CMS Finalizes Price Transparency Requirements for Hospitals
On November 15, 2019, CMS published the highly anticipated hospital price transparency final rule. Although CMS has explained the intent of the rule as encouraging patients to better understand health care prices and become more active consumers, the rule will also require hospitals to make significant data publicly available online. After significant comments from providers, CMS has clarified that all hospitals will be required to post standard charges as well as the payer-specific negotiated charges – now defined as any discount the patient receives for using an in-network provider – online, in a single digital, machine-readable file. Hospitals must also post similar information for at least 300 “shoppable” items and services. CMS has extended the deadline for compliance to January 2021.
CMS has also proposed an additional rule that, if finalized, will require health plans to provide consumers with real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability for all covered healthcare items and services. Most group health plans and health insurers will be required to provide this information through an online tool and in paper form at the consumer’s request.
Despite lengthy arguments on the legality of the new rule from CMS, hospitals have challenged this in litigation due to potential contractual and anti-trust concerns. On June 23, 2020, the United States District Court for the District of Columbia ruled against the hospital-plaintiffs in American Hospital Association v. Azar and upheld CMS’s rule. The District Court held that it was not unreasonable nor unduly burdensome for hospitals to report multiple forms of pricing data for each line of service offered to different patient groups. The District Court further reasoned the new price transparency rule does not violate the First Amendment since agencies can compel corporations’ speech if it is in furtherance of the public interest.
The hospital-plaintiffs appealed the decision and oral arguments were held in the United States Court of Appeals for the District of Columbia Circuit on October 15, 2020. The appellate court questioned the AHA on the reasonableness of HHS’s statutory interpretation of the Affordable Care Act, which CMS’s rulemaking authority relied on when it finalized the price transparency rule. The government centered its arguments around public policy and the benefit patients would have if they were able to view prices. Counsel for the AHA and hospitals urged the Appellate Court to make a quick decision as the deadline of January 1, 2021 is fast approaching.
Advis will continue to monitor the proposed health plan price transparency rule and has summarized key details regarding recent developments in the price transparency rule below. Advis’s expert data science team will also be assisting providers in developing efficient solutions to comply with these detailed requirements.
Overview of the Price Transparency Requirements for Hospitals
- Types of Hospitals Required to Comply
For purposes of the price transparency rule, CMS defines “hospital” to include all institutions licensed as hospitals under applicable state laws, regardless of whether the hospital is Medicare-certified. CMS did not provide exemptions for small or rural hospitals, such as critical access hospitals or sole community hospitals.
2. Pricing Information Hospitals are Required to Make Public
CMS explains that, essentially, it would like to provide patients with the ability to create their own Explanation of Benefits (“EOBs”) before the receipt of any items or services. Hospitals will therefore be required to make their patient’s “standard charges” public. CMS defines ‘Public’ as “the regular rate established by the hospital for an item or service provided to a specific group of paying patients.” CMS explains that “standard charges” goes beyond the hospital’s chargemaster; they require actual pricing data to be made public. CMS notes that presentation of both “gross charges” and “payer-specific negotiated charges”, both defined below, is consistent with the standard charges found in a patient’s EOB that health insurance plans are required to provide to patients following a healthcare service.
CMS created four different types of “standard charges” that hospitals are required to make public so that patients can determine how much they will have to pay:
- Gross Charges – the price the hospital actually charges for an item or service;
- Payer-specific Negotiated Charges – the charge that a hospital has negotiated with a third-party payer for an item or service, and/or any discount the patient receives for using an in-network provider;
- De-Identified Minimum and Maximum Negotiated Charges – the lowest and highest charge for an item or service among all negotiated third party payers; and
- Cash Discount Charges – the discounted charge that applies to an individual who pays cash, or the equivalent of cash, for a hospital item or service.
Additionally, CMS clarified that it will continue to use the terms “rate” and “charge” interchangeably and references the plain language Oxford dictionary definition of “rate” to support this assertion. Through this interpretation, CMS will be giving patients access to data typically deemed confidential and proprietary between hospitals and third-party payers.
The District Court’s ruling in American Hospital Association v. Azar was premised on the conclusion that ‘standard charges’ referenced within the rule can be interpreted to include rates negotiated with third-party payers, but no definitive ruling on the matter was rendered. However, presiding over this case, Judge Carl Nicholas stated in his opinion that he favored the publication of third-party payer rates as, “the more charges published for any one item or service, the less any one of these charges can be considered ‘unusual’ or ‘customary.” CMS has not yet finalized a rule that would require third-party payers’ rates to be required in cost reports, but a proposed rule is anticipated in the coming months.
