CMS Issues First Fines for Noncompliance with Transparency Rule
By Greg Freeman
CMS has issued the first fines for violations of the Hospital Price Transparency Rule, and more penalties are expected. The first two hospitals fined for violations of the rule, both in Georgia, received written warnings and were allowed more than four months to bring their operations in compliance with the rule.1
When the hospitals’ websites still did not provide price transparency, CMS issued a Request for a Corrective Action Plan to each hospital. Neither hospital responded with a Corrective Action Plan. CMS fined the hospitals $883,180 and $214,320.
CMS instituted its hospital price transparency rule to help patients better understand the cost of items and services provided by hospitals before receiving them, explains Nicole J. Aiken-Shaban, JD, partner with Reed Smith in Philadelphia. The rule is similar to other rules implemented with respect to patient accessibility to their own health information and charges from providers, like the interoperability surprise billing rules that became effective over the past couple of years.
“In short, it requires hospitals to provide pricing information by way of a comprehensive machine-readable file and by displaying at least 300 shoppable services in a consumer-friendly format,” Aiken-Shaban says.
The rule was effective Jan. 1, 2021, but only first enforced at the end of June.
Hospitals should take steps now to ensure they are complying with the technical requirements of the rule, Aiken-Shaban says. For hospitals that are due for re-survey this year, they should ensure compliance before surveyors arrive.
To the extent a hospital receives a request for audit or a warning letter from CMS, communication with counsel to coordinate response to the audit or letter is important early in the process to develop an appropriate corrective action plan and mitigate any potential fines.
“These enforcement actions are a sign of the likely enforcement to come in the next year with respect to compliance with other price transparency and surprise billing rules, so hospitals should be examining compliance with those other rules closely,” Aiken-Shaban says.
Compliance has been limited, with many providers citing resource constraints, higher priorities, and lack of clarity of what constituted compliance, says Paul Shorrosh, CEO of AccuReg, a company based in Mobile, AL, that provides revenue cycle assistance for hospitals.
Shorrosh notes hospitals seem to be attempting to comply with some aspects of the rule — notably, the patient shoppable services portion. But as of February 2022, less than 20% of hospitals had fully complied, according to a report from PatientRightsAdvocate.org.2
CMS has been auditing a sample of hospitals since January 2021. As of June 2022, they had issued about 350 warnings for noncompliance. Of those, 157 were issued correction action plan requests and 170 received case closure notices after addressing citations, Shorrosh notes.
“It is difficult to predict at what rate CMS will reveal fines for other hospitals, but the agency is committed to the rule, and initial fines suggest many more are on the way, as the 350 warnings may indicate,” Shorrosh says.
Instances of noncompliance may be attributed to the special strain hospitals were under during the pandemic. “Hospital price transparency regulations were rolled out while our nation and world were dealing with the global COVID pandemic, which understandably pushed this down the ladder of priorities,” Shorrosh says. “Many hospitals felt they did not have the people, resources, or budget to address the burden of compliance during this time.”
Secondly, providers are unsure what constitutes compliance, Shorrosh says. Citing a recent report from KLAS Research, he notes hospital leaders have said a top barrier to compliance was the confusing and complex regulations in the rule.3 Additionally, many hospital leaders doubt the efficacy of the price transparency rule as it was written by the government and say it creates more confusion for their patients than clarity. They worry the confusion could result in a loss of trust, lost volume, and decreased revenue.
“Also, many providers are wary of giving competitors access to their prices, and admitted they were holding out to see what their competition would do,” Shorrosh says. “Other obstacles to compliance include the cost to comply, the impact on patient satisfaction of potentially providing inaccurate estimates due to complexity, and providing competition a window into their prices and strategy.”
For these reasons, many providers appear willing to risk paying the fines instead, even after CMS increased the fines dramatically in January 2022, Shorrosh says. The increase took the form of a sliding scale based on bed size that can result in a maximum annual penalty per hospital of more than $2 million.
There is significant administrative burden and cost to compliance, Shorrosh notes. Providers have dozens, if not hundreds, of payer contracts with unique pricing for procedures, not to mention ancillary and other physician costs in addition to those of the hospital.
“This means there are tens of thousands of data elements that must first be identified and then maintained as these prices change when contracts are renegotiated and cost of goods change — which is a real concern, given the runaway inflation rates we are experiencing today,” Shorrosh says. “Without a comprehensive strategy to address price transparency beyond simple compliance, hospitals are right to be fearful about the repercussions.”
