Hospital Price Transparency Rule: Full Steam Ahead

November 9, 2020 Alerts and Newsletters

Neither COVID-19 nor continued legal challenges appear likely to derail the Centers for Medicare & Medicaid Services (CMS) Hospital Price Transparency Rule from going into effect on January 1, 2021. Hospitals therefore should continue to comply with the requirements by the deadline. This is not to be confused with two other recently finalized rules requiring hospitals to report their average negotiated prices with Medicare Advantage plans and insurers to provide enrollees with personalized cost-sharing estimates.

1. Core Requirements of Hospital Price Transparency Rule

In November 2019, CMS finalized the Hospital Price Transparency Rule and established an effective date of January 1, 2021. Despite an intervening global pandemic and a pending legal challenge, the rule’s target effective date remains unchanged.

This means that upon the New Year, hospitals must disclose the prices it charges various payers for services provided. Specifically, the rule requires hospitals to publish two separate lists of hospital prices:

  • a comprehensive list comprised of various charges for all items and services, and
  • a consumer-friendly list of prices associated with a narrower set of “shoppable” services.

The more comprehensive list must include every item and service provided by the hospital. Additionally, for each item or service, the hospital must include five types of “standard” hospital charges:

  • the gross charge (as reflected in the chargemaster),
  • each payer-specific negotiated charge,
  • the de-identified minimum and maximum negotiated charges, and
  • if applicable, the discounted cash price the hospital charges an individual who self pays.

The rule obligates hospitals to publish the comprehensive list in a machine readable format and to update the list annually.

By contrast, the consumer-friendly list must include 70 CMS-specified “shoppable” services (i.e., services that a patient could schedule in advance, such as blood tests or MRI scans), as well at least 230 additional services selected by each hospital based on frequency of patient utilization. Similar to the more comprehensive list described above, the consumer-friendly list of shoppable services must be populated with various standard charges. However, unlike the more comprehensive list, the consumer-friendly list must also include a plain language description of the item or service, as well as charges for commonly associated ancillary services, such as lab tests or post-surgery follow up care. Importantly, hospitals that maintain internet-based price estimator tools may comply with this requirement if their tool provides estimates for the 70 CMS-specified and 230 additional shoppable services.

CMS has prepared a helpful website and FAQs on the subject. See links in "Key Resources" box.

Status of Legal Challenge:

Earlier this summer, the U.S. District Court for the District of Columbia (D.C.) dismissed a case brought by the American Hospital Association (AHA) and other hospital groups seeking to block implementation of the Hospital Price Transparency Rule. The AHA subsequently appealed the decision to the D.C. Court of Appeals, which heard oral arguments on October 15. The Appeals Court is not expected to decide the case prior to the rule’s January 1, 2021 effective date.

2. Medicare Advantage Rate Disclosure Rule Finalized for 2021

CMS’ intent to press ahead with hospital price transparency was confirmed by a separate rule issued on September 2 finalizing the IPPS update for FY 2021. The new IPPS rule requires hospitals to report their de-identified median payment rate for each DRG they have negotiated with Medicare Advantage insurers for cost reporting periods ending on or after January 1, 2021. CMS will then use the reported rates to re-weight the DRGs for Medicare reimbursement starting in FY 2024.

Utilizing negotiated rates departs from CMS’ previous rate setting methodology, which used hospital chargemaster prices. However, CMS described that the IPPS requirement to report de-identified Medicare Advantage negotiated rates will ultimately be “less burdensome for hospitals” because this requirement overlaps with the Hospital Price Transparency Rule, which requires hospitals to report charges negotiated by all payers—including Medicare Advantage insurers. Critically, CMS cautions in the final IPPS rule that a hospital’s failure to comply with the new IPPS reporting requirements could jeopardize its future Medicare payments.

3. Parallel Transparency Rule for Insurers Effective in 2022

A Rule recently jointly finalized by the U.S. Department of Health & Human Services (HHS), the Department of Labor, and the Department of Treasury imposes analogous price disclosure requirements on health insurers beginning on January 1, 2022. Issued on October 29, 2020, the rule establishes a multi-phase rollout requiring insurers to:

  • disclose detailed pricing information in machine readable lists by January 1, 2022;
  • develop and maintain an online consumer-facing price tool that calculates customized out-of-pocket costs for enrollees by 2022;
  • expand customized cost-calculation capabilities to include 500 agency-selected “shoppable” services by 2023; and
  • expand customized cost-calculation capabilities to include all covered items and services by 2024.

In short, the rule represents the most recent component of a broader health price transparency initiative by requiring insurers to provide consumers with coverage-specific breakdowns of hundreds-- and eventually thousands--of health services.

The bottom line: Barring a decision from the D.C. Court of Appeals to the contrary, hospitals must be prepared to comply with the Hospital Price Transparency Rule by January 1, 2021. Under a separate (but related) rule, a hospital’s failure to disclose de-identified median rates negotiated by Medicare Advantage insurers could have far reaching implications for its Medicare payments. Insurers will also face price transparency requirements beginning in 2022.

Please contact a member of Verrill's Health Care & Life Sciences Group with any questions regarding the rules.

Key Resources

  1. CMS Hospital Price Transparency Checklist

  2. CMS FAQ for Hospital Price Transparency

  3. FY 2021 Hospital IPPS Final Rule

  4. New Transparency in Coverage Final Rule (issued Oct. 29, 2020)

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