CMS Set to Crack Down on Hospitals Over Price Transparency

After fighting against them for so long, including in court, hospitals have been reluctant to comply with the new hospital price transparency rules that officially took effect on January 1, 2021. Of course, the Centers for Medicare and Medicaid Services (CMS) are perfectly aware of the foot dragging and have taken steps to put it to an end, most notably by providing for higher penalties for price transparency violations as part of the Medicare Hospital Outpatient Prospective Payment System (HOPPS) rules for 2022.

The Price Transparency Controversy

Requiring hospitals to disclose their prices in an accessible way enables consumers to make informed decisions about where to spend their health care dollars. At least that’s the theory. Hospitals see things very differently. They feel quite strongly that the rates they negotiate with private payors is proprietary information and that disclosing them will do little more than promote conflict between patients and hospitals. The other big complaint about the price transparency rules is how burdensome they are to implement, particularly the online disclosure requirements. Based on a pure cost-benefit analysis, some hospitals have concluded that the potential costs of not following the rules, principally the risk of penalties of up to $300 per day, are more than outweighed by the costs of complying with them. So, it’s not surprising that studies have shown that many hospitals aren’t in compliance. For example, of the 200 random hospitals analyzed for a June JAMA report, 83 were found to be noncompliant with at least one of the rules’ major requirements. Of the 100 highest revenue hospitals analyzed, 75 were out of compliance with at least one requirement.

No More Mr. Nice Guy

One year into the new system, CMS has decided to roll out the heavy artillery to enforce it. Effective Jan. 1, the minimum civil monetary penalty (CMP) for smaller hospitals (i.e., those with a bed count of 30 or fewer) will be $300 per day; hospitals with more than 30 beds will be subject to a penalty of $10 per bed per day, up to a maximum of $5,500 per day. Result: A full calendar year of noncompliance will now cost a hospital at least $109,500 and as much as $2,007,500. The new higher penalties are expected to reverse the cost/benefit analysis in favor of compliance. In addition, the administration’s doubling down on price transparency is likely to be accompanied by more aggressive enforcement in the coming year.