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Hospital Price Transparency Requirements for 2021

October 14, 2020

Earlier this month, the Centers for Medicare and Medicaid Services (CMS) issued a reminder that its hospital price transparency final rule will become effective January 1, 2021 (84 FR 65524; to be codified at 45 CFR Part 180) (the “Rule”).  That rule generally requires hospitals to publicly post their prices. Although some hospitals were holding out hope that CMS would delay implementation of the Rule due to COVID, or alternatively that a court challenge to the Rule would invalidate it, neither has come to pass.  The court challenge was rejected by the DC District Court in June, with appeal arguments set to be heard October 15 in the DC Circuit.  Nevertheless, CMS has reaffirmed its commitment to the Rule in its annual IPPS rule it promulgated in September.  Thus, with less than three months left to comply, hospitals must devote the time and resources necessary to be in compliance by January 1, 2021.

Pursuant to the Rule, it is required that “each hospital operating within the United States, for each year, to establish, update, and make public a list of the hospital’s standard charges for items and services provided by the hospital.”  CMS made clear too in its commentary in the Rule that the regulatory definition of hospital is a “broad definition that will encompass all institutions recognized by a State as a hospital,” including examples such as critical access hospitals, inpatient psychiatric facilities, sole community hospitals, and inpatient rehabilitation facilities.  Therefore, except for federally owned or operated hospitals, this rule applies to every institution that meets the definition of hospital, whether enrolled in Medicare or not.  In addition, all hospital locations operating under the same hospital license are subject to the requirements of the Rule, including outpatient departments located at an off-campus location.

The general requirement to make standard charges public is further specified in two ways that a hospital must make its standard charges public: (1) through a comprehensive machine-readable list of “standard charges” for all items and services; and (2) through a display of “shoppable services” in a consumer-friendly format.  Each of these lists must be made public electronically via the internet, must be displayed in a prominent manner on a publicly available website, and must be easily accessible without barriers, including no charge, no username and password requirements for access, and no submission of personal identifying information necessary for access.

First, the “standard charges” list must list all “standard charges” for all of the hospital’s “items and services.”  These terms are further defined in the regulations, with “standard charge” defined as “the regular rate established by the hospital for an item or service provided to a specific group of paying patients,” which includes “gross charge, payer-specific negotiated charge, de-identified minimum negotiated charge, de-identified maximum negotiated charge, discounted cash price.”  Each of these terms is further defined in the Rule.  “Items and services” is defined as “all items and services, including individual items and services and service packages, that could be provided by a hospital to a patient in connection with an inpatient admission or outpatient department visit for which the hospital has established a standard charge,” and is accompanied by the following examples: (1) supplies and procedures, (2) room and board, (3) use of the facility and other items (generally described as facility fees), (4) services of employed physicians and non-physician practitioners (generally reflected as professional charges), and (5) any other items or services for which a hospital has established a standard charge.

Note here that the list of items and services must include time-based charges, unit-based charges and service packages, and must also include the services of employed physicians and non-physician practitioners.  CMS, however, declined to define “employment” due to the “variation and complexity in employment models and possible contracting relationships that may exist between hospitals and physicians,” thereby leaving it up to hospitals to identify those practitioners who are employed under their organizational structure.  This requirement applies even to the services of employed practitioners that do not appear on the hospital’s chargemaster.  Note too that the definition of “third party payer” may include a state’s Medicaid managed care contracts, if they include rates negotiated with the hospital, and could also include a local company with which a hospital has negotiated a specific charge for an item or service such as drug screening.

A hospital must also include a whole host of corresponding data elements in its list of standard charges, including: a description of each item or service provided by the hospital, the gross charge that applies to each individual item, the payer-specific negotiated charges along with the name of the third-party payer and plan, the de-identified minimum and maximum negotiated charges that apply to each item or service, the discounted cash price that applies to each item or service, and any code used by the hospital for the purposes of accounting or billing for the item or service.  If a hospital does not offer a cash discount for an item or service, then the hospital’s discounted cash price would generally just be its gross charge as reflected on the chargemaster.  

