The Centers for Medicare & Medicaid Services has sent its first wave of warning letters out to hospitals breaking federal rules requiring them to disclose payer-negotiated prices, a spokesperson for the agency confirmed.
CMS has been auditing hospitals’ websites and complaint submissions since the rule went into effect on January 1 and began sending out warnings in April, the spokesperson said.
Hospitals that received the warning are given a 90-day window to address shortcomings outlined in the letter. From there, the agency may close its inquiry, deliver a second warning letter or request a corrective action plan from the hospital.
The final rule specifies that facilities receiving a civil monetary penalty will also be publicly named on CMS’ website. The agency said it has yet to reach this point with its enforcement, as prematurely releasing the names of those hospitals could harm organizations that have already updated their online pricing information or are in the process of doing so.
The Hospital Price Transparency final rule requires hospitals to publish a machine-readable file online that outlines their payer-negotiated payment rates. It also requires hospitals to provide a tool that allows consumers to search and view the prices of 300 shoppable medical services.
Noncompliance with those rules can result in hospitals facing a penalty of up to $300 a day.
“These actions are necessary to promote price transparency in healthcare and public access to hospital standard charges,” the agency wrote in the final rule. “By disclosing hospital standard charges, we believe the public (including patients, employers, clinicians and other third parties) will have the information necessary to make more informed decisions about their care. We believe the impact of these final policies will help to increase market competition, and ultimately drive down the cost of healthcare services, making them more affordable for all patients.”
Reports, professional organizations warn of low compliance
A handful of reports from the past few months suggest that many hospitals and health systems likely are not in compliance with the rule.
A March Health Affairs analysis of the largest 100 U.S. hospitals found that 65 were “unambiguously non-compliant” by early February, with some of the remainder showing mixed levels of compliance.
A more recent analysis from Milliman found that 68% of included health systems had posted a file containing some degree of information by early March. However, it also noted that there was a “wide degree of diversity” in how they were presented.
CMS has faced resistance from the industry in the years since proposing the price transparency rule.
Professional organizations such as the American Hospital Association (AHA) and the Association of American Medical Colleges launched a lawsuit arguing that the agency did not have the authority to mandate its rule. This effort was rebuffed in federal court last June and hammered home by a federal appeals court judge in late December.
At the time of the appeal, the AHA warned that hospitals hadn’t received a clear answer on how exactly to comply with the rule.
“During a webcast on December 8, 2020, CMS advised that a common strategy that hospitals and their vendors have pursued to comply with the rule would not satisfy its requirements,” AHA wrote in a December filing. “Thus, even some hospitals that believed they were on track may find themselves subject to noncompliance penalties after the rule takes effect on January 1, 2021.”
“We need much more clarity”
Ambiguity in the rule’s language has been a major source of frustration for one health system executive who had heard that warning letters were being circulated.
Speaking with Fierce Healthcare on the condition of anonymity to avoid being identified by CMS, the vice president of one large U.S. health system said that their organization has worked for months to comply with the requirements. Despite numerous conversations with legal experts, the VP still isn’t sure whether their system’s implementation of the “poorly written” rule will be acceptable to the agency.
“I’ve actually had varying discussions with outside law firms and everything, and everyone has a different opinion,” the executive said. “One interpretation is you simply publish your rate schedule—whatever your rate exhibits are in your contracts, publish that and that’s compliant. Another one is to summarize these [CMS] packages [and] what your negotiated charges are by package. You start going down that path and it starts getting very confusing very quick.”
CMS estimated that first-year implementation of the final rule’s requirements would require a total per hospital burden of 150 hours split across lawyers, general operations managers, business operations specialists, network system administrators and registered nurses. Their time would run each hospital about $12,000, according to the rule.
This estimate was “way off base” according to the VP. After combining setup fees, monthly vendor subscription fees and other internal resources, the executive’s system spent closer to $64,000 per hospital for a total estimated cost of $832,000.
“We had to bring in our claims clearinghouse people—granted, I don’t think they charged us anything, but it was a cost to them to help us decipher the [paid claims] files,” the executive said. “We also had easily 15 people on an hour call once a week, every week since last September, when it became clear AHA wasn’t going to win the lawsuit. … We had me as a VP on every call, a project manager, our VP of revenue cycle on many of the calls and several director-level people on the calls.
“We’re talking a lot of money here on trying to get this up—and I’m not even sure if it’s compliant at the end of the day.”
The VP noted that the time and cost of their efforts were likely on the higher end of the scale, as the health system had decided to use paid claims data rather than the data from their contract management systems, “which in retrospect we probably should have done and may have taken less time.”
Still, the VP said their system’s costly decision speaks to the rule’s lack of clarity. Others who pursued an approach on the other end of the spectrum may find themselves the target of CMS’ attention down the road.
“I mean, if we were just to publish the rates schedule as one law firm suggested, I could do that in 10 minutes because we already have that summarized,” the executive said. “But I’m not sure that’s what CMS really wants.”
Some hospital executives say their issues with the CMS rule are chiefly with the machine-readable file requirements rather than the price transparency component. Although a recent Kaiser Family Foundation study suggests that these price comparison tools have been difficult for patients to use from provider to provider, the executive who spoke to Fierce Healthcare said that health systems “have fully embraced” the concept of these patient resources and will likely continue to build upon them over time.
“Providing patients with estimates, I think that’ll stick. That’s something hospitals will do even without a rule [and] I think we’re already past that issue by and large,” the VP said. “The machine-readable part of the rule, I hope that goes away. I hope CMS realized that hospitals are already helping patients understand prices and that the machine-readable side isn’t necessary. [Should] that part stay, that rule has to be rewritten to be clearer on what it is we’re supposed to publish. It’s so convoluted right now that … nobody can do a comparison across hospitals because every hospital is reporting differently.”
The VP said that their health system had not received any warnings from CMS and speculated that the agency may be focusing its first wave on the hospitals that haven’t taken any steps toward complying with the rule. Many health systems are making a “good faith effort” to comply, industry stakeholders say.
“Some hospital systems said that [they are] going to incur the $300 a day fine because [they] don’t want their rates out there,” the VP said. “That wasn’t our position … but if we get ‘You’ve got stuff out there, but it does not comply with the rule,’ then I need guidance on what they need to be compliant. We need much more clarity.”