Analysis: Proposed negotiated-rate posting requirements from the OPPS rule

• The proposed rule requires all hospitals to make publicly available a list of both gross charges and negotiated rates for all services in the hospital chargemaster as well as a set of 300 shoppable services in a “consumer-friendly format.”
• The rule specifies the manner and format in which the lists are to be made publicly available.
• Hospitals that do not comply with the requirement may be subject to a civil monetary penalty (CMP) of up to $300 per day.

In response to the President’s executive order on price transparency, the Centers for Medicare and Medicaid Services (CMS) expands its prior interpretations of section 2718 of the Public Health Service Act (chargemaster posting requirement).

The OPPs proposed rule, if finalized, would:

• Require all hospitals to make publicly available a list of both gross charges and negotiated rates for all services in the hospital chargemaster as well as a set of 300 shoppable services in a “consumer-friendly format.”
• Specify the manner and format in which the lists are to be made publicly available.
• Give CMS the ability to levy a civil monetary penalty (CMP) of up to $300 per day on hospitals that do not comply with the requirement.

Further, the rule includes a request for information (see Section XVII of the OPPS proposed rule) seeking feedback on requiring providers to post quality information along with price information on their website.

Given the volume of data hospitals will be required to post (even in the consumer-friendly format for shoppable services) some are wondering, according to this July 31 NPR article, if this won’t be overwhelming for consumers who, to date, have not readily adopted transparency tools and shopped for care.

HFMA’s detailed summary of the OPPS proposed price transparency provisions is now available.

The HFMA article, “A look at early hospital concerns over the proposed release of negotiated charges,” by Rich Daly does a nice job of succinctly capturing the issues.  

Takeaway

Here are a couple of places where I want to add additional details.

1. Why some think CMS is on shaky legal ground with its interpretation of the statute: Various industry groups have signaled an intent to sue the administration if it finalizes the price transparency provisions as proposed. And while I’m not a lawyer, attorneys and policy experts I’ve spoken with since the rule was released are unanimous in the opinion that CMS overstepped its bounds in its interpretations of sections 2718(e) — specifically the definition of “standard charges” — and 2718(b)(3) of the Public Health Service Act (PHS) — which it cites as granting enforcement powers to level civil monetary penalties on hospitals that don’t comply.  

For starters, section 2718(e) requires hospitals to “make public a list of the hospital’s standard charges for items and services . . .” In my 20 years in the industry, any time someone said “standard charges” it meant one thing — gross charges. It doesn’t mean contracted rate; it doesn’t mean negotiated rate or as CMS’s new term of art would have it: “payer-specific negotiated charges.”

Although the Affordable Care Act contains several well-publicized drafting errors, I don’t believe this is one of them. The folks who wrote the legislation know (or should have known) the difference between the “standard charge” and the payer-specific negotiated rate. Further, even if they didn’t know the difference, they didn’t include language stating that standard charge posting must be payer specific (which gets to negotiated rate). Also, in my 20 years, I don’t think I’ve ever heard anyone use the phrase “payer-specific negotiated charges” to mean negotiated rate.

Statutory and regulatory interpretation

Now we get to my favorite part because I do appreciate creativity in statutory and regulatory interpretation . . . 

“You’re out of compliance with the law,” was a CMS staffer’s response to a caller who asked about penalties for non-compliant hospitals on the Nov. 13, 2018, Hospital Open Door Forum call. When the caller clarified her question to what specifically the penalty was for non-compliance, the CMS staffer repeated his response. And did so without mentioning that CMS has any ability to assess CMPs on non-compliant hospitals. The closest they came was stating they were exploring enforcement options.

It’s interesting that less than a year ago when asked about enforcement of a long-established statute — as the CMS staffer painstakingly pointed out in another answer on the call about the chargemaster posting requirement — the staffer didn’t say anything about being able to levy penalties. Only that they were looking into it (and presumably have been since the law was passed a decade ago). What’s the change? Did Congress pass additional legislation? Nope.

CMS has reinterpreted the statute and is now drawing enforcement authority from section 2718(b)(3), which appears to pertain only to the MLR rebate provisions of the PHS Act. It’s highly questionable whether Congress granted CMS any enforcement authority for the chargemaster posting requirement. It will be interesting to see if the courts agree that CMS got too creative in its interpretation of the statute.

2. Administrative Burden: The administration estimates it will take 12 hours and cost hospitals approximately $1,000 to comply with the law (~ $6 million nationally) annually. My guess is most hospitals will fly that estimate just wrapping their heads around the proposed (and final) rule. 

• In reality, this involves multiple commercial payers for each hospital. Potentially each commercial payer will have multiple contracts with different prices for the same services based on what’s been negotiated with an employer (or group of employers). And then each contract may have a different payment rate for the same service.
• While hospitals have this information in a contract management system, it’s in most cases not in the same table. So, it’s not quite as simple as download and post the magic file as the proposed rule envisions.
• Someone from IT and managed care will need to sit down and figure how to display all of these disparate contracts in a “single digital file” for the machine-readable version. The consumer-friendly version can be made available as multiple files. 

The rule also requires hospitals to create “service packages” that include both the primary service and any ancillary services. For some things, this will be relatively straightforward. For others, the ancillary services required by one patient will be different from the ancillary services required by another. What’s ironic is this is a challenge CMS struggles with when it rebases APC weights for outpatient services. In any given year, they typically only use about half of outpatient claims to develop the relative weights. Why? Because on claims with multiple APCs (a.k.a. multiple “service packages”), they can’t figure out what ancillary services are related to the multiple primary services that trigger the payments. This will be another time sink that will require managed care to sit down with clinicians to figure out what the typical “service package” looks like.

Any time someone tells you an administration is dedicated to reducing administrative burden, be wary.