House passes bill to codify healthcare price transparency, expand site-neutral payment

The hospital industry saw reason for both relief and disappointment this week after a bill designed to promote price transparency took a major step toward becoming law.

The House on Dec. 11 passed H.R. 5378, also known as the Lower Costs, More Transparency Act, by a 320-71 vote. Along with cementing price transparency as the law of the land for hospitals, insurers and other stakeholders, the bipartisan bill would give hospitals a reprieve from a four-year, nearly $32 billion cut to Medicaid disproportionate share hospital (DSH) payments. The cut would be postponed from 2024 to 2026, and the bill also includes long-term extensions of funding for community health centers and the National Health Service Corps.

Update: As a point of clarification, the Medicaid DSH cut would be $16 billion over two years starting in 2026, per the provision in the bill.

But hospitals are displeased with the bill’s advancement of site-neutral payment in Medicare. Rates for drug administration services would be reduced in outpatient departments to establish equality with payment for those services as billed by physician offices.

The legislation had appeared destined for passage in September before stalling as the parties worked to extend funding for the federal government past a Sept. 30 deadline. With another such deadline looming in mid-January, a similar fate initially seemed to await the bill this time around.

But in a sign that healthcare price transparency is a winning political issue, committee leaders were able to fast-track a floor vote Monday using a tactic known as suspension of the rules. The procedure means debate is limited to 40 minutes and amendments are prohibited, and it requires support by two-thirds of members to implement.

Codifying price transparency

The bill’s price transparency provisions for hospitals largely are similar to regulations that have been on the books since 2021 and that were modified going into 2024. However, the American Hospital Association (AHA) expressed concern that price estimator tools no longer would be allowed as a means of compliance, thus negating recent investments by hospitals in such tools.

Maximum penalties would rise for most hospitals starting in 2026. The current penalty is $300 per day, increasing to a rate of $10 per bed per day if the hospital’s bed count is above 30. The new legislation maintains the $300 daily penalty for hospitals with 30 or fewer beds and sets the following fines for larger hospitals:

• $12.50 per bed per day for hospitals with 31-100 beds
• $17.50 per bed per day for hospitals with 101-200 beds
• $20 per bed per day for hospitals with 201-500 beds
• $25 per bed per day for hospitals with more than 500 beds

The applicable penalty would increase for any hospital after a one-year period of noncompliance.

Price transparency provisions in the bill also apply to labs, imaging centers, ambulatory surgical centers, health plans and pharmacy benefit managers.

Equalizing some payments

The bill’s incorporation of site-neutral payment is narrower in scope than in bill drafts from earlier this year yet significant enough to pose concerns for hospitals.

The provisions would affect payment for drug administration starting in 2025 for most hospital outpatient departments (HOPDs) and in 2026 for those in a rural area or a designated health professional shortage area. There would be four-year phase-ins of the adjusted rates.

The Federation of American Hospitals (FAH) wrote to Congress that the proposals on site-neutral payment “would jeopardize access to care and would undermine [the] same safety net” Congress is seeking to support by delaying the Medicaid DSH cuts.

“The so-called site-neutral payment cuts do not take into account the fact that hospitals are already only paid 80 cents on the dollar by Medicare and hospitals require more funding than other sites of care because we treat sicker, lower-income patients with more complex and chronic conditions, provide 24/7 access to care in the community, and are held to a higher regulatory and safety standard,” the FAH wrote.

Not surprisingly, insurers are more upbeat about the provision. Although the bill affects only Medicare payment, program rates frequently serve as a framework for negotiations between hospitals and health plans.

“Our seniors should not be charged more simply because a hospital system bought a doctor’s practice and started calling it a hospital outpatient center,” the Blue Cross Blue Shield Association said in a written statement.

Increased scrutiny on outpatient care

Starting in 2026, as a condition of receiving Medicare payment, each off-campus outpatient department of a provider would have to obtain a standard unique health identifier, bill under that identifier and submit appropriate attestation.

The required reporting could lead to further site-neutral payment policies if the resulting data suggest hospitals are converting freestanding physician offices to HOPDs for the sake of billing at higher rates. Under the Bipartisan Budget Act of 2015, which established site-neutral payment in Medicare for a range of services, exemptions crucially are available to HOPDs that were operating or under construction before November 2015 and to preexisting physician practices that were bought and then converted to HOPDs.

The immediate concern for hospital advocates is the regulatory burden.

“This provision is unnecessary since hospitals are already transparent about the location of care delivery on their bills,” the AHA wrote. “Hospitals and other providers bill according to federal regulations, which require them to bill all payers — Medicare, Medicaid and private payers — using codes that indicate the location of where a service is provided. As a result, this provision would impose an unnecessary and onerous administrative burden on providers and needlessly increase Medicare program administrative costs.”

Eyes on the Senate

The bill moves to the Senate, which is preparing to consider a year-end healthcare package that passed out of the Finance Committee, potentially paving the way for merged legislation. Any bicameral bill that emerges could be voted on as stand-alone legislation or folded into a larger vehicle such as the National Defense Authorization Act or funding for the Federal Aviation Administration. The latter approach likely would speed final passage.

Of the two healthcare bills, the bipartisan Senate bill surely will be greeted with more enthusiasm by the hospital lobby because it likewise delays the Medicaid DSH cut and does not impose any of the House bill’s provisions on transparency or site-neutral payment.

Whereas the thrust of the House bill is an effort to increase transparency, the Senate is seeking to use its bill to expand access to mental healthcare. For example, one set of provisions would raise the standards for provider directories as maintained by Medicare Advantage health plans.

The bill also would be welcomed by physician practices. Language in the bill would lessen the scheduled Medicare payment reduction that was incorporated in 2024 regulations for the physician fee schedule — a respite that advocates had feared wouldn’t come to pass during a hectic month on Capitol Hill.

Other provisions would extend the floor for the work Geographic Practice Cost Index through the end of 2024, protecting rural practices from a looming potential drop in payments if the floor expires at the end of this year as scheduled. And the bonus payment for practices participating in advanced alternative payment models would be extended through 2024, albeit only at a rate of 1.75%, compared with 3.5% this year and 5% in prior years.