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The Evolution of Price Transparency Requirements for Hospitals in the FY 2020 Medicare Proposed Outpatient Prospective Payment Rule

on Thursday, 5 September 2019 in Health Law Advisory: Zachary J. Buxton, Editor

The Centers for Medicare and Medicaid Services (“CMS”) issued a controversial proposed rule regarding price transparency for hospitals as part of the FY 2020 Outpatient Prospective Payment Proposed Rule. In its fact sheet regarding these provisions of the proposed rule, CMS noted that President Trump signed an Executive Order on June 24, 2019, stating that it is the policy of the Federal government to increase the availability of meaningful price information for patients. The Executive Order directed the Secretary of Health and Human Services (“HHS”) to propose a regulation requiring hospitals to publicly post standard charge information. In support of the push to transparency, Seema Verma, the Administrator of CMS, stated in January 2019 that transparency in health care pricing is “critical to enabling patients to become active consumers so that they can lead the drive towards value.”

The proposed rule implementing the increased pricing transparency provisions builds on the prior requirements to make standard pricing information available to patients upon request in 2015 and to publish charges on hospital web sites in machine-readable format in 2019. The proposed rule would require each hospital to make public a yearly list of the hospital’s standard charges for its items and services, including diagnosis-related group (“DRG”) services. In perhaps the most controversial part of the proposed rule, hospitals would be required to display payer-specific negotiated charges for a subset of “shoppable” services. Hospitals and third-party payers have argued that such charges are confidential, and that negotiating positions of hospitals and payers would be undermined by requirements to publish those rates.

CMS would define “standard charges” as a hospital’s gross charges and payer-specific negotiated charges for an item or service. Hospitals would be required to publicize all hospital standard charges for all items and services provided by the hospital in a digital and machine-readable file posted online. In addition, CMS has proposed that hospitals would also be required to publicize payer-specific negotiated charges for a more limited subset of “shoppable” services. Those charges would need to be packaged in a “consumer-friendly” manner.

CMS proposed that for the posting of standard charges, hospitals would need to include all items and services provided to patients during inpatient admissions or outpatient department services for which the hospital has established a charge. Examples given by CMS include supplies, procedures, room and board charges, facilities fees, professional services of employed practitioners, and any other items or services for which the hospital has established a charge.

For “shoppable” services, CMS would define “shoppable” services as those services that can be scheduled by a patient in advance. CMS notes that posting of these rates will allow patients to make “apples-to-apples” comparisons of payer-specific negotiated charges. Under the proposed rule, hospitals would be required to:

  • list payer-specific negotiated charges for at least 300 “shoppable” services (which must include 70 “shoppable” services selected by CMS), and if a hospital does not provide one or more of those 70 “shoppable” services, additional services must be selected and listed by the hospital so that the total number of “shoppable” services is at least 300;
  • include charges for services that the hospital customarily provides in conjunction with the primary service (which is identified by CPT, HCPCS or DRG code);
  • display the charge information prominently on a publicly available webpage, with the hospital and hospital location (if applicable) specified, and ensure the webpage is easily accessible and searchable; and
  • update the information at least annually.

CMS is proposing to monitor hospital compliance with these requirements by receiving and investigating complaints made by individuals or entities to CMS and by auditing hospitals’ websites. If CMS concludes a hospital is noncompliant with one or more of the above requirements, CMS proposes that it may first request a corrective action plan from the hospital if its noncompliance constitutes a material violation of one or more requirements. If the hospital fails to respond to CMS’ request to submit a corrective action plan or fails to comply with the requirements of the corrective action plan, CMS proposes it may impose a civil monetary penalty on the hospital not in excess of $300 per day, with publication of the penalties on a CMS website.

All charges, both for all items and services and for “shoppable” services, would need to be posted in machine-readable formats. CMS believes this format will allow patients to download and utilize the information in pricing apps and on-line comparison tools.

The proposed rule can be reviewed here. The deadline for submitting comments on the proposed rule is September 27, 2019. We would encourage hospitals to consider commenting on these provisions and why posting of payer-negotiated rates would be detrimental to hospitals’ ability to negotiate with payers for competitive rates.

Kimberly A. Lammers

1700 Farnam Street | Suite 1500 | Omaha, NE 68102 | 402.344.0500