CMS plans aggressive price transparency enforcement while hospitals urge a halt to the new rules

• CMS plans in January to begin hospital website audits to check compliance with price transparency requirements.
• An appeals court was urged to freeze the rules pending a decision on an appeal.
• The incoming Biden administration was urged to freeze the rules for the duration of the pandemic.

Hospitals should expect aggressive enforcement of new price transparency rules, beginning with January audits, federal regulators say. Hospital groups responded with entreaties to both federal judges and the incoming Biden administration to halt the rules.

CMS notified hospitals on Dec. 18 that beginning in January it plans to audit the websites of “a sample of hospitals” to determine compliance with the new price transparency requirements, which take effect Jan. 1. Additionally, it plans to investigate rule-related complaints that are “submitted to CMS” and to review “analyses of non-compliance.”

“CMS is trying to send a signal that hospitals need to pay attention to this,” Lesley Yeung, a senior counsel for Epstein Becker Green, said in an interview. “I took this as CMS signaling, ‘Yes, we want this to go into place and we want you, hospitals, to take it seriously.’”

The rule requires all hospitals — not just those paid by Medicare — to post online by Jan. 1 several types of what CMS calls “standard charge information,” including:

• Comprehensive, machine-readable files of negotiated prices for all offered items and services
• A display of prices for 300 shoppable services in a consumer-friendly format

Various surveys of hospital officials have found some degree of reluctance to fully implement the requirements due to the estimated cost and resource demand — especially amid a pandemic — along with the rule’s complexity and some uncertainty about CMS’s commitment to the rule during a change in administrations.

Hospitals face penalties of up to $300 per day for noncompliance, while estimates by some health systems of implementation costs totaled several million dollars, plus large and ongoing maintenance costs.

“There’s been some reluctance to invest resources that are needed to really comply with this,” Yeung said. “I don’t think this [prospective auditing] changes that financial calculation, but maybe it changes the public-facing scrutiny and reputational calculation of, ‘How likely is that CMS is going to take action and we will be called out for not being in compliance with it?’”

CMS plans to publicize online which hospitals pay penalties for noncompliance, potentially making the information available to media and consumers.

In an era of healthcare consumerism, hospitals likely would want to avoid such adverse publicity, industry advisers said.

Another challenge has been continuing uncertainty over how to comply with the rule.

For instance, in a Dec. 8 webcast, officials at CMS said, “A common strategy that hospitals and their vendors have pursued to comply with the rule would not satisfy its requirements,” according to a recent legal filing by the American Hospital Association (AHA).

AHA officials were unable to detail the specifics of the rejected compliance strategy, and no audio recording or transcript of the webcast had been posted by CMS when this article was published. But CMS should keep such challenges in mind during enforcement, said James Pinna, a partner for Hunton Andrews Kurth.

“It’s going to be a challenging process for hospitals to compile the data in the format that CMS wants,” Pinna said. “So hopefully, CMS will understand that there is a learning curve to getting all of the data posted exactly in the format CMS may want to see.”

Hospitals lobby for appeals court action

Hospitals’ reluctance to undertake full compliance also stems from outstanding legal challenges.

As part of an ongoing suit to stop the rule, the AHA on Dec. 21 filed a motion with a three-judge appeals panel to stay the rule “to prevent the diversion of personnel and resources hospitals have brought to the front lines of the coronavirus pandemic.”

The filing came as part of an ongoing hospital appeal of a lower-court ruling that upheld the rule.

Yeung was doubtful the appeals court would freeze implementation.

“It would be a different matter if the district court had struck down the rule,” Yeung said.

Biden administration also receives hospital pleas

The American Hospital Association wrote a Dec. 11 letter to the incoming Biden administration urging it to “[r]escind provider requirements to publicly disclose negotiated rates that do nothing to help patients understand their costs, could result in anticompetitive actions on the part of health plans, and, according to the Federal Trade Commission, could result in high costs for patients.”

However, price transparency initiatives generally have bipartisan support, Yeung said. Plus, the looming requirements were seen as building on price transparency rules included in the Affordable Care Act, which Biden helped become law in the early years of the Obama administration.

“So, it’s less clear that they would automatically come in and put holds on it,” Yeung said. “But they may come in and put holds on everything just to stop and see the lay of the land before moving forward.”

A key directional indicator for Pinna was the FY21 Inpatient Prospective Payment System requirement regarding Medicare cost-report filings. Starting Jan. 1, hospitals must include the median charges negotiated with their Medicare Advantage organization payers, by MS-DRG.

“To me, that goes to reinforce the understanding that CMS is serious about pursuing this price transparency initiative,” Pinna said.