Hospitals scramble to meet price transparency requirements after court decision

• Hospitals are unlikely to receive a legal reprieve before the Jan. 1 deadline to post negotiated prices online.
• Hospital executives have misunderstood some key components of the new requirements, potentially leaving insufficient time to implement them.
• The cost of implementation, especially for stand-alone hospitals, is likely much higher than CMS estimated.

After a federal judge upheld requirements for hospitals to disclose prices negotiated with health plans, hospitals are advancing efforts to comply before the January deadline. But the requirements may be misunderstood, some advisers warn.

A judge for the U.S. District Court for the District of Columbia on June 23 upheld a 2019 rule from CMS that hospitals release the rates they privately negotiate with health plans.

The decision did not surprise Amy Mackin, JD, an attorney for Hall Render, because administrative law places a large burden on any challenge. However, the judge acknowledged that the decision was “a close call.”

“That was almost a green light to appeal,” Mackin said.

The American Hospital Association and plaintiff hospitals have filed notice that they will appeal the ruling.

However, Mackin said it was unlikely an appeals court will rule on the case before the start date for the requirements, which is why she advised hospitals to try to implement them.

The two broad requirements of the rule are:

• Producing annually a machine-readable file of “standard charges (including gross charges, discounted cash prices, payer-specific negotiated charges, and deidentified minimum and maximum negotiated charges) for all hospital items and services.”
• Displaying online “discounted cash prices, payer-specific negotiated charges, and deidentified minimum and maximum negotiated charges for at least 300 ‘shoppable’ services”

Frederick Stodolak, CEO of Panacea, has advised many hospitals on the coming requirements and said many chose to begin implementation in the weeks before the court ruling, since the start date was only six months away.

“This is a heavy lift for providers, and more than providers may realize,” Stodolak said in an interview.

Hospitals may be misreading the requirements

Hospital executives may be unaware of two specific aspects of implementing the requirements:

• That the rule calls for separate and unique price lists of elective procedures for each hospital within a system
• That calculations will be necessary to make comparable lists of different health plans’ payment rates

Hospitals cannot simply transfer their negotiated rates into a machine-readable file, Stodolak said, because the requirement implies that the rates must be comparable. Such comparability doesn’t exist when health plans use varying methods to determine payment. For example, they may use DRG rates, add a percentage charge for devices or use per-diem rates.

“This is an example of what providers haven’t thought about,” Stodolak said.

To create comparability between the rates, hospital would need to group 12 months of claims data into an MS-DRG (even when health plans pay per diem or as a percentage of charge) and then calculate what the allowable payment is on an equalized basis, Stodolak said.

“Without doing those calculations, it is almost impossible to comply with the rule,” Stodolak said.

Stodolak said hospitals will need about four months to correctly calculate, organize and post the pricing information.

Another misunderstood challenge is the need to display individual-hospital lists of 300 “shoppable” items. Those need to be based on the most common or highest-revenue procedures for each hospital within a health system.

Stodolak noted that hospitals are not required to calculate patients’ out-of-pocket costs as part of the list. If they use a service that does so for individual patients, they do not need to display rates for their other payers.

Of the hospitals that Jackie Nussbaum works with in her role as a director with BKD, about half use such online patient cost-estimator tools, and she expects more to add them. However, lower-revenue hospitals, such as critical access hospitals, can find such tools hard to afford.

Many hospital leaders also are unclear about when it’s necessary to include standard charges for items and services provided by employed physicians or non-physician practitioners. CMS declined to codify a definition of employment in the final rule, so Nussbaum expects to see some variability in how organizations account for items and services provided by employed physicians or non-physician practitioners.

Various penalties are possible

Hospital that do not meet the rule’s requirements by Jan. 1 face a range of possible actions, including:

• Warning notices
• Requests for corrective-action plans
• Levies of civil monetary penalties of up to $300 per day
• Publicizing of penalties

The possibility of choosing the penalty over trying to implement a complex new requirement may prove attractive to some hospitals.

“Three hundred dollars a day, especially if it doesn’t go on too long, is probably palatable,” Mackin said. “So, I could absolutely see that as a strategy.”

The decision to absorb the penalties may be driven in part by the compliance costs. CMS estimated it would cost between $15,000 and $20,000 to meet the requirements, but Stodolak estimated it will cost stand-alone hospitals between $40,000 and $80,000.

“Based on the work we’re doing, [CMS estimates] are really low,” Nussbaum agreed.

The ruling may free CMS to consider a delay, Mackin said, and hospitals are expected to begin pushing for one as they struggle to address the COVID-19 pandemic.