The Centers for Medicare & Medicaid Services (CMS or the Agency) recently finalized burdensome new requirements for hospitals to disclose the payment rates they have negotiated with third-party payors. CMS asserts that it has the authority to impose these requirements under a provision of the Patient Protection and Affordable Care Act, although that statute only requires disclosure of hospitals’ “standard charges.”1 Previously, CMS had encouraged hospitals to simply post their chargemasters online. The newly issued requirements, however, are much more onerous, requiring hospitals to publish multiple pricing lists, including not only their standard charges, but also negotiated rates with third-party payors. Hospitals must comply with the new rules starting January 1, 2021. Given the complexity of the rule and the volume of data it requires, and the Agency’s ability to impose corrective action plans and civil monetary penalties for violations, hospitals would be well advised to begin developing this data as soon as possible and to actively engage with the Agency, which is likely to issue additional sub-regulatory guidance over the next year.2
As part of the Patient Protection and Affordable Care Act, Congress enacted Section 2718(e) of the Public Health Service Act, which requires that:
- Each hospital operating within the United States shall for each year establish (and update) and make public . . . a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.3
Under the terms of the statute, CMS is to develop guidelines governing the manner in which a hospital makes its standard charges public.
CMS has done so incrementally, first stating in the fiscal year (FY) 2015 inpatient prospective payment system (IPPS) final rule that hospitals can comply by making public either “a list of the standard charges (whether that be the chargemaster itself or in another form of their choice)” or “their policies for allowing the public to view a list of those charges in response to an inquiry.”4 Then, in the FY 2019 IPPS final rule, CMS required “that hospitals’ list of standard charges be made available to the public via the internet in a machine readable format and that hospitals update this information at least annually, or more often as appropriate.”5
On June 24, 2019, President Trump issued an executive order directing CMS to propose a regulation:
- [T]o require hospitals to publicly post standard charge information, including charges and information based on negotiated rates and for common or shoppable items and services, in an easy-to-understand, consumer-friendly, and machine-readable format using consensus-based data standards that will meaningfully inform patients’ decision making and allow patients to compare prices across hospitals. The regulation should require the posting of standard charge information for services, supplies, or fees billed by the hospital or provided by employees of the hospital. The regulation should also require hospitals to regularly update the posted information and establish a monitoring mechanism for the Secretary to ensure compliance with the posting requirement, as needed.6
New Rulemaking in Effect January 1, 2021
In response, CMS proposed7 and then finalized8 new price transparency rules. Originally, CMS estimated that it would take just 12 hours for a hospital to comply with these new rules the first year.9 The Agency has since substantially revised its estimate of the compliance burden upward to 150 hours,10 an increase that likely led to the Agency’s decision to defer the effective date of the rule to January 1, 2021.11 (The proposed rule had not specified an effective date, and many commenters expressed concerns that the Agency would expect compliance by the beginning of 2020.) Even the Agency’s revised estimate, however, likely understates the actual burden that hospitals will face.
Under the new rule, all state-licensed hospitals12 (with minimal exception)13 must publish information with regard to all individual items and services, or service packages,14 that could be provided by a hospital to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a standard charge.15 Hospitals will also have to include items and services furnished by physicians and nonphysician practitioners employed by the hospital.16 Other practitioners who are not employed by the hospital, such as an anesthesiologist who performs services at a hospital but who practices independently, would not be included.17
Moreover, CMS has significantly expanded upon the statutory term “standard charges,” which is now redefined to mean both “gross charges” (charges listed by the hospital on its chargemaster) and “payer-specific negotiated charges” (charges that a hospital has negotiated with a third-party payor for an item or service).18 According to the Agency, disclosure of the latter “can help individuals with high deductible health plans (HDHPs) or those with co-insurance determine the portion of the negotiated charge for which they will be responsible for out-of-pocket.”19 Furthermore, these disclosures, according to the Agency “will increase competition throughout the market and address healthcare costs.”20 CMS acknowledges that “many contracts between third party payers and hospitals contain so-called ‘gag clauses’ that prohibit hospitals from disclosing the rates they have negotiated with third party payers.”21
Puzzlingly, however, the Agency does not concede that posting payor-specific data will require hospitals to renegotiate contracts, a burdensome undertaking and one without guarantee that the end result — the ability to publish data as required by CMS — will be a term to which a third-party payor accedes. CMS reasons instead that payor-specific data is not proprietary and is “already generally disclosed to the public in a variety of ways,” including state-level databases and patient explanation of benefits forms.22 In any event, hospitals should begin these discussions with their payors now to meet the Agency’s implementation deadline of January 1, 2021.
Hospitals will be required to publish their price information in two formats. First, hospitals must publish a comprehensive machine-readable file with all of the standard charges for those items and services, as defined by the regulation.23 This must be in a specified format and include:24
- A description of the item or service, including individual items and services, and service packages;
- The gross charge for the item as reflected on the chargemaster, without discounts;25
- Any payor-specific negotiated charges26 for the item identifying by name the third-party payor and plan;
- The de-identified minimum and maximum negotiated charge with all third-party payors;27
- The discounted cash price (the charge that applies for a self-pay patient);28 and
- Any accounting or billing codes used by the hospital, such as HCPCS codes, DRG codes, or other common payor identifiers.
