated charge (the lowest charge that a hospital has negotiated with all third-party payers for an item or service);
- de-identified maximum negotiated charge (the highest charge that a hospital has negotiated with all third-party payers for an item or service); and
- the discounted cash price (the charge that applies to an individual who pays cash (or cash equivalent) for a hospital item or service).
Wait, payer-specific negotiated 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.
What format of disclosure for standard charges?
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.
What format of disclosure for “shoppable services” charges?
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.
How will HHS monitor compliance?
The federal government will evaluate hospital compliance through individual complaints, analysis of noncompliance, and hospital website audits.
What are the consequences of non-compliance?
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.
Will the rule be challenged in court?
Yes. A coalition of hospitals and hospital associations has voiced opposition and indicated that they will challenge the rule in federal court.[5] 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.
- Centers for Medicare & Medicaid Services, CY 2020 Hospital Outpatient Prospective Payment System (OPPS) Policy Changes: Hospital Price Transparency Requirements (CMS-1717-F2), November 18, 2019, https://www.cms.gov/newsroom/press-releases/cms-announces-approval-groundbreaking-demonstration-expand-access-behavioral-health-treatment.
[Back to reference] - Internal Revenue Service, Department of the Treasury; Employee Benefits Security Administration, Department of Labor; Centers for Medicare & Medicaid Services, Department of Health and Human Services, Transparency in Coverage (CMS-9915-P), November 18, 2019, https://www.hhs.gov/sites/default/files/cms-9915-p.pdf.
[Back to reference] - Hospitals licensed by the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands are also covered under the rule.
[Back to reference] - Centers for Medicare & Medicaid Services, CY 2020 Hospital Outpatient Prospective Payment System (OPPS) Policy Changes: Hospital Price Transparency Requirements (CMS-1717-F2), November 18, 2019, https://www.cms.gov/newsroom/fact-sheets/cy-2020-hospital-outpatient-prospective-payment-system-opps-policy-changes-hospital-price.
[Back to reference] - American Hospital Association, Hospital and Health System Groups on Public Disclosure of Privately Negotiated Rates Final Rule, November 15, 2019, https://www.aha.org/press-releases/2019-11-15-joint-statement-national-hospital-and-health-system-groups-public.
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