CMS price transparency mandates hold greater penalties

The healthcare industry has been on a path toward transparency for many years. Leading the charge has been the federal government by way of the Centers for Medicare and Medicaid Services (CMS). With greater transparency, CMS expects that healthcare stakeholders will provide to the public more meaningful information related to quality and efficiency – both of which are paramount to a positive consumer experience. In efforts to achieve transparency, CMS has issued federal mandates for reporting, including the controversial hospital pricing transparency rule.

The first implementation of the price transparency rule was in calendar year 2019, and it stood without change through this current calendar year, 2020. It was the final rule for enhancements to the existing price transparency rule requirements that brought about the most debate. For implementation Jan. 1, 2021, CMS is requiring additional information to be reported by hospitals, and their employed providers, including payer-negotiated rates. Other requirements are also detailed to provide cash-pay rates, billing identifiers and interrelated charges for shoppable services, and calculation of minimum and maximum negotiated rates accepted by the hospital.  

It was the requirement to publish the payer-negotiated rates that was met with pushback. Hospitals consider these rates proprietary and for a multitude of reasons did not seek to comply. On behalf of hospitals, the American Hospital Association (AHA) sued CMS, arguing that they were outside of their authority to mandate the publishing of payer-negotiated rates. AHA lost the lawsuit in June 2020 when a federal judge sided with CMS and supported CMS’s efforts toward transparency. The judge indicated in his ruling that “all of the information required to be published by the Final Rule can allow patients to make pricing comparisons between hospitals.” 

AHA continues to fight on behalf of hospitals, but CMS has not wavered on its position or compliance date. All hospitals will be required to publish their standard charge file and shoppable services display or patient estimation tool online, and PPS hospitals must include median Medicare Advantage rates by negotiated payer on the Medicare cost report. 

Not meeting the requirements comes with monetary penalties, from up to $300 a day up to $109,500 per year, plus public shaming by CMS via their social media outlets and the Hospital Compare website, as well as the potential to lose Medicare payments altogether. President Trump’s recent executive order emphasized the administration’s desires to improve price transparency for the consumer and directed the Secretary of Health and Human Services to identify and report on non-compliant hospitals by the end of March 2021. 

At the onset of the price transparency final rule, issued in November 2019 by way of the Outpatient Prospective Payment System Final Rule for CY2020, many hospital executives weighed the monetary penalty against the cost of compliance, and in protecting their negotiated pricing from consumers, competitors, employers, and payers. The annual fine to larger hospitals was a cost that executives were willing to absorb. As for the public shaming, that was less discussed. And even less discussed is the harshest of potential penalties, the cessation of Medicare payments, which arose from an additional requirement from the Inpatient Prospective Payment System (IPPS) Final Rule for FY2021. Likely this is due to the voluminous pages of the rule, and the quick mention of the penalty is buried.

In the IPPS Final Rule, CMS outlines requirements for the calculation and inclusion of median rates by Medicare Severity-Diagnosis Related Group (DRG) for hospitals paid under IPPS methodologies. The rationale for this additional price transparency requirement is for CMS rate-setting purposes in future years. Under the Social Security Act (SSA), not providing information that is required for rate-setting purposes indicates non-compliance and is subject to CMS’s associated corrective actions. This can include no Medicare payments. Medicare payments can represent roughly 40% of an average individual hospital’s overall annual net revenue, with hospital net inpatient revenue reaching close to $500 billion nationally on an annual basis.

Under SSA sections 1815(a) and 1833(e), no payments will be made to a hospital that has not fulfilled their obligation to submit information requested to determine payments due to the hospital. This is a much harsher reality than a $300-a-day penalty or CMS’s public shaming. 

As hospitals are regaining volumes and revenues after the initial disruption of COVID-19, it’s the public’s trust that is also at stake. This is another consideration in the decision to comply with the federal price transparency rule. To outwardly and deliberately not comply could bring greater scrutiny from the consumers in the community where hospitals reside and claim missions and values to strive in service excellence and clinical quality.