Hospital Labs: CMS Pushes Forward with Controversial Price Transparency Rules

Brushing aside the intense objections and negative feedback, CMS pressed forward with price transparency by including as part of the 2020 Outpatient Prospective Payment System final rules the requirement that hospitals disclose to the public their standard charges public, including their negotiated rates with payers. Hospitals lost no time pushing back by filing a lawsuit challenging the rule on First Amendment grounds and asking a federal court to block its enforcement.

The Price Transparency Controversy

The controversy began with an executive order issued by the President to advance the Trump Administration policy of compelling providers to make their prices transparent in advance so that consumers can make financially informed decisions about their care. CMS’s response to the order was a July 2019 proposed rule requiring hospitals to post gross charges, i.e., list prices, to the hospital’s negotiated price by specific payer and plan for a set of “shoppable” services, starting on Jan. 1, 2020. Such services included anything that could be scheduled by a patient in advance. (For more on the proposal, see National Intelligence Report (NIR) Sept. 30, 2019.) After pushback from both providers and payors, CMS decided to take the Jan. 1, 2020 active date off the table in early November.

But now CMS has decided to move forward with the rules, effective Jan. 1, 2021, thus granting hospitals a one-year reprieve. Specifically, CMS wants hospitals to provide patients with clear, accessible information about their standard charges for the services. In addition to empowering consumers to comparison shop, the idea is to protect against surprise billing. and compare across hospitals, as well as mitigating surprises.

The Final Rule

In a nutshell, the final rule requires hospitals to disclose negotiated rates and provide patients with accessible information about standard charges. This includes making all standard charges available in a single data file that can be read by other computer systems. Hospitals must also make information about “shoppable services”, procedures which can be scheduled by patients in advance, available in a “prominent location online” and describe the information in plain language. More specifically, the final rule will require hospitals to make their standard charges public in two ways, beginning in 2021:

1. Comprehensive Machine-Readable File

Hospitals must make public all hospital standard charges (including the gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges) for all items and services on the internet in a single data file that can be read by other computer systems. The file must include additional information such as common billing or accounting codes used by the hospital, such as Healthcare Common Procedure Coding System (HCPCS) codes and a description of the item or service to provide common elements for consumers to compare standard charges from hospital to hospital.

2. Consumer-Friendly Display of Shoppable Services

 Hospitals must also make public payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient for an item or service, and the minimum and maximum negotiated charges for 300 common shoppable services in a manner that is consumer-friendly and update the information at least annually. Shoppable services are services that can be scheduled by a healthcare consumer in advance such as X-rays, outpatient visits, imaging and laboratory tests or bundled services like a cesarean delivery, including pre- and post-delivery care. In addition:

• The information must be made public in a prominent location online;
• The information must easily accessible, without barriers and searchable;
• Item and service descriptions must be in “plain language”; and
• Shoppable service charges must be displayed and grouped with charges for any ancillary services the hospital customarily provides with the primary shoppable service.

To ensure that hospitals comply with the requirements, the final rule provides CMS with new enforcement tools including monitoring and auditing as well as the authority to impose corrective action plans and civil monetary penalties of $300 per day.

Proposed Rules for Payers

To cover its flank, the agency also included a proposed rule requiring health plans to disclose on a public website their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers. The Transparency in Coverage proposed rule requires employer-based group health plans and health insurance issuers offering group and individual coverage to disclose price and cost-sharing information to participants, beneficiaries, and enrollees up front. If finalized, the proposed rule would require health plans to:

• Give consumers real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability for all covered healthcare items and services;
• Provide that access via an online tool (as well as in paper form, if consumers request it) available to all members of group health plans; and
• Disclose on a public website their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers.

The proposed rule would also encourage health insurance issuers to offer new or different plan designs that incentivize consumers to shop for services from lower-cost, higher-value providers by allowing issuers to take credit for “shared savings” payments in their medical loss ratio calculations.

The Industry Strikes Back

Payer and provider stakeholders responded to the final and proposed rules with a chorus of boos and promises of litigation. In a joint statement, the American Hospital Association, Association of American Medical Colleges, Children’s Hospital Association, and Federation of American Hospitals called the proposed rule “a setback in efforts to provide patients with the most relevant information they need to make informed decisions about their care.” On Dec. 4, the organizations joined with member hospitals to file a lawsuit claiming that mandatory price disclosure will confuse patients, thwart competition and innovation, violate their First Amendment rights and exceed the Administration’s authority.

Impact on Labs
In addition to imposing new administrative burdens and restrictions on what hospital and other labs can charge, providers cite concerns about mandatory pricing disclosure’s unforeseen adverse impact on patient relations and expectations.

1. Damage Due to Disconnect between Quoted & Actual Charges

Standard charges are based on customary care and don’t take into account emergency or acute situations. In other words, standard pricing assumes a best-case scenario which doesn’t always prove to be realistic. This puts labs in a ticklish position when actual patient charges end up being higher than the previously quoted prices. The potential result is damage to not only customer relations but the trust on which the patient relationship is based. 

2. Demand for Medicare Payment Information

The standard charges referred to in the CMS proposal are provider charges only. They don’t take into account what Medicare pays for the service. But if providers begin disclosing this information, patients may also expect and insist on receiving Medicare payment information as well.