Most providers have turned to vendors to manage compliance with the CMS price transparency regulations. This comes with the cost to deploy and maintain the machine-readable file and shoppable services.
“But, too often, both vendors and hospitals focus on the stick instead of the carrot associated with price transparency as a concept. That is, they’re focused on meeting the CMS minimum and not on providing a consumer-grade user experience that matches consumers’ experience when they shop online with Amazon, book travel on Expedia, or stream content on Netflix,” Shorrosh says.
As with any consumer business, it is critical to avoid creating a disjointed user experience in healthcare. “Today, all too often, hospitals have cobbled together a Frankenstein’s monster of technologies that frustrate the patient and result in dissatisfaction, lost volume, and revenue,” Shorrosh says. “What the patient actually needs to achieve, and what the price transparency rule failed to accomplish, is a highly accurate price estimate that can be guaranteed, and that both the patient and the hospital trust enough to be confident in making payments prior to service.”
The best way to accomplish this requires using a single integrated, intelligent automation solution that audits patient data, their insurance information, payment information, and enables the patient to digitally self-generate their estimate and make payment, Shorrosh says.
The point is price transparency should be about providing the patient what they really want. If you provide accurate cost information pre-service, the patient is more likely to come back and more likely to pay you. If you focus on compliance only, and if estimates aren’t accurate, you lose the loyalty and trust of your patients. Choose your vendor wisely.
“Compliance is important but thinking about transparency less as a compliance issue and more of a customer service issue is more important. You need to comply to avoid fines, but if you get the right partner and go beyond, the hospital gets more cash payment sooner, it costs less to collect that cash, and hospitals increase patient satisfaction and loyalty,” Shorrosh says. “That at least retains volume and revenue you are likely to lose if you do this poorly with an eye only on compliance. Correctly approached, a price transparency initiative can be a win for the hospital.”
Even with recent fines, the healthcare industry deserves some credit for its attempts to comply with the transparency rule, says Matthew Albright, chief legislative affairs officer with Zelis, a company based in Bedminster, NJ, that provides payment support services for healthcare providers and insurers. Albright previously worked for CMS.
“There has been some frustration with this, but hospitals are coming into compliance. They took the scenic route, kicking and screaming the whole way, but the implementation has been surprisingly successful if you look at the history of this rule,” Albright says.
The transparency rule survived three administrations and a major lawsuit. Albright says he is impressed hospitals are complying as well as they are. He notes that after a year and a half of compliance efforts, only two hospitals have received fines, and HHS closed the cases of many others.
For those struggling to comply with the rule, Albright says their key challenge seems to be obtaining reliable data. Consumers want to compare prices the same way they do with a product at two grocery stores, but healthcare data are quite different.
“Hospitals and health plans really don’t know how much their healthcare services cost because it changes on a provider-to-provider basis and insurance-by-insurance basis. They aren’t kidding when they say don’t know what things cost,” Albright says. “Much of the business of healthcare is farmed out to other entities, and the negotiations are quite complex. It’s not like getting the cost of eggs from your egg supplier.”
Another complication is the government has been determining how they want the data organized and presented over time. Regulators continue refining the requirements.
“It’s been kind of building the plane as they’ve been flying it. Hospitals have to keep paying attention to the changes and submitting ideas about the best way to do this,” Albright says. “The specs are going to change and adapt as the industry tells CMS the things they can and cannot do.”
- Centers for Medicare & Medicaid Services. Enforcement actions. Page last updated June 8, 2022.
- PatientRightsAdvocate.org. Semi-Annual Price Transparency Compliance Report. February 2022.
- Cragun D, McIntosh A, Sycamore T. Price transparency 2022: Hospital perceptions of CMS regulation. KLAS Research. April 21, 2022.
- Nicole J. Aiken-Shaban, JD, Partner, Reed Smith, Philadelphia. Phone: (215) 851-8173. Email: [email protected].
- Matthew Albright, Chief Legislative Affairs Officer, Zelis, Bedminster, NJ. Phone: (888) 311-3505.
- Paul Shorrosh, CEO, AccuReg, Mobile, AL. Phone: (866) 872-7498.
CMS has issued the first fines for violations of the Hospital Price Transparency Rule, and more penalties are expected. The first two hospitals fined for violations of the rule, both in Georgia, received written warnings and were allowed more than four months to bring their operations in compliance with the rule.
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