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CMS Proposes, and Then Backs Away, from Increased Penalties to Address Non-Compliance with the Price Transparency Rule

on Tuesday, 7 September 2021 in Health Law Advisory: Andrew D. Kloeckner, Editor

In the proposed 2022 Outpatient Prospective Payment System (“OPPS”) rule released on July 19th, the Centers for Medicare and Medicaid Services (“CMS”) proposed increasing penalties for hospitals not in compliance with the price transparency requirements that took effect for hospitals on January 1, 2021.  A portion of the price transparency rule that requires hospitals to post payer-negotiated rates has perhaps been the most controversial part of the rule, as many hospitals believe this requirement undermines their ability to negotiate contracts with payers.  This requirement also appears to have had the highest level of non-compliance, with one source reporting over the summer that more than three-fourths of hospitals were not in compliance.  

Another reason given for non-compliance is that the price transparency rule includes only a minimal penalty at $300 per day for each day the hospital is determined to be non-compliant.  In May, CMS sent warning letters to 165 hospitals it had determined were not in compliance with the price transparency requirements notifying them they had ninety days to correct the issues CMS had identified, but CMS did immediately assess penalties on those hospitals.

In a statement issued with the proposed OPPS rule, CMS noted that it takes seriously concerns it has heard from consumers and consumer advocacy groups that hospitals were not in compliance with the requirements.  In the statement, CMS Administrator Chiquita Brooks-LaSure explained “we are simply showing hospitals through stiffer penalties: concealing the costs of services and procedures will not be tolerated by this administration.”

In the proposal, CMS would keep in place the current penalty of $300 per day for small hospitals with a bed count of 30 or fewer.  However, for all other hospitals, CMS is proposing to implement a penalty of $10 per bed per day, not to exceed a maximum daily dollar amount of $5,500.  CMS notes that under this proposed approach, for a full calendar year of noncompliance, the minimum total penalty amount would be $109,500 per hospital, and the maximum total penalty amount would be $2,007,500 per hospital.

CMS also requested comments on other potential ways for scaling the monetary penalties, including factoring in a hospital’s reasons for noncompliance and the severity of the situation.  CMS also asked for comments on best practices for online price estimator tools that hospitals can make available in lieu of posting standard charges for the 300 shoppable services.

After the proposed rule was released, the American Hospital Association stated it was “deeply concerned about the proposed increase in penalties for non-compliance, particularly in light of substantial uncertainty in the interpretation of the rules.”  On August 17th, Bloomberg Law reported that a CMS representative told it that CMS plans to hold off on increasing the penalties for non-compliance to allow hospitals more time to come into compliance with the price transparency requirements.  CMS has not yet released an official statement about a decision to delay the implementation of increased penalties.

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