If an item or service does not have a corresponding common billing and accounting code, or other required data element, it is acceptable to leave that information blank.  The list must be published in a single digital file that is in a machine-readable format (a defined term under the Rule, but common examples include .XML, .JSON and .CSV formats), must be posted on a publicly available website as described above, must be digitally searchable, must follow a specific naming convention in its file title, and must be updated at least once annually.  Hospitals should also pay attention to any confidentiality provisions that may exist in contracts with third-party payers to ensure that they permit disclosures required by Federal law, or can be modified to do so before January 1, 2021.  Generally, CMS does not believe that negotiated price information is proprietary as it is made public information through state databases and EOBs by way of example.

Second, the “shoppable services” list must include the standard charge for as many of the 70 CMS-specified shoppable services that are provided by the hospital, plus as many additional hospital-selected shoppable services as is necessary for a combined total of 300 shoppable services. “Shoppable services” are defined in the Rule as “a service that can be scheduled by a healthcare consumer in advance.” Physical therapy and joint replacements are examples of shoppable services, as is the administration of certain medications, such as flu shots or medication infusions for chronic conditions. The list of CMS-specified shoppable services is available here.  If a hospital does not offer a CMS-specific shoppable service, it must clearly indicate that it does not provide it and may use “NA” for the corresponding charge.  The hospital would then select an additional shoppable service to include in its list of shoppable services to bring the list to 300.  If the hospital does not provide 300 shoppable services, the hospital must make public the below information for as many shoppable services as it provides.

Like the standard charges list, the hospital must include corresponding data elements when displaying the standard charges for its shoppable services, including: a plain-language description of each shoppable service, an indicator when one or more of the CMS-specified shoppable services are not offered by the hospital, the payer-specified negotiated charge that applies to each shoppable service (and ancillary service, as applicable) with negotiated charges clearly associated with the name of the third-party payer and plan, the discounted cash price that applies to each shoppable service (and ancillary services, as applicable) or undiscounted gross charge if the hospital does not offer a discounted cash price, the de-identified minimum and maximum negotiated charges that apply to each shoppable service (and corresponding ancillary service), the location at which the shoppable service is provided including whether the standard charges for the shoppable service applies at that location in inpatient or outpatient setting (or both), and any primary code used by the hospital for purposes of accounting or billing for the shoppable service.

“Ancillary service” is defined as an item or service a hospital customarily provides as part of or in conjunction with a shoppable service and may include laboratory, radiology, drugs, delivery room, operating room, recovery room, therapy services, hospital fees, room and board charges and charges for employed professional services.  As with the standard charges list, the shoppable services list must be made available on a publicly available website as described above, must be searchable by service description, billing code, and payer, and must be updated at least once annually.

Unlike the standard charges list, a hospital has discretion to choose a format for making public this information.  With that being said, however, CMS has made clear that when the hospital offers a shoppable service as a service package that includes all ancillary services, the hospital must display the charge the hospital has established for the service package as a whole, and not a manufactured charge for each of the individual items and services that constitutes the service package.  And hospitals are required to list any additional ancillary services provided with the shoppable service package.

Also unlike the standard charges list, a hospital can meet the requirements of posting the shoppable services list by maintaining an internet-based price estimator tool that meets certain requirements.  The price estimator tool must meet the following criteria to comply with the rule: (1) provide estimates for as many of the 70 CMS-specified shoppable services as the hospital offers, plus as many additional shoppable services selected by the hospital as necessary for a total of 300 shoppable services; (2) allow healthcare consumers to obtain an estimate of the amount they will be obligated to pay for the shoppable service at the time they use the tool; and (3) is prominently displayed on the hospital’s website and accessible to the public without charge, without having to register, and without having to establish or use a username and password.

Failure to comply with this rule could expose a hospital to civil monetary penalties of up to $300 per day if the hospital fails to respond to CMS’ request to submit a corrective action plan or comply with the requirements of a corrective action plan.  In addition, CMS’ September 18, 2020 yearly IPPS rule contains a provision that requires hospitals to provide their median negotiated rates with Medicare Advantage private insurance plans on their Medicare cost reports.

Ultimately, price transparency is likely part of the future business environment for hospitals with continued pushes for cost transparency.  Thus, not only should hospitals prepare to comply with the Rule for January 1, 2021, they should be prepared for such transparency and consumer access to prices to only expand in the future.  Hospitals that haven’t yet started compliance efforts for the Rule, however, have ground to make up to ensure they can meet that January 1, 2021 effective date.

CMS has issued FAQs, checklists, and other guidance materials on the price transparency rule, available here.

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