CMS recently provided a sample display of gross charges as part of a December 2019 webinar.29
“Machine-readable” files include, but are not limited to, .XML, .JSON, and .CSV.30 CMS will not permit .PDF files.31 Hospitals may choose the internet location on which it posts this file, so long as the file is “publicly-available” and the file is “displayed prominently and clearly identifies the hospital locations with which the standard charges information is associated.”32 Hospitals may not charge for accessing the price data, cannot require a user account or password, and may not ask for submission of personally identifying information.33 Finally, hospitals must make the list searchable, use a CMS-specified file naming convention and update the file at least annually.34 These requirements apply to each separate hospital location.35
Second, hospitals must publish a consumer-friendly display of payor-specific negotiated charges for certain common “shoppable” services, which CMS defines to mean “a service that can be scheduled by a healthcare consumer in advance.”36 Where typically accompanied by ancillary services, “the hospital must present the shoppable service as a grouping of related services.”37 Ancillary services include things like laboratory, radiology, drugs, delivery room, operating room, therapy services, hospital fees, room and board charges, and charges for employed professional services.38
Hospitals should include on display as many of the 70 shoppable services identified by CMS as the hospital provides, and at least 300 in total (presuming a hospital provides that many).39 When selecting its list for display, “a hospital must consider the rate at which it provides and bills for that shoppable service,” i.e., include on the list its commonly provided services.40 Similar to the above, hospitals must include:41
- A plain-language description of each shoppable service;
- An indicator when one or more of the 70 CMS-specified shoppable services is not offered;
- The payor-specific negotiated charge, clearly associated with the name of the third-party payor and plan;
- The discounted cash price;
- The de-identified minimum and maximum negotiated charge for each service (and corresponding ancillary service, as applicable);
- The location at which the shoppable service is provided; and
- The primary billing code.
A hospital may meet the requirements of the new regulation, 45 C.F.R. § 180.60, if the hospital has an online price estimator tool, if that tool provides estimates for a total of 300 shoppable services, including as many of the 70 CMS-specified shoppable services that the hospital provides; the tool allows consumers to provide an estimated price obligation; and the tool is prominently displayed on the hospital’s website for free and without registration.42 Also similar to the above, the shoppable list, if not using a price estimator tool, must be free, accessible without registration or submission of personally identifiable information, searchable, and updated at least annually.43 A hospital otherwise has discretion as to the formatting of the price estimator tool.44 CMS recently provided a sample display of shoppable services as part of a December 2019 webinar.45
New Enforcement Powers
CMS plans to rely on “complaints made by individuals or entities, or individuals’ or entities’ analysis of noncompliance as the basis for being notified about inaccuracies in the information made public by hospitals.”46 CMS may also conduct an audit of hospitals’ websites.47 These alerts would then trigger an investigation by the Agency, which in turn could result in an enforcement action.48
Upon a finding of noncompliance, CMS may provide a written warning, request a corrective action plan, and/or impose a civil monetary penalty.49 A corrective action plan may be used if a hospital has a “material violation” of certain requirements, including failing to make its standard charges public or in the form and matter CMS requires.50 In turn, a failure to respond to the Agency’s request to submit a corrective action plan or comply with the requirements of such plan can result in the imposition of civil monetary penalties.51 A civil monetary penalty can be imposed for each violation of 45 C.F.R. part 180, with a maximum daily dollar amount of $300.52
Stakeholders have expressed concern that price publication will drive healthcare prices up, result in anti-competitive behavior and expose hospitals to litigation risk for making potentially proprietary third-party payor pricing information public.53 They have also expressed concern that patients would seek out the cheapest care, rather than the most effective or best quality, and may not fully understand the cost of care or how out-of-pocket costs like co-insurance or deductibles relate to the published pricing data.54
Despite these concerns, hospitals cannot avoid the looming January 1, 2021 deadline, and need to begin making preparations now to meet the burdensome new requirements. As detailed above, providers face a number of time-consuming contractual, logistical, and technical challenges to meet the Agency’s obligations. Hospitals should also be on the lookout for continued sub-regulatory guidance over the next year as the Agency clarifies certain requirements. Finally, although several hospital groups have filed a challenge to the price transparency rule in federal court,55 such litigation takes time to work its way through the courts and likely will not be fully concluded by January 1, 2021. As such, hospitals should expect to be held to account by the implementation deadline.
- See 84 Fed. Reg. 65524, 65525 (Nov. 27, 2019); Patient Protection and Affordable Care Act, Pub. L. No. 111-148, § 1001, 124 Stat. 119, 887 (2010).
- For example, CMS has already presented a webinar on its new price transparency rules. See Transcript, available at https://www.cms.gov/files/document/transcript-hospital-price-transparency-final-rule-call. See also Presentation, available at https://www.cms.gov/files/document/2019-12-03-hospital-presentation.
- 42 U.S.C. § 300gg-18(e) (emphasis added).
