Now that CMS’ price transparency final rule is effective (as of Jan. 1, 2021), noncomplying hospitals face the real possibility of sanctions.1
“Hospitals have the discretion to make it easy or difficult for consumers to learn the cost of care,” says Ge Bai, PhD, CPA, an associate professor of health policy and management at Johns Hopkins Bloomberg School of Public Health.
Some hospitals were holding off, hoping courts would overturn the requirements. “In normal times, that would be more concerning. But it’s hard to fault the hospitals, which are operating on pretty thin margins, for putting off dedicating resources until it’s certain that the rule would stand,” says Matthew R. Fisher, JD, a partner at Mirick O’Connell in Westborough, MA.
Hospitals still are contending with operational challenges caused by COVID-19. “Rightly or wrongly, other concerns such as price transparency are getting pushed down the line for day-to-day emergency issues,” Fisher observes.
Certain facilities are willing to compete on price for expansion of market share. On the other hand, says Bai, “powerful hospitals that enjoy ‘must-have’ status are less likely to compete on price, and, thus, will have less incentive to make price disclosure user-friendly.”
Noncompliance will land hospitals in trouble, if not right away then over the long-term, says George A. Nation III, a professor of business and law at Lehigh University. CMS has provided a good deal of guidance on what must be disclosed and the desired goals.2,3 “Much discretion is left to hospitals, as long as it is exercised consistently with achieving the purposes of the rule,” Nation says.
Making it difficult for patients to find meaningful price information is going to negatively affect hospitals’ reputations. “It will certainly appear as though they have something they’re trying to hide,” Nation cautions.
Posted information must be correct and not misleading. “Hospitals must be careful when making the distinction between a discounted cash price available to all patients, a discount based on the hospital’s financial assistance policy, and the writing off of a bad debt,” Nation explains. Administrators should disclose the following:
- If the hospital offers a cash discount to all patients (regardless of whether this discount is advertised to patients).
- If the hospital maintains a policy of collecting a certain amount from self-pay patients at the time of treatment, and usually writes off the balance of its list price charges for these patients without making a good-faith effort to collect the balance of the debt. “This practice could be interpreted as offering cash discounts, which would need to be disclosed,” Nation notes.
- If the hospital maintains a policy of discounting prices for self-pay patients. For instance, if the hospital routinely discounts prices for 25%, this cheaper rate may need to be disclosed as a payer-specific negotiated charge. In this case, the “payer” is the patient. “While this may not be specifically spelled out in the rule, it is certainly consistent with the goals and purposes of the rule as explained by CMS,” Nation says. That is because it is information that a self-pay patient would need to be able to comparison price shop.
The disclosure requirements are not based on healthcare systems; they are based on individual hospitals. If practices differ from one facility to another within the same system, it could require different disclosures for each hospital.
“Also, if the same good or service is priced differently by the hospital depending on where (inpatient/outpatient) and how it’s being used (a stand-alone procedure or done as part of a larger procedure), then multiple disclosures would be required,” Nation says.
Hospital price transparency rules were meant to work in concert with CMS quality measures, says Karen Mandelbaum, JD, a healthcare attorney at Epstein Becker Green in Washington, DC. It gives nonemergency patients a chance to shop for the “best” deal, based on both quality and price. There is not anything too complicated about what hospitals need to disclose. “But that doesn’t mean that it won’t be a big job for hospitals to meet the requirements, or that it won’t require vigilance to keep the information up to date,” Mandelbaum warns.
CMS will rely predominantly on complaints regarding a hospital’s potential noncompliance, Nation predicts. Auditing hospitals’ websites is another possibility. “Hospitals should be mindful that it is not as resource-intense to monitor websites as it is to conduct auditing for a HIPAA or EMTALA violation, so they should be prepared for CMS to do that type of remote monitoring,” Mandelbaum says.
Nation expects that at first, enforcement efforts will consist of advising hospitals about what they are doing wrong. “Of course, as time goes on, CMS will expect more from hospitals,” Nation says.
Noncompliant hospitals can be fined $300 per day. Financially struggling hospitals might take the position that compliance would cost more than the fine. “However, I think this is a hard sell,” Nation says. “$300 a day will come to $109,000 per year, which is not huge but would require an explanation.”
Second, if top executives choose not to comply with the law, it will not go over well. Also, the fine could increase in the near future. “If CMS gets the sense that a hospital is trying to undermine the goal of transparency by making it difficult for consumers, that will not bode well for the hospital,” Nation says.
Revenue cycle leaders must analyze pricing, billing, and payment practices. “It’s important to look at what in fact is happening, rather than what is supposed to be happening or what the hospital hopes may be happening,” Nation explains.
Pricing, billing, and payment policies (such as no cash discounts, or not always making collection attempts on all patients) adopted by a health system are not always followed in all facilities. “That sort of thing tends to occur in hospital systems that have expanded rapidly by acquiring hospitals that were previously independent,” Nation observes.
The acquired hospitals operated under their own procedures. “Sometimes, they live on even though technically they are not supposed to,” Nation adds.
Under the price transparency rule, disclosures made by those hospitals will be inaccurate. “Revenue cycle folks may be in the best position to discover these sorts of discrepancies when they concern pricing, billing, or payment issues,” Nation says.
- Centers for Medicare & Medicaid Services. CMS-9915-F. Final rule.
- CMS.gov. CMS completes historic price transparency initiative. Oct. 29, 2020.
- CMS.gov. Transparency in coverage final rule fact sheet (CMS-9915-F). Oct. 29, 2020.