The Future of Hospital Price Transparency

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On July 31, 2023, the Centers for Medicare and Medicaid Services (CMS) published proposed amendments to its hospital price transparency regulations in the CY2024 Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center (OPPS/ASC) Proposed Rule. If finalized, the proposed amendments will supplement and standardize hospital price transparency obligations, enhance CMS enforcement capabilities with respect to hospital noncompliance, and facilitate the release of information related to hospital monitoring and assessment activity conducted by CMS.

While CMS has conducted limited enforcement of hospital price transparency rules to date, the proposed rulemaking demonstrates that hospital price transparency remains a CMS priority. Accordingly, as CMS continues to refine price transparency requirements and strengthen its oversight capabilities, hospitals must be conscious of the various means of noncompliance that may trigger liability in preparation for an era of stricter rules and increased scrutiny and enforcement.

The Evolution of Hospital Price Transparency Requirements

While there has been a flurry of hospital price transparency regulatory activity over the last several years, the federal statutory authority that forms the basis for the current hospital price transparency rules was set forth more than thirteen years ago in the Affordable Care Act (ACA). The ACA’s hospital price transparency requirement is simple: it requires each US hospital to publicize a list of the hospital’s standard charges.This simplicity, however, created a considerable amount of confusion when the ACA was enacted regarding what exactly a hospital needed to do to comply, given the complexities associated with hospital pricing.

In an effort to address at least some of this uncertainty, in 2014, CMS stated that hospitals could comply with the ACA requirement by publicizing annually either: (1) a list of the hospital’s standard charges or (2) the hospital’s policy for allowing the public to view its standard charges.Four years later, CMS amended its initial guidance to require hospitals to make their standard charges available via the internet in a machine-readable format.

These directives, however, did little to create meaningful parameters surrounding compliance. Accordingly, in 2019, CMS promulgated its first set of final hospital price transparency regulations.Effective January 1, 2021, these regulations obligate hospitals to make public both: (a) a machine-readable file (also known as an MRF) containing a list of all standard charges for all items and services; and (b) a consumer-friendly list of standard charges for a limited set of shoppable services (i.e., services that can be scheduled by a healthcare consumer in advance), though a hospital can satisfy this latter obligation via the maintenance of an internet-based price estimator tool. The regulations further define what “items and services” are covered by hospital price transparency regulations and specify what “standard charges” hospitals must disclose (i.e., gross charges, discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges).

After CMS issued its first set of hospital price transparency regulations, the American Hospital Association (AHA) and various other associations and hospitals brought an action to vacate CMS’s regulations based on arguments that CMS’ interpretation of “standard charges” violated the ACA, the Administrative Procedure Act, and the First Amendment.However, both the US District Court for the District of Columbia and the US Court of the Appeals for the DC Circuit ultimately rejected AHA’s arguments, holding that the ACA permitted CMS’s interpretation of “standard charges” and the requirement that hospitals disclose negotiated rates.

CMS Monitoring and Enforcement Activity

CMS’s hospital price transparency regulations provide that CMS monitors hospital compliance by: (1) evaluating public complaints, (2) reviewing third-party compliance analyses, and (3) conducting audits.In cases of identified noncompliance, the regulations provide that CMS may issue written warning notices, request corrective action plans (CAPs), or impose civil monetary penalties (CMPs).

When CMS first issued its hospital price transparency regulations, CMS capped CMPs associated with noncompliance at $300/day for even the largest hospitals. However, when CMS conducted its initial hospital compliance audits in early 2021, it determined that over 70% of audited hospitals were noncompliant. Accordingly, effective January 1, 2022, CMS amended its hospital price transparency regulations in part to significantly increase the potential CMPs associated with noncompliance according to a sliding scale based on hospital bed count.As a consequence of the amendments, the maximum annual CMP for noncompliance is more than $2 million for the largest U.S. hospitals.

Recent CMS statements indicate that CMS is conducting more than 200 comprehensive hospital compliance reviews per month, and as of June 27, 2023, CMS had sent more than 906 warning notices and 371 requests for CAPs to hospitals.To date, CMS has issued seven CMP notices to hospitals due to alleged price transparency noncompliance totaling approximately $2.3 million.