- 79 Fed. Reg. 49854, 50146 (Aug. 22, 2014).
- 83 Fed. Reg. 41114, 41686 (Aug. 17, 2018).
- “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First,” available at https://www.whitehouse.gov/presidential-actions/executive-order-improving-price-quality-transparency-american-healthcare-put-patients-first/.
- 84 Fed. Reg. 39398, 39571-94 (Aug. 9, 2019).
- 84 Fed. Reg. at 655244–606.
- 84 Fed. Reg. at 39630.
- 84 Fed. Reg. at 65525.
- The proposed rule was not clear on its effective date, and many commenters expressed concern about potentially having to comply by January 1, 2020, the typical effective date of the Outpatient Prospective Payment System rulemaking of which it was a part. 84 Fed. Reg. at 65585.
- 84 Fed. Reg. at 65532, codified at 45 C.F.R. § 180.20.
- Exceptions include federally owned hospital facilities and hospitals operated by an Indian Health Program. 84 Fed. Reg. at 65533, codified at 45 C.F.R § 180.30(b).
- A service package is “an aggregation of individual items and services into a single service with a single charge.” 84 Fed. Reg. at 65603, codified at 45 C.F.R. § 180.20.
- 84 Fed. Reg. at 65537-37, codified at 45 C.F.R. § 180.20.
- 84 Fed. Reg. at 65534.
- 84 Fed. Reg. at 65540, codified at 45 C.F.R. § 180.20.
- 84 Fed. Reg. at 65528.
- 84 Fed. Reg. at 65542.
- 84 Fed. Reg. at 65544.
- 84 Fed. Reg. at 65560, codified at 45 C.F.R. § 180.50(b).
- 84 Fed. Reg. at 65541, codified at 45 C.F.R. § 180.20.
- 84 Fed. Reg. at 65551, codified at 45 C.F.R. § 180.20.
- 84 Fed. Reg. at 65555, codified at 45 C.F.R. § 180.20
- 84 Fed. Reg. at 65553, codified at 45 C.F.R. § 180.20.
- Slide 11, available at https://www.cms.gov/files/document/2019-12-03-hospital-presentation.
- 84 Fed. Reg. at 65561, codified at 45 C.F.R. §§ 180.50(c), 180.20.
- 84 Fed. Reg. at 65561. The Agency will not accept a .PDF file “because the data contained within the PDF file cannot be easily extracted without further processing or formatting.” Id.
- 84 Fed. Reg. at 65563, codified at 45 C.F.R. §§ 180.50(d)(1)–(2).
- 84 Fed. Reg. at 65563, codified at 45 C.F.R. § 180.50(d)(3).
- 84 Fed. Reg. at 65563, codified at 45 C.F.R. §§ 180.50(d)(4), (d)(5), 180.50(e).
- 84 Fed. Reg. at 65564, codified at 45 C.F.R. § 180.50(a)(2).
- 84 Fed. Reg. at 65568, codified at 45 C.F.R. § 180.20.
- 84 Fed. Reg. at 65568.
- 84 Fed. Reg. at 65571, codified at 45 C.F.R. § 180.60(a); the full list of 70 shoppable services is at 84 Fed. Reg. at 65571–72.
- 84 Fed. Reg. at 65571, codified at 45 C.F.R. § 180.60(a).
- 84 Fed. Reg. at 65576, codified at 45 C.F.R. § 180.60(b).
- 84 Fed. Reg. at 65579, codified at 45 C.F.R. § 180.60(a)(2).
- 84 Fed. Reg. at 65581, codified at 45 C.F.R. § 180.60(d), (e).
- 84 Fed. Reg. at 65579, codified at 45 C.F.R. § 180.60(c).
- Slide 15, available at https://www.cms.gov/files/document/2019-12-03-hospital-presentation.
- 84 Fed. Reg. at 65583–84, codified at 45 C.F.R. § 180.70(a)(2).
- 84 Fed. Reg. at 65586, codified at 45 C.F.R. § 180.70(b).
- 84 Fed. Reg. at 65586, codified at 45 C.F.R. § 180.70.
- 84 Fed. Reg. at 65589, codified at 45 C.F.R. § 180.90(a).
- 84 Fed. Reg. at 65589, codified at 45 C.F.R. § 180.90(c).
- 84 Fed. Reg. at 65547, 65599.
- 84 Fed. Reg. at 65547.
- See American Hosp. Assoc. v. Azar, D.D.C., No. 1:19-cv-03619, complaint filed Dec. 4, 2019.
About the Authors
Joel McElvain is a partner in King & Spalding’s healthcare industry practice group in Washington, D.C. Before joining King & Spalding, Mr. McElvain served as an Assistant Director in the Civil Division of the Department of Justice, where he oversaw the government’s defense of litigation involving Medicare and other federal health programs. He may be reached at [email protected].
Elizabeth Swayne is an associate in King & Spalding’s healthcare industry practice group, also in Washington, D.C. Ms. Swayne’s practice consists of providing strategic payment and compliance advice to healthcare providers participating in Medicare, Medicaid and commercial insurance plans, as well as representing providers in litigation matters. She may be reached at [email protected]