Hospital Price Transparency: CMS Issues Proposed Rule to Increase Penalties for Larger Hospitals Violating Disclosure Requirements

On July 19, 2021 the Centers for Medicare and Medicaid Services (CMS), as part of proposed rule covering a variety of subjects, including Medicare Hospital Outpatient and Ambulatory Surgery Center PPS modifications, issued a proposed rule with an opportunity to comment (the Rule) amending the hospital price transparency regulations. (The Rule is scheduled to be published in the Federal Register on August 4, 2021.) The Rule seeks to modify the existing hospital price transparency regulations codified at 45 C.F.R. part 180 Subpart C, by, among other things,

1. Increasing the penalties for hospital non-compliance with the existing regulations through the use of a scaling factor;
2. Prohibiting conduct that has been a barrier to accessing the price information online.

The existing hospital price transparency regulations (the Regulations), among other things, require hospitals to make publicly available all of the hospitals “standard charges.” “Standard charges” is defined to include five categories, namely:

1. The gross charges of the hospital;
2. The discounted cash price applied to individuals who pay cash;
3. The payer-specific negotiated charges for each item and service;
4. The de-identified minimum negotiated charge for each item and service, with any third-party payer</a>; and
5. The de-identified maximum negotiated charge for each item and service, with any third-party payer.

The Regulations also require hospitals to make public a list of at least 300 shoppable services. The files with the standard charges and shoppable services are required to be displayed on the hospital’s website to be readily available without barriers and to be searchable.

The Regulations further provide for monitoring and enforcement of noncompliance. A hospital found noncompliant may receive a written warning, a required corrective action plan, and a $300 per day Civil Monetary Penalty (CMP) if the corrective action plan is violated. The $300 per day meant a hospital’s maximum penalty for noncompliance was $109,500 per year.

Concerned about reports of a high rate of hospital noncompliance with the Regulations, including inquiries from bipartisan Congressional committee leaders—discussed in a previous blog post—CMS has elected in the Rule to propose an increase in the CMP. As proposed the CMP will vary on a sliding scale based on a hospital’s number of beds as reported on the most recent filed cost report of Medicare-enrolled hospitals (for hospitals whose number of beds cannot be determined from a filed cost report, CMS would use other documentation filed by the hospital).The proposed sliding scale for noncompliance (even if the hospital is in violation of multiple discrete requirements) is as follows:

While the CMP for the smallest hospitals would remain unchanged, the annual penalty for noncompliance by the largest hospitals throughout a year would be $2,007,500. The amount of the daily CMP is to be adjusted annually by the consumer price index (beginning in 2023).

CMS also has had reports that publicly available standard charge listing have not been as accessible as CMS intended or desired. CMS reports that some hospitals have imbedded standard charges in websites “without any ability for users to easily or directly download a ‘single machine-readable file’” and have “either intentionally or unintentionally, placed barriers that make it challenging for the public [to] find and access the file and its contents.”

As a consequence, CMS proposes in the Rule that each hospital must ensure “that the standard charge information is easily accessible, without barriers, including, but not limited to, ensuring information is accessible to automated searches and direct file downloads through a link posted on a publicly available website.”

In the commentary accompanying the Rule, CMS expressly seeks comment on:

• Considerations with respect to hospital price estimator tools, which may be used to satisfy certain requirements under the Regulations;
• The definition of “Plain Language,” including whether Federal plain language guidelines or some other standard should be required in the public notifications;
• Identifying and highlighting hospital exemplars who are embracing and exemplifying the spirit of hospital price transparency; and
• Improving the standardization of machine-readable files.

Those wishing to comment have 60 days to do so after the Rule is filed for public inspection.

Foley is here to help you address the short- and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please reach out to the authors, your Foley relationship partner, or to our Health Care Practice Group with any questions.