New Laws

January 1, 2021 Is D-Day for Hospital Pricing Transparency 

It appears to be full speed ahead for hospital price transparency. The controversial effort to make hospitals divulge information about their healthcare pricing, including lab procedures, is very much a part of CMS’ proposed hospital prospective payment system proposed rule for 2021.

CMS’ Push for Price Transparency

In November 2019, CMS published a final rule requiring hospitals to publish their chargemasters online for consumers. The agency made it clear that this would be the first of potentially many initiatives geared toward increasing transparency around hospital and other provider fees. The goal of all of these changes is to improve the ease and accuracy with which consumers can understand the expected out-of-pocket expenditures for patient care.

The rules, which are contained in FY 2021 Proposed Rule CMS-1735-P, aka, “Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals,” take effect on Jan. 1, 2021, one year later than initially proposed.

What the New Transparency Rules Require

The new rules require hospitals to make real negotiated prices known to patients. More precisely, they must make public their “standard charges” for both gross charges and payer-specific negotiated charges for all items and services.

Pricing information must also be available on the Internet in a machine-readable file and include information such as common billing or accounting codes used by the hospital, along with a description of the particular item or service. The pricing information must be presented in a “consumer friendly” way and include payer-specific negotiated charges for common “shoppable” services.

3 Things You Need to Know to Ensure Proper Implementation

Hospital labs need to start taking steps to implement the new rules when they take effect on January 1. To do that, there are three things you need to know:

  1. What “Shoppable Services” Means

 The “shoppable services” for which you must provide pricing information are those that can be scheduled by a health care consumer in advance, theoretically in the interest of shopping out the best price or deal. That would, of course, include most lab tests, as well as x-rays, outpatient visits, imaging tests and bundled services like pre- and post-delivery care and cesarean deliveries.

Hospitals would have to display negotiated charges for at least 300 services, including 70 selected by the CMS and 230 selected by the hospitals. The services could include both inpatient and outpatient procedures and affect all patients, not just Medicare beneficiaries. (CMS cites the Public Health Service Act as the source of its authority to impose these pricing requirements on hospitals not in Medicare.)

  1. What “Consumer-Friendly” Means

Simply disclosing hospital charge information isn’t enough. The disclosure must also be “consumer-friendly,” i.e., made public in a prominent location online (or in written form upon request) that’s easily accessible, without barriers and searchable. Product and service descriptions must also be in “plain language” with the shoppable service charges displayed and grouped with charges for any ancillary services the hospital customarily provides with the primary shoppable service. Hospitals also have to update their posted pricing information at least once a year.

  1. What the Transparency Rules Don’t Require

Finally, keep in mind that the CMS transparency rules short of requiring hospitals to post patient-specific price information, e.g., information showing particular patients where they are in meeting their deductibles.

 The Pushback

While largely sympathetic with its objectives, hospital and health care industry groups have opposed the CMS transparency plan from the onset. According to American Hospital Association (AHA) President Rick Pollack, requiring hospitals to post negotiated rates “could seriously limit the choices available to patients in the private market and fuel anticompetitive behavior among commercial health insurers in an already highly concentrated insurance industry.”

There’s also concern about the potential costs and risks associated with the transparency rules, particularly in terms of patient relations and expectations. Standard charges, for example, are based on customary care and don’t take into account emergency or acute situations. In other words, standard pricing assumes a best-case scenario which doesn’t always prove to be realistic. This puts labs in a ticklish position when actual patient charges end up being higher than the previously quoted prices. The potential result is damage to not only customer relations but also the trust on which the patient relationship is based.

Takeaway

The AHA has also challenged the constitutionality of the transparency plan. But in June 2020, a federal district court sided with CMS and tossed the case. As a result, barring another delay, Jan. 1, 2021 will be D-Day for pricing transparency. And the stakes are high. The agency also said it wants to enforce the price transparency requirements by monitoring, auditing and imposing civil monetary penalties of up to $300 a day and more than $100,000 per year against hospitals that don’t comply. 

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