2021 Brings Hospital Pricing Transparency
Understand what your organization must do to comply with the new requirements.
In 2019, out-of-pocket spending on healthcare grew 4.6 percent to $406.5 billion and Medicare spending grew 6.7 percent to $799.4 billion, according to National Health Expenditure data. With healthcare spending on the rise, the federal government aims to decrease spending by increasing market competition and developing the groundwork for a patient-driven healthcare system. This is currently being addressed through the Price Transparency Requirements for Hospitals to Make Standard Charges Public final rule (Price Transparency final rule). The Centers for Medicare & Medicaid Services (CMS) finalized the price transparency policies on Nov. 15, 2019, and the final rule went into effect Jan. 1, 2021.
The Price Transparency final rule requires U.S. hospitals to make public an up-to-date list of their standard charges for the items and services they provide. This information must be available through a comprehensive machine-readable file, as well as be displayed in a consumer-friendly format.
The single machine-readable digital file must contain all five of the standard charges for all items and services provided by the hospital. In contrast, the display of shoppable services in a consumer-friendly format must display 300 shoppable services (services that can be scheduled in advance), or as many as the hospital provides, in plain language and grouped by ancillary service, including all standard charges (except gross charge).
This transparency will allow patients to make more informed choices related to the cost of their medical care, according to CMS.
Review Definitions and Clarifications
CMS defines hospitals in the Price Transparency final rule as institutions “in any state in which state or applicable local law provides for the licensing of hospitals, that is licensed as a hospital pursuant to such law, or is approved by the agency of such state or locality responsible for licensing hospitals, as meeting the standards established for such licensing.”
CMS further defines in the Price Transparency final rule the types of “standard charges” for items and services that hospitals must make public:
- Gross charge: The charge for an individual item or service that is reflected on a hospital’s chargemaster, absent any discounts.
- Discounted cash price: The charge that applies to an individual who pays cash, or cash equivalent, for a hospital item or service.
- Payer-specific negotiated charge: The charge that a hospital has negotiated with a third-party payer for a hospital item or service.
- De-identified minimum negotiated charge: The lowest charge that a hospital has negotiated with all third-party payers for an item or service.
- De-identified maximum negotiated charge: The highest charge that a hospital has negotiated with all third-party payers for an item or service.
Hospitals should include in their price sheet, according to the final rule, “individual items and services and service packages, that could be provided by a hospital to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a standard charge.” This includes, but is not limited to:
- Supplies and procedures;
- Room and board;
- Use of the facility and other items (generally described as facility fees);
- Services of employed physicians and non-physician practitioners (generally reflected as professional charges); and
- Any other items or services for which a hospital has established a standard charge.
Transparency in Coverage Extends to Payers
Building on these hospital pricing transparency requirements, the Transparency in Coverage final rule, released in October 2020, sets forth requirements, making available to consumers the tools needed to access pricing information through their health plans. This rule will require most group health plans and health insurance issuers in the group and individual market to disclose pricing and cost-sharing information to participants, beneficiaries, and enrollees.
This final rule approaches healthcare pricing information in two ways:
First, group health plans and health insurance issuers will be required to make available to participants, beneficiaries, and enrollees personalized out-of-pocket costs and underlying negotiated rates for all healthcare items and services. For plan years beginning Jan. 1, 2023, a list of 500 shoppable services must be made available via the internet and a full list of items and services must be made available by Jan. 1, 2024.
Second, for plan years beginning on or after Jan. 1, 2022, group health plans and health insurance issuers will be required to make available three separate, machine-readable files with detailed price information. These files will include negotiated rates for all covered items and services between the plan and all in-network providers, historical payments to and billed charges from in-network providers, and, finally, in-network negotiated rates and historical net prices for all covered prescription drugs by the plan at the pharmacy location level.
CARES Act Requires Public Display of COVID-19 Testing Costs
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted on March 27, 2020, requires providers of diagnostic tests for COVID-19 to make public the cash price for the COVID-19 test on their public website. This price transparency requirement is effective for the duration of the public health emergency.
To date, there is no requirement for non-hospital-employed providers to make pricing information available outside of the requirements outlined in the CARES act. That being said, the goal of pricing transparency is to support price-conscious decision-making for consumers and competition in the healthcare industry. It seems reasonable to assume that a requirement for full price transparency for all healthcare providers is likely on the horizon.
Compliance Is Key
CMS will be monitoring compliance of hospitals under the authority of Section 2718(e) of the Public Health Service Act. Should noncompliance be found in any of the pricing transparency requirements, action taken by CMS may include presenting the hospital with a warning; a request for a corrective action plan; civil monetary penalties, no more than $300 per day and adjusted annually; and the noncompliance can be publicized on the CMS website. Hospitals will have a right to a hearing within 30 days.
It is crucial to be proactive in your compliance measures. Failure to implement the pricing transparency rule can result in nearly $110,000 in penalties per year. Although this may not be a substantial amount to hospitals, noncompliance can still degrade the hospital’s image via the CMS website, as well as public and professional opinions.
Clear the Path to Compliance
What steps should your organization take to prepare and implement Price Transparency final rule requirements and maintain compliance?
1. Determine if your organization meets CMS’ definition of a hospital as defined in the final rule.
2. Verify the organization’s comprehensive machine-readable file meets all criteria for format, data elements, accessibility, and annual updates.
3. Make available a display of shoppable services for each individual hospital. Ask yourself:
- Are the standard charges posted, specific to, and clearly identifying the location?
- Does the file meet all criteria for data elements, accessibility, and annual updates?
- Does your hospital meet the requirements for making public standard charges for shoppable services by maintaining an internet-based price estimator tool? If so, are all the regulations being followed?
A significant amount of time and effort from a team of experts including IT, revenue cycle, marketing, compliance, and possibly an external third party, is necessary to meet all of the requirements in the final rule. Do not delay in establishing pricing transparency at your hospital. If you have not already done so, now is the time to establish a team and begin a thorough review of your chargemaster and payer data.
Laura Brink, CRC, RHIT, is a senior auditor who began her career as an outpatient facility coder and auditor, working in this field for many years. Following her work in outpatient services, she moved to specializing in HCC risk adjustment, performing provider and coder auditing, with experience working in multiple models such as HCC, RxHCC, ACO, and QHP. Additionally, she assisted in provider education and training to ensure accurate risk scores utilizing query processes.
Jessica Whitney, CPC, CPMA, is an audit services manager with more than 20 years of experience in healthcare. She began her healthcare career at Blue Cross of Idaho, working in both provider relations and claims, and transitioned to practice management. She has provided services in all areas of practice management, including coding, billing, and auditing, with a strong focus on revenue cycle management for both small, privately owned, and large multispecialty hospital-owned practices. Whitney has extensive experience in provider contracting, credentialing, and reimbursement analysis.