Price transparency empowers consumers to make better-informed financial decisions about their healthcare.

On June 24, 2019, then President Trump signed Executive Order (EO) 13877, Improving Price and Quality Transparency in American Healthcare to Put Patients First, but for a variety of reasons, compliance has been slow in coming.

As of January 1, 2021, each hospital operating in the United States was to give clear, accessible pricing information online for the items and services they provided.

In November 2021, the Centers for Medicare & Medicaid Services (CMS) released a final rule that enhances penalties. The Calendar Year (CY) 2022 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Final Rule (CMS-1753-FC) will strengthen enforcement of price transparency requirements.

As of January 1, 2022, CMS will impose new guidelines for calculating penalties for noncompliance with those requirements. The agency’s actions demonstrate that it takes consumers’ concerns about pricing transparency seriously. CMS is increasing pressure on hospital systems to comply, as they have been required to do since January 1, 2021.

In this post, we summarize the requirements, discuss obstacles to compliance and outline steps to help hospital systems overcome these obstacles.

The requirements

EO 13877 has these goals:

• Improve price and quality transparency
• Empower patients with information
• Increase transparency to reduce costs

The order requires hospitals to:

• Provide machine-readable files (such as those encoded using Extensible Markup Language; a few formats are permitted) to give pricing information for each item or service provided in inpatient and outpatient settings. Each item or service must include a description as well as accounting and billing codes. The information must be updated at least annually and must be freely available to healthcare consumers and decision-making tool developers without user IDs or passwords. It must be searchable online.
• Provide a consumer-friendly shoppable services tool for a minimum of 300 service items, 70 of which are specified by CMS. (The hospital must indicate if any of the 70 specified services isn’t offered, and it is required to meet the minimum of 300 services anyway.) Entries must include the primary code used for billing and a plain-language description of the item or service. Ancillary services must be grouped with applicable primary services. Entries must indicate at which location the service is provided and state whether the standard charge provided applies to inpatient or outpatient settings or both. As with machine-readable files, the shoppable services tool must be available without logging in. The tool must identify the hospital location and be updated at least annually. Shoppable services must be prominently displayed on the hospital’s website.

The penalties

For larger hospital systems, noncompliance will become a great deal more expensive in 2022, as CMS will calculate penalties on a per bed and per hospital basis.

As of January 1, 2022, hospital systems will be charged minimum civil monetary penalties as follows:

• 30 beds or fewer: $300 per day: $300 x 365 = $109,500
• 31 beds or more: $10 per bed per day, but not to exceed a daily maximum of $5,500 per day: $5,500 x 365 = $2,007,500 per hospital

It’s important to note that penalties are per hospital. For a system with 10 hospitals, therefore, $5,500 x 365 x 10 = $20,075,000 minimum for a 10-hospital system.

The obstacles to compliance

The increase in price transparency noncompliance fines is CMS’ response to the market’s low level of compliance to date, but the obstacles to compliance have been significant. To name a few:

• Hospital system leaders are concerned that public pricing diminishes competitive advantage and could force them to compete on price. So strongly held are these views that some leaders have consequently accepted the risk of previously published penalties, which were considered widely as nominal, and reputational damage rather than comply.
• Specific requirements are left to interpretation and, as written, don’t achieve the goal of enabling like-to-like comparisons. For instance, the rules don’t explicitly call for including professional charges such as interpretation and readings, anesthesiology, and nonemployed physicians. (We argue that including physician charges, while a more complex effort, is in keeping with the objective of empowering the consumer.) Where some healthcare organizations may include these details, others may not, creating greater confusion for prospective patients when transparency is the goal.
• There may be difficulties with assembling the required information for publishing compliant and machine-readable data files. Many hospital systems lack the required expertise to extract data from their systems, or their technology service providers (including EMR platforms) haven’t configured the required files yet.

Recommendations

While CMS may make an example of a few healthcare organizations early in 2022, it has offered generous timelines to those it has found in noncompliance up until now: Generally, organizations are given 90 days to respond with a corrective action plan (CAP). Demonstrating the intent to comply is better than taking no action at all.

Recommendations for facilitating compliance include, but may not be limited to, the following:

• Develop a compliance initiative for ensuring key participants become familiar with the order’s requirements:
  • Include finance, revenue cycle, compliance, and marketing leaders in the effort.
  • Be aware that the story will be developing quickly, particularly in early 2022; participants should monitor regulatory news for developments and be prepared to act swiftly.
• Check that data in source systems (revenue cycle, EMR) is current and correct.
• Evaluate current practices against emerging standards and address gaps.
• Develop complete machine-readable files for each entity within the hospital system. Consider seeking third parties to assist with preparing these files. Check whether the EMR provider can provide extracts to create them.
• Consider having posted files audited by internal audit or a third party who specializes in this to ensure the files meet the requirements.
• Select internal or third-party specialists to deliver consumer-friendly shoppable services.
• Pair pricing information with hospital quality data, where possible, to give consumers a better view of the quality of care rather than pricing alone.

Price transparency will help patients and their loved ones know how much hospital services and items will cost them, and CMS is acting to expedite compliance with EO 13877 so that clear and accessible pricing information is available to consumers online, as required since January 1, 2021. Even given the obstacles to compliance, it isn’t too late for hospital systems to avoid the heavier penalties that are coming in 2022.