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Forget the “Carrot,” Straight to the “Stick”: CMS Proposes Increased Penalties for Noncompliance with the Price Transparency Rule

on Thursday, 29 July 2021 in Health Law Advisory: Andrew D. Kloeckner, Editor

As of January 1, 2021, hospitals were required to disclose prices and otherwise comply with the price transparency requirements or face penalties.  As a refresher, the price transparency rule requires hospitals post the “standard charges” of 300 common health services.  The Centers for Medicare & Medicaid Services (“CMS”) specified 70 specific services that must be posted and allows hospitals to exercise discretion in determining the remaining services to disclose.  These prices must be made available to the public in a “machine-readable file” on the hospital’s website.  Non-compliant hospitals were to be subject to a penalty of $300 per day for noncompliance. 

In July 2021, a survey released by a patient advocacy group highlighted that 94.4% of hospitals are noncompliant with the price transparency rules.  The survey alludes to a range of problems from straight out failure to post prices, to a failure to comply with the machine-readable file requirement, to failure to post all payer-specific and plan-specific negotiated rates.

In response to what is viewed as wide noncompliance driven by the lack of material financial penalty, on July 19, 2021, CMS issued a proposed rule that would substantially increase the penalty for noncompliance with the price transparency requirements for many hospitals. For example, a hospital with 550 beds would owe slightly more than $2 million for non-compliance over an entire year, whereas previously the penalty would have been just north of $100,000.  (The initial rate of $300 per day remains for hospitals with 30 or fewer beds).  For each bed over 30, the penalty increases by $10 per day for each bed with a cap at $5,500 per day.  This is a substantial increase for larger hospitals if noncompliance reaches a full calendar year.  

The Biden administration explained the need to increase penalties with HHS Secretary Xavier Becerra stating: “[w]e are simply showing hospitals through stiffer penalties: Concealing the costs of services and procedures will not be tolerated by this administration.”  The new penalty structure and proposed rule will likely be challenged as the American Hospital Association issued a statement of concern that the new penalty is excessive.

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