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November 15, 2022

Investigation of Hospitals Hiding Prices from Patients

Written by Joanne Byron, BS, LPN, CCA, CHA, CHCO, CHBS, CHCM, CIFHA, CMDP, COCAS, CORCM, OHCC, ICDCT-CM/PCS

The Federal Hospital Price Transparency Rule helps Americans know the cost of a hospital item or service before receiving it.  Compliance is mandatory.  The regulation aims to improve the affordability of hospital care by promoting price competition. However, a low compliance level among hospitals would compromise the operational effectiveness of this regulation. Understanding hospitals’ compliance status to the regulation has important implications for its enforcement effort and effectiveness assessment.

Noncompliance with the Hospital Price Transparency Rule

The Hospital Price Transparency Final Rule (“the final rule”) was published in November 2019 and went into effect on January 2021.  The Centers for Medicare & Medicaid Services (CMS) is the federal agency responsible for enforcement and has been working with the American Hospital Association (AHA) to comply with challenges related to compliance.  The government expects hospitals to be compliant as there has been ample time to prepare for its implementation and to comply with the requirements.

The House Committee on Energy and Commerce is calling on the government watchdog, the Government Accountability Office (GAO), to investigate how well hospitals are complying with price transparency rules in addition to evaluating how CMS is monitoring and enforcing hospital compliance.   

So, exactly what is this all about? 

In the US, hospital prices vary widely but are not visible to patients or the public. In 2019, the federal government finalized a rule requiring hospitals to disclose the prices they negotiate with insurers.  The Hospital Price Transparency Final Rule requires hospitals to make public a machine-readable file containing a list of all the standard charges for all items and services, and to display charges for the hospital’s 300 most shoppable services in a consumer-friendly format.

Under the final rule, hospitals are required to make public the gross charges, the discount cash price, the

payer-specific negotiated charges, and the de-identified minimum and maximum negotiated charges for all items and services.

Consequences of Noncompliance?

For hospitals found to be noncompliant, the Department of Health and Human Services will issue a written warning notice or request a corrective action plan (CAP) if noncompliance constitutes a material violation of one or more requirements of the final rule. If the non-compliance is still not resolved, hospitals will face a civil monetary penalty (CMP).

In November 2021, CMS finalized the 2022 Medicare Outpatient Hospital Prospective Payment Rule which increased CMPs for hospital noncompliance from a maximum of $109,500 per year to a sliding scale of up to $2 million per year for larger hospitals.

As of January 2022, CMS has issued over 300 warning letters and 98 requests for CAP for hospitals deemed to be non-compliant. In June 2022, CMS issued CMP notices to two hospitals for failure to comply with the final rule.

How is the Government Monitoring for Noncompliance?

On January 1, 2021, CMS began proactive audits of hospitals for compliance with the final rule and a review of complaints submitted via the hospital price transparency website.  Since January, 2021, articles and studies have revealed the lack of compliance, bringing this issue to the attention of Congress.  The government is concerned with continued press releases and studies revealing high rates of hospital noncompliance with the final rule.  Just a few published press releases are cited below.

The Wall Street Journal’s article Hospitals Still Not Fully Complying with Federal Price-Disclosure Rules, reported in December, 2021, that some of the biggest hospitals have failed to comply with the final rule. A study by the Johns Hopkins Bloomberg School of Public Health found that more than half—55 percent—of hospitals were non-compliant with the final rule in Study Estimates That More than Half of U.S. Hospitals Not in Compliance with New Pricing Disclosure Rules in First Five Months.

Another report issued by the Patient Rights Advocate found that only 14 percent of hospitals were fully compliant with all of the provisions of the final rule as stated in their Semi-Annual Hospital Price Transparency Compliance Report published in February, 2022.  Additionally:

  • Over half of the approximately 40 percent of hospitals that posted negotiated rates were non-compliant with other provisions of the final rule including failure to post the payer specific negotiated rates.


  • 20 percent of hospitals did not allow consumers to see discounted cash price, which is in clear violation of the final rule. This follows a series of other reports documenting hospitals’ slow compliance with the requirements of the final rule, and some hospitals’ complete lack of compliance.

Until there is a higher compliance rate, the government will continue auditing and monitoring for hospitals failing to comply.


Where Can We Obtain More Information to Comply?

This article provides a summary of the basic rule and references Public Disclosure Requirements under the rule with helpful hyperlinks to the Federal Register.

Each hospital location operating under a single hospital license (or approval) that has a different set of standard charges than the other location(s) operating under the same hospital license (or approval) must separately make public the standard charges applicable to that location.

The hospital must ensure that the standard charge information is easily accessible, without barriers, including but not limited to ensuring the information is accessible:

  • Free of charge;
  • Without having to establish a user account or password; and
  • Without having to submit personal identifying information (PII).

The digital file and standard charge information contained in that file must be digitally searchable.

Standard charges must be posted two ways (both are required): 

1.    Machine Readable File

45 CFR §180.50

A hospital must include a single machine-readable digital file containing the following standard charges for all items and services provided by the hospital: gross charges, discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges.

  • Gross charge means the charge for an individual item or service that is reflected on a hospital's chargemaster, absent any discounts.
  • Discounted cash price means the charge that applies to an individual who pays cash (or cash equivalent) for a hospital item or service.
  • Payer-specific negotiated charge means the charge that a hospital has negotiated with a third-party payer for an item or service.
  • De-identified maximum negotiated charge means the highest charge that a hospital has negotiated with all third-party payers for an item or service.

2.    Consumer-friendly Display of Shoppable Services

45 CFR §180.60

A hospital must display of at least 300 “shoppable services” (or as many as the hospital provides if less than 300) that a health care consumer can schedule in advance. A hospital must contain plain language descriptions of the services and group them with ancillary services, and provide the discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges.

  • Discounted cash price means the charge that applies to an individual who pays cash (or cash equivalent) for a hospital item or service.
  • Payer-specific negotiated charge means the charge that a hospital has negotiated with a third-party payer for an item or service.
  • De-identified maximum negotiated charge means the highest charge that a hospital has negotiated with all third-party payers for an item or service.
  • De-identified minimum negotiated charge means the lowest charge that a hospital has negotiated with all third-party payers for an item or service.

A hospital is deemed by CMS to meet the requirements when the hospital maintains an internet-based price estimator tool which meets the following requirements:

  • Provides estimates for as many of the 70 CMS-specified shoppable services that are provided by the hospital, and as many additional hospital-selected shoppable services as is necessary for a combined total of at least 300 shoppable services.
  • Allows healthcare consumers to, at the time they use the tool, obtain an estimate of the amount they will be obligated to pay the hospital for the shoppable service.
  • Is prominently displayed on the hospital's website and accessible to the public without charge and without having to register or establish a user account or password.

Resources

For additional details on monitoring and enforcement refer to:

CMS Resource Page citing Regulations, Hospital Price Transparency Sample Formats, FAQ, Quick Reference checklist and more: https://www.cms.gov/hospital-price-transparency/resources

2019 Federal Register: Medicare and Medicaid Programs: CY 2020 Hospital Outpatient PPS Policy Changes and Payment Rates and Ambulatory Surgical Center Payment System Policy Changes and Payment Rates. Price Transparency Requirements for Hospitals to Make Standard Charges Public

https://www.federalregister.gov/documents/2019/11/27/2019-24931/medicare-and-medicaid-programs-cy-2020-hospital-outpatient-pps-policy-changes-and-payment-rates-and#h-84

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