Price Transparency: 2 of 3 Hospitals Not Complying with New CMS Disclosure Rules, Study Finds

Despite vociferous industry protest, the Centers for Medicare and Medicaid Services’ (CMS’s) controversial new hospital price transparency rule officially took effect on Jan. 1, 2021. But through mid-March, nearly 2 out of 3 hospitals aren’t actually complying with it. At least, that’s the conclusion of a study published by the journal HealthAffairs on March 16.

The Hospital Price Transparency Rule

Section 2718(e) of the Public Health Service Act, which is part of the Affordable Care Act (ACA), requires “[e]ach hospital” to make public and annually update “a list of the hospital’s standard charges for items and services provided by the hospital” (in accordance with guidelines developed by CMS. During the initial years after the ACA took effect, hospitals complied with this requirement by publishing their chargemasters in accordance with CMS guidance.

After initially going along with this approach, CMS became “concerned” that chargemasters “are not helpful to patients for determining what they are likely to pay for a particular service or hospital stay.” As the agency pointed out, chargemaster rates tend to be “highly inflated” and “bear little relationship to market rates” because they list non-discounted, fee-for-service prices. And without meaningful price information, consumers would not be able to make informed price decisions and exert downward pressure on health care costs the way the ACA envisioned.

So, in August 2019, CMS adopted a new policy by issuing a notice of proposed rulemaking dramatically expanding the amount of information that hospitals would have to make public under Section 2718(e). In November 2019, CMS published the final rule, aka, “Price Transparency Requirements for Hospitals to Make Standard Charges Public” requiring hospitals to make public “a machine-readable file containing a list of all standard charges for all items and services.” The rule defined “standard charges” as including:

• Gross charges, or the non-discounted rate, as reflected in a hospital’s chargemaster;
• Discounted cash prices, or the rate the hospital would charge individuals who pay cash;
• Payer-specific negotiated charges, or the rate the hospital negotiated with an insurer or other third-party payor (for example, an insurer) for a particular item or service provided in the hospital;
• De-identified minimum negotiated rates, or the lowest rates that a hospital negotiated with all third-party payors, without identifying those payors; and
• De-identified maximum negotiated rates, or the highest rates that a hospital negotiated with all third-party payors, without identifying the payors.

Hospitals that fail to comply face civil penalties of up to $300 per hospital per day or $109,500 per year. CMS has also reserved the right to re-visit and increase the civil penalty amounts.

The Hospital Industry Pushes Back

To say that the final rule didn’t go over well with the hospital industry would be a bit of an understatement. In addition to imposing onerous new administrative burdens, hospitals complained that the final rule would force them to disclose important proprietary information and potentially endanger their relationships with patients. The final rule was originally slated to take effect on 2020 but CMS pushed back the start date by one year to Jan. 1, 2021.

The American Hospital Association (AHA) challenged the law in federal court and appealed to the U.S. Court of Appeals for the District of Columbia Circuit after the district court ruled against them. But the appeal failed when the D.C. Appeals Court affirmed the lower court’s decision in December 2020, paving the way for the rule to take effect on Jan. 1, 2021 even though the industry insisted hospitals needed more time to get their price disclosure systems up and running.

The Price Transparency Compliance Study

Given the relatively low penalties and hospitals’ protests about not being ready, it makes a lot of sense to determine whether the price transparency rule is actually being followed. To answer that question, the authors of the HealthAffairs study compiled the price transparency files of the 100 largest hospitals in the U.S. by bed count over the period from late January 2021 through early February 2021. Using Google to search for the hospitals’ standard charges, the authors downloaded and saved the data files using the name of each file as posted. The authors then opened each individual data file and checked:

• Whether the data set contained all the variables necessary to be compliant; and
• Whether these variables complied with all necessary requirements: For example, payer-specific negotiated charges needed to “be clearly associated with the name of the third-party payor and plan.”

If files did not contain required variables, or cover all items and services, the hospitals were recorded as being unambiguously noncompliant. To err on the side of caution, hospitals didn’t get the unambiguously noncompliant label if there was any question or case to be made showing that the hospital was in compliance.

The Study Findings

Of the 100 hospitals in the sample, 65 were labeled unambiguously noncompliant. Among these 65:

• 12, or 18 percent, didn’t post any files or provided links to searchable databases that weren’t downloadable; and
• 53, or 82 percent, either didn’t include the payor-specific negotiated rates with the name of the payor and plan clearly associated with the charges or were noncompliant in some other way.

Of the remaining 35 hospitals that didn’t get the unambiguously noncompliant label, at least 22 appeared to be compliant, and 13 hospitals clearly exceeded the regulations in terms of the amount of information disclosed. Examples:

• The file for Massachusetts General Hospital contained 3,669,193 observations covering more than 65,000 items and services for 19 payors and 54 plans (with 54 unique payor-plan-contract combinations), as well as data on inpatient and outpatient contracting details; and
• The file for Riverside Methodist Hospital of Ohio contained data for more than 120 payor-plan combinations covering more than 98,000 items and services (inpatient, outpatient, pharmacy, professional and supplies).

Takeaway

There are some important caveats to keep in mind. First and foremost, we are still very, very early into the new transparency regime. These initial returns reflect not defiance but administrative and technology challenges that confirm industry contentions that hospitals simply weren’t yet set up to comply with the rule by the Jan. 1 start date.

 The other reason for not making too much about the study, which the authors readily acknowledge, are the challenges to assessing compliance. Thus, for example, the authors noted the difficulties in ascertaining whether the files contained “all items and services, including individual items and services and service packages, that could be provided by a hospital to a patient in connection with an impatient admission or an outpatient department visit for which the hospital has established a standard charge.” The researchers also stated that it was also difficult to ascertain if a hospital’s file contains payor-specific negotiated charges for all payors and plans.