Burr & Forman

03.15.2021   |   Articles / Publications

Birmingham Medical News: Hospital Price Transparency Rule – January 1, 2021 Effective Date

Reprinted with permission from the Birmingham Medical News

As if hospitals don’t have enough challenges with the fallout from COVID-19, they also need to comply with the new Hospital Price Transparency Rule (See 45 C.F.R. Part 180) which is effective January 1, 2021. This rule requires hospitals to establish, update, and make public online: (i) a list of their standard charges for items and services in a machine readable format, and (ii) a list of certain shoppable services in a consumer-friendly manner.

The Hospital Price Transparency Rule received substantial pushback, including a lawsuit filed by the American Hospital Association in December 2019, challenging that it exceeds CMS’ authority, violates the First Amendment, and is arbitrary and capricious. On June 23, 2020, the United States District Court for the District of Columbia rejected all of those challenges and granted summary judgment to the defendants, ruling in favor of CMS. The American Hospital Association has since appealed the ruling, and a three-judge panel on the D.C. Circuit Court of Appeals heard oral arguments in the appeal on October 15, 2020. However, a ruling has not been issued at the time this article was submitted.

In addition to the appeal, multiple hospitals across the U.S. sent joint letters to the U.S. Department of Health and Human Services urging CMS to delay the effective date of the Hospital Price Transparency Rule until its legality is fully adjudicated by the courts, due to the burden compliance would represent for hospitals in the midst of responding to the COVID-19 public health emergency. CMS has given no indication that it intends to push back the January 1, 2021 effective date.

Given the outstanding status of the appeal, and lack of indication by CMS that the effective date will be pushed back, hospitals should be confirming they comply with the requirements of the Hospital Price Transparency Rule – an overview of which is listed below:

  1. Who is required to comply with the Hospital Price Transparency Rule – “Hospitals” – CMS requires “Hospitals” to comply with the Hospital Price Transparency Rule and defined Hospitals to mean an institution in any State in which State or applicable local law provides for the licensing of hospitals, that is licensed as a hospital pursuant to such law or is approved, by the agency of such State or locality responsible for licensing hospitals, as meeting the standards established for such licensing.

CMS did not exempt rural hospitals or critical access hospitals. To the extent considered a “Hospital” pursuant to the above definition, long-term care hospitals, inpatient psychiatric facilities, and inpatient rehabilitation facilities will have to comply with the Hospital Price Transparency Rule as well.

Federally owned or operated hospitals are deemed by CMS to be in compliance with the requirements of the Hospital Price Transparency Rule because their charges are publicized to their patients, the facilities do not provide services to the general public, and the established payment rates for services are not subject to negotiation.

  1. Machine Readable Online List of Standard Charges for all Items and Services – The Hospital Price Transparency Rule requires each Hospital to establish, update annually, and make public online a “Machine-Readable File” containing a list of all “Standard Charges” for all “Items and Services.” Each hospital location operating under a single license (or approval) that has a different set of standard charges than the other locations under the same license or approval must separately make public the standard charges applicable to that location. The list made public by the Hospital must include any code used by the Hospital for purposes of accounting or billing for the item or service.
      1. What is included in “Items and Services” – CMS defined “Items and Services” to mean 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 an outpatient department visit for which the hospital has established a standard charge. Examples include, but are not limited to, the following: (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.
      2. What are the “Standard Charges” that must be disclosed on the list – CMS defined standard charges to mean the regular rate established by the Hospital for an item or service provided to a specific group of paying patients. This includes:
        1. Gross charge – the charge for an individual item or service that is reflected on a hospital’s chargemaster, absent any discounts.
        2. Payer-specific negotiated charge – the charge that a hospital has negotiated with a third-party payer for an item or service.
        3. De-identified minimum negotiated charge – the lowest charge that a hospital has negotiated with all third-party payers for an item or service.
        4. De-identified maximum negotiated charge – the highest charge that a hospital has negotiated with all third-party payers for an item or service.
        5. Discounted cash price – the charge that applies to an individual who pays cash (or cash equivalent) for a hospital item or service.
      3. What is a Machine Readable Format Online – Examples of machine-readable formats include, but are not limited to, .XML, .JSON and .CSV formats. CMS noted that a .PDF file is not included as a machine-readable format.
  2. Shoppable Services Displayed in a Consumer Friendly Manner – Since the amount of data in a machine readable list may be not easily understood by consumers, each hospital is required to make public certain standard charges in a consumer-friendly pricing display. Hospitals are required to display pricing for 70 CMS specified shoppable services (if offered; and noted if not offered) and as many additional hospital-selected shoppable services as is necessary for a combined total of at least 300 shoppable services (or as many shoppable services as the hospital provides, if 300 are not provided). A shoppable service is a service that can be scheduled by a healthcare consumer in advance. Hospitals must provide the following information for each listed shoppable service and ancillary service: (i) plain language description; (ii) indication of any CMS-specified shoppable services that are not offered by the hospital; (iii) payer-specific negotiated charge; (iv) discounted cash price (or undiscounted gross charge if a discounted cash price is not offered); (v) de-identified minimum negotiated charge; (vi) de-identified maximum negotiated charge; (vii) location where the service is provided, including whether the standard charge applies at that location in the inpatient setting, outpatient setting, or both; and (viii) any primary code used by the hospital for purposes of accounting or billing.

The shoppable services must be published online without barriers, and be searchable. However, a hospital is deemed to meet these consumer-friendly disclosure requirements if the hospital maintains an internet-based price estimator tool that: (i) allows users to obtain an estimate of the amount they will be obligated to pay the hospital for the shoppable service; and (ii) is prominently displayed on the hospital’s website and accessible to the public without charge and without having to register or establish a user account or password.

  1. Penalties for Non-Compliance – If CMS concludes a hospital is non-compliant with its obligations under the Hospital Price Transparency Rule, CMS may provide a written warning notice to the hospital, request a corrective action plan from the hospital, and/or impose a civil monetary penalty of up to $300 per day (which amount will be adjusted annually).
  2. Estimated Cost of Compliance – CMS estimates that the total burden for a hospital to review and post its standard charges for the first year will be 150 hours per hospital, at an estimated cost of $11,898.60 per Hospital, with the annual burden to review and update such charges in subsequent years being 46 hours per Hospital at $3,610.88 per Hospital. CMS anticipates that the Hospital Price Transparency Rule will affect approximately 6,002 Hospitals.

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