The new hospital price transparency rule and the details: Implementation, explanation, hitches and so on

Filed Under: Costs, Patients, Providers

- photo by Photo by Greg Rosenke on Unsplash

The administration’s health price transparency rule went live Jan. 1. We’ve been seeking out and assessing the results; you can find our previous blog posts with that reporting here and here.

This post will go into some of the more obscure and messy points of the mandate, including hurdles to implementation, enforcement, definition and so on.

Describing the new rules, the Centers for Medicare and Medicaid Services say on their website:

“Starting January 1, 2021, each hospital operating in the United States will be required to provide clear, accessible pricing information online about the items and services they provide in two ways:

“As a comprehensive machine-readable file with all items and services.
“In a display of shoppable services in a consumer-friendly format.

The first, the machine-readable file, applies to standard charges for all items and services, and requires hospitals to include their negotiated rates with third-party payers. Then, in the listing for shoppable services, to be provided in a consumer-friendly format, “hospitals must make public the charges associated with a total of 300 shoppable services, and CMS indicates in the Final Rule that it may increase this number once hospitals are accustomed to posting charge information. CMS specified 70 shoppable services in the Final Rule, and hospitals must post their charges for as many of these services as they provide. The remaining shoppable services will be selected by the hospital,” according to The National Law Review’s article on the topic.

It would be quite difficult for the average person to first find these. It’s easier — but still hard — for health nerds like me who have been talking about the topic. It’s hard to understand them, and then figure out how to compare, insurer by insurer, who’s paying what. I do health data for a living, and it’s a challenge for me. That said, more transparency is better than less transparency — and this is light-years beyond the administration’s last attempt at price transparency, which went into effect Jan. 1, 2019. Here’s our post about that.

A doctor’s perspective

Several doctors who are acquaintances have strong feelings on this topic. One is Dr. Mary I. O’Connor, professor of orthopedics and rehabilitation at Yale School of Medicine. She is also chair of “Movement is Life,” and recently delivered a TED talk “Promoting Health: Your Secret Superpower!”

Speaking of the transparency rule, she wrote in an email:

“This is an important topic!

“I can share with you from the surgeon perspective that price transparency does not exist. If my patient asks me what a surgery will cost them, I cannot give them an answer. I refer them to customer support at the hospital who can typically give them an estimate of their [out of pocket] expenses.

“Note that to my knowledge no one is sharing with the patient what the hospital is charging the patient’s insurance company. I can’t even tell the patient what my medical group will charge their insurance company for my services (I don’t know). I would be able to tell a Medicare patient what the surgeon fee is for their procedure—but that is the degree of price transparency that exists in my world right now.”

Implementation and compliance hurdles

In the middle of the year, the National Law Review pointed out that implementation and compliance were likely to be difficult. When the federal district court for the District of Columbia upheld the rule in June, the review examined some of the important issues.

One of the most important was the light penalty for noncompliance. In the face of a $300-a-day penalty, which is pennies to the bottom line for many hospital systems, it’s hard to see why spending thousands if not millions to create these price lists would make sense to the chief financial officer of any hospital system.

The review wrote:

“The Final Rule incorporates several mechanisms for monitoring and enforcing hospitals’ compliance. CMS has established a pathway for individuals and entities to report instances of alleged noncompliance, which CMS may then investigate (in the future, CMS may also self-initiate audits of hospital websites). In instances where hospitals are found to be noncompliant, CMS has specified three levels of enforcement:

    • CMS may issue a written warning to the hospital.
    • CMS may request a corrective action plan if the noncompliance constitutes a material violation of one or more requirements.
    • If a hospital fails to respond to a request for a plan or to comply with a plan’s terms, CMS may impose (and publish notice of) civil monetary penalties. The financial penalties are capped at $300/day, which equates to a maximum of $109,500 per year.

“CMS acknowledged that some hospitals may prefer to pay the penalties rather than comply with the provisions in the Final Rule. Although it refrained from altering the proposed penalties as a result, CMS indicated that it would monitor any such occurrences and may adjust the penalties in future rulemaking.”