3. Formatting Requirements for Price Transparency Data
Hospitals will be required to create a single digital file with the required price transparency data and post this file online in a “machine-readable format.” The file must:
- Include a description of the item or service and its HCPCS/CPT code;
- Display the file “prominently” and identify the hospital location that is associated with the standard charge on a public website;
- Ensure the data is easily accessible – meaning it does not require a login or fee for anyone to access it and that the data is easily searchable; and
- Update the file at least annually and note the date it was updated either in the file or where it is posted.
4. Requirements for Shoppable Services in a “Consumer-Friendly Manner”
In addition to pricing information for all items and services described above, CMS will also require hospitals to create and make public a list of “shoppable services” for consumers. CMS clarified that “shoppable services” are those that can be scheduled in advance by a healthcare consumer. CMS would like patients to be able to search through a hospital’s list of “shoppable services” to better understand and compare pricing when selecting a provider.
To comply with this requirement, hospitals must:
- Post at least 300 shoppable services – 70 services are specified by CMS and the other 230 are chosen by the hospital;
- List all types of “standard charges” defined above except “gross charges”;
- Include a description of the charge, the HCPCS code, and the location at which the service is provided, including whether the charge applies for an inpatient setting, outpatient setting, or both;
- Display the shoppable services “prominently” and identify the hospital location that is associated with the standard charge on a public website;
- Ensure the data is easily accessible – meaning it does not require a login or fee for anyone to access it and that it is easily searchable; and
- Update the file at least annually as well as note the date it was updated either in the file or where it is posted.
Additionally, hospitals can meet the “consumer-friendly” formatting requirements by creating an online price estimator that allows patients to obtain an estimate of the amount the patient would pay out-of-pocket for the 70 shoppable services specified by CMS and the additional 230 services chosen by the hospital. The price estimator tool should allow the patient to obtain a real-time estimate of the service at the time the patient is using the tool. Additionally, the tool will need to be posted on the hospital’s website and accessible to the public without requiring a fee or login.
5. Monitoring and Enforcement of Price Transparency Requirements
CMS will review and audit public hospital websites and monitor patient complaints to enforce these rules. Additionally, if CMS determines a hospital is noncompliant with the price transparency rules, CMS may provide a written warning of the specific violations, request a CAP, or impose a civil monetary penalty of up to $300 a day, and publicize the penalty on a CMS website. Further, recent litigation in favor of CMS has allowed for the withholding or suspension of Medicare payments for cost reporting requirements similar to those prescribed within the price transparency rule. Failure to provide timely or accurate (as determined by CMS) cost reports can result in an immediate impact on Medicare payments from a provider’s regional MAC.
6. 2020 CMS IPPS Final Rule Impact on Medicare Advantage Organizations Reports
On September 2, 2020, CMS released FY 2021 Medicare Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTACH) Final Rule expanded cost reporting requirements for Medicare reimbursement. The IPPS Final Rule specifically referenced that hospitals will need to report the median payer-specific negotiated charges with all Medicare Advantage (“MA”) organizations. The reporting for MA organizations will need to be broken down by the Medicare Severity-Diagnosis Related Group (“MS-DRG”) to which the specific rates apply. The payer-specific negotiated rates should be cross-walked against the rates for an MA organization’s MS-DRG to calculate the medians required on the cost reports.
CMS believes that this approach to additional cost reporting requirements will reduce the Medicare program’s reliance on the hospital chargemaster and import market pricing into Medicare FFS reimbursement. CMS has also updated its approach to calculating the MS-DRG relative weights that MA organizations must closely detail when finding their median payer-specific rates for their cost reports. Under the IPPS Final Rule, cost reports can be deemed inaccurate or incomplete and subsequently rejected if price transparency information is not included in the report. Arguably, incomplete or inaccurate cost reports may give cause to CMS to withhold or suspend Medicare payments under 42 CFR 405.371 and implementing guidance.
Advis’s expert data science team will also be assisting providers in developing efficient solutions to comply with these detailed requirements. Please contact the Advis data team today at (708) 478-7030 for assistance.
Published: October 26, 2020