Proposed Amendements to Hospital Price Transparency Regulations

In the CY2024 OPPS/ASC Proposed Rule, CMS proposed several significant amendments to hospital price transparency requirements. These include:

1. New machine-readable file requirements. With respect to MRFs, the proposed amendments would require hospitals to: affirm the accuracy and completeness of displayed standard charges, use a CMS template and adhere to CMS formatting standards, display additional data elements (including the type of contracting method used to establish standard charges, and whether standard charges are based on percentages or algorithms), and ensure automated access to MRFs.
2. Enhanced CMS enforcement. The proposed amendments would strengthen CMS’s enforcement capabilities by authorizing CMS to compel hospitals to: submit a statement from an authorized hospital official certifying the accuracy and completeness of standard charge information in the MRF, submit additional necessary documentation to CMS as necessary for CMS to adequately assess compliance, and acknowledge receipt of warning notices. The amendments also would expressly reserve CMS’s right to notify health system leadership of individual hospital noncompliance and publicize information related to such notifications.
3. Release of CMS monitoring and assessment activity. The proposed amendments would permit CMS to publicize on its website information related to its assessments of a hospital’s compliance, any compliance actions taken against a hospital, the status of such compliance actions, and the outcome of such compliance actions.

The proposed regulations reflect a stricter approach to hospital compliance on the part of CMS. If finalized, the amendments would restrict hospital flexibility with regard to compliance with MRF requirements, obligate hospitals to include additional information and data elements in MRFs, and require hospitals and authorized hospital officials to affirm and certify the accuracy and completeness of MRF data and information. The proposed regulations further build on actions undertaken by CMS earlier this year to streamline hospital price transparency enforcement.

CMS’ initial assessments in 2021 focused on whether a hospital had posted any MRF, a consumer-friendly list of shoppable services, or price estimator tool, but these assessments did not review aspects of regulatory requirements that required validation or clarification from the hospital (e.g., when a hospital specified “NA” for the contract rate for a certain payer or procedure in an MRF). However, beginning in 2022, CMS began conducting comprehensive compliance reviews. These reviews are more substantial than assessments and peer into the completeness of a MRF and the integrity of the data contained therein.As CMS’ enforcement processes mature, hospitals should continue to expect increased scrutiny of their compliance efforts with respect to hospital price transparency requirements.

New Requirements Should Improve Data Quality and Usability

Apart from enforcement considerations, CMS’s proposed regulations, if finalized, will also likely improve the accuracy and usability of published hospital price transparency data. There is currently widespread variation in the data reported in MRFs. For example, one hospital may list a contract rate for “United Healthcare HMO” while another hospital may list its contract rate for the same plan and product as “UHC HMO.” Another may include the rate that applies to both the HMO and PPO products on one line that says, “United HMO and PPO.”

It is clear that CMS has proposed the amended MRF regulations to remedy many of the issues driving these variations and to make MRFs easier to navigate and compare. The use of a CMS-issued MRF template, which is central to the regulations, should mitigate (if not eventually eliminate) many of the variations identified. Other requirements, such as reporting data elements in a standardized format, providing descriptions of items and services corresponding to each contract rate, and identifying the reimbursement methodology behind each contract rate, will facilitate data analysis and improve the quality and accuracy of the output.

Further, the new proposed requirements obligating hospitals and authorized hospital officials to certify the accuracy and completeness of MRF data—both in the MRF itself and in response to a demand from CMS—will certainly raise the stakes. One of the most significant and most common current MRF issues is that MRFs do not contain all required standard charge information. Many hospitals report rates for some payers (such as Medicare Advantage, Medicaid managed care, and workers’ compensation plans), but not others (such as commercial plans). While it has been difficult to systematically assess whether hospitals are missing certain standard charges in MRFs, limited analyses conducted by Berkeley Research Group of certain hospital MRF data compared to other reimbursement data maintained and published by certain state agencies suggest that there remains a considerable number of hospitals that are noncompliant with MRF regulations, especially with respect to the disclosure of payer-specific negotiated charges.

Historically, payer-specific negotiated charges were considered proprietary and hospitals and other healthcare providers were fiercely protective of them, else they run the risk that they may lose leverage in payer negotiations. For this reason, hospitals have been reluctant to share their negotiated rates with the public. However, CMS’s proposed amendments demonstrate that CMS is committed to maintaining a more transparent marketplace when it comes to healthcare pricing. Further, the CY2024 OPPS/ASC Proposed Rule’s new certification requirements would create new risks, as if such requirements are finalized, allegations of false certifications (e.g., allegations that a MRF does not include all payer-specific negotiated charges or that reported standard charges are inaccurate) will certainly be at the heart of many future disputes (between hospitals and the government, payers, consumers, and otherwise).

Conclusion

CMS’s proposed regulations demonstrate that hospital price transparency remains a central focus of the federal government even while the White House announces a new wave of actions to lower healthcare costs and protect healthcare consumers.Accordingly, ensuring the integrity of MRFs and published hospital price transparency data is essential given the risk of CMPs and other potential integrity obligations. As the market is flooded with additional pricing information from the public and private sectors (including by health plans and health insurance issuers in response to the requirements set forth in CMS Transparency in Coverage regulations),the opportunities for external parties to further scrutinize and challenge the integrity of hospital MRFs will likely only continue to increase.