The review also points out that the rule applies only to “standard charges for all items and services provided by the hospital, which include “services of employed physicians and non-physician practitioners’ (i.e., the professional component of services provided at a hospital).” In this era of doctors not employed by hospitals — emergency room doctors, anesthesiologists, radiologists and pathologists are commonly employed by private equity or non-hospital entities — this is a pretty big loophole.

Using a price estimator to comply

The rules about how this is to be done and what qualifies as compliance are a little murky. It seems that if a hospital has a “price estimator” tool on the site, it might satisfy the rules.

Becky Greenfield, an associate attorney with Wolfe Pincavage, told HealthCareDive that seemed to comply at least with the “consumer-friendly” requirement, though not the machine-readable one.

“By compiling all the insurance products and pricing information, the price estimator tool would be able to spit out the out-of-pocket cost a patient is responsible for given the tool would have the benefit design information loaded in,” Healthcare Dive wrote.  “‘My experience is that many hospitals are adopting that,’ Greenfield said. ‘In my mind, that’s the best of both worlds. You’re not disclosing negotiated rates, which no one wants to do. But you’re delivering something that is maybe not perfect, but is a good estimate for what the patient is actually paying for the services.'”

This makes a certain amount of sense — though we have heard of multiple cases in which the hospital estimator is just plain wrong. Also, the machine-readable files will indeed need to disclose negotiated rates to be in compliance with the letter and the spirit of the mandate.

Another compliance issue: What is the ‘service package’?

The review writes: “The Final Rule requires hospitals to report their standard charges for ‘service packages,’ which are defined broadly and vaguely to simply mean an ‘aggregation of individual items and services into a single service with a single charge.’ There are many operational questions associated with preparing and publishing charges for such service packages. In particular, service packages may vary based on the particular payor and may not align with particular CPT and HCPCS codes.”

Again: What is a “shoppable service”?

“In addition to requiring publication of charges for items and services, the Final Rule requires hospitals to publish the charges for so-called ‘shoppable services,’ which are defined as ‘a service that can be scheduled by a healthcare consumer in advance.’ The intent is for the term to encapsulate non-emergency services that a patient can schedule based on convenience and which are therefore more conducive to price shopping. CMS provides the examples of “delivery of babies” and cancer treatments, where the location of delivery is typically planned well in advance and patients with cancer diagnoses often seek information from various providers before committing to a treatment course by a particular provider.”

These stipulations make it clear that comparing apples to apples across hospitals will be difficult at best.

Vendors seeking business

Perhaps not surprisingly, people are trying to make money on this ruling. SlicedHealth, which says on its Twitter account that it joined Twitter in September 2020 and has 17 followers, offers on Twitter: “New #pricetransparency rules take effect tomorrow! Schedule a meeting now to learn how we can quickly get your #hospital set up and compliant.”

IBM Watson, too, has offerings for you. “The upcoming #PriceTransparency mandate doesn’t have to result in penalties for your hospital. Discover the critical steps you should take to prepare for the new rule: ibm.co/33JAFSF.”

There are dozens of vendors seeking to solve hospitals’ problems on this mandate. From our research on the existing ones, it seems clear that Experian is doing a lot of work, and also Cleverley, a health costs consultancy.

Just take the penalty?

The Centers for Medicare and Medicaid Services has said it plans to audit compliance, starting as early as this month. And in fact, complying with the mandate will cost money. So … what happens if you don’t comply? As noted above, the 2019 mandate had Seema Verma enforcing it via Twitter. In this case, enforcement also seems likely to be lax.

One service provider, Pelitas, posted on its website a piece by Mike Bickers, identified as a director at Pelitas, that included this paragraph: “In fact, the government estimates nationwide costs of hundreds of millions of dollars to develop the tools and files needed to satisfy the executive order. Is it any wonder that some organizations would rather pay the $300-per-day noncompliance penalty than fulfill the executive order’s requirements?”

Bickers adds, though: “PELITAS is ready to implement your iPAS Price Transparency Calculator. You’ll love letting us handle the consumer-friendly shoppable requirement of the executive order; your patients will love the patient-facing module and the ability to see accurate price estimates in an easy-to-read format.”

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Related coverage:

Hospital price transparency, again: The Jan. 1, 2020, disclosure rule, examined

The new hospital transparency rule: The deadline for posting price lists is on Jan. 1, so how did they do?