The Centers for Medicare & Medicaid Services ("CMS") published a final rule (the "Transparency Rule") at 45 C.F.R. Part 180 on November 27, 2019, that will, effective January 1, 2021, require "Hospitals" to, among other things, establish, update, and make public online: (i) a list of their standard charges for items and services in a machine readable format, and (ii) a list of certain shoppable services in a consumer-friendly manner. CMS's rationale for the Transparency Rule is that by Hospitals disclosing standard charges to the public (including patients, employers, clinicians, and other third parties) the public will have the information necessary to make more informed decisions about their care, which will ultimately help increase market competition and drive down the cost of health care services, making health care services more affordable to all patients. Assuming legal challenges (as further discussed below) are not successful in delaying or implementing the Transparency Rule, it is important that Hospitals are prepared to meet the requirements of the Transparency Rule, which becomes effective January 1, 2021. Below is an overview of some of the requirements of the Transparency Rule:
1. Who is required to comply with the Transparency Rule - "Hospitals" - CMS requires "Hospitals" to comply with the Transparency Rule and has defined Hospitals to mean an institution 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 did not exempt rural hospitals or critical access hospitals. To the extent considered a Hospital pursuant to the above definition, long-term care hospitals, inpatient psychiatric facilities, and inpatient rehabilitation facilities will have to comply with the Transparency Rule as well.
Federally owned or operated hospitals are deemed by CMS to be in compliance with the requirements of the Transparency Rule because their charges are publicized to their patients, the facilities do not provide services to the general public, and the established payment rates for services are not subject to negotiation.
2. Machine Readable Online List of Standard Charges for all Items and Services - The Transparency Rule requires each Hospital to establish, update annually, and make public online a "Machine-Readable File" containing a list of all "Standard Charges" for all "Items and Services." Each Hospital location operating under a single license (or approval) that has a different set of Standard Charges than the other locations under the same license or approval must separately make public the Standard Charges applicable to that location. The list made public by the Hospital must include any code used by the Hospital for purposes of accounting or billing for the item or service (i.e. CPT billing codes).
(a) What is included in "Items and Services" - CMS defined Items and Services to mean all items and services, including 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. Examples include, but are not limited to, the following: (1) Supplies and procedures; (2) Room and board; (3) Use of the facility and other items (generally described as facility fees); (4) Services of employed physicians and non-physician practitioners (generally reflected as professional charges); and (5) Any other items or services for which a hospital has established a standard charge.
(b) What are the "Standard Charges" that must be disclosed on the list - CMS defined Standard Charges to mean the regular rate established by the Hospital for an item or service provided to a specific group of paying patients. This includes all of the following:
(i) Gross charge - the charge for an individual item or services that is reflected on a Hospital's chargemaster, absent any discounts.
(ii) Payer-specific negotiated charge - the charge that a Hospital has negotiated with a third party payer for an item or service.
(iii) De-identified minimum negotiated charge - the lowest charge that a Hospital has negotiated with all third party payers for an item or service.
(iv) De-identified maximum negotiated charge - the highest charge that a Hospital has negotiated with all third party payers for an item or service.
(v) Discounted cash price - the charge that applies to an individual who pays cash (or cash equivalent) for a Hospital item or service.
As applicable, the above charges when provided in an inpatient setting and outpatient department setting must be listed.
(c) What is a Machine Readable Format Online - The list of Standard Charges must be published on the internet in a single digital file in a machine-readable format, which means a digital representation of data or information in a file that can be imported or read into a computer system for further processing. Examples of machine-readable formats include, but are not limited to, .XML, .JSON and .CSV formats. CMS noted that a .PDF file is not included as a machine-readable format. The Standard Charge information must be displayed in a prominent manner, clearly identified, and be easily accessible without barriers (free of charge; without requiring a user account or password; and without having to submit personally identifiable information). The digital file and Standard Charge information must be digitally searchable and the Transparency Rule sets forth a specific naming convention for how to title the file.
3. Shoppable Services Displayed in a Consumer Friendly Manner - Since the amount of data in a machine readable list may be overwhelming or not easily understood by consumers, the Transparency Rule also requires each Hospital to make public certain Standard Charges in a consumer friendly pricing display. Hospitals are required to display pricing for 70 CMS specified shoppable services (if offered; and noted if not offered) and as many additional hospital-selected shoppable services as is necessary for a combined total of at least 300 shoppable services (or as many shoppable services as the Hospital provides, if 300 are not provided). A shoppable service is a service that can be scheduled by a healthcare consumer in advance. Hospitals must provide the following information for each listed shoppable service and ancillary service (ancillary items and services the Hospital customarily provides in conjunction with the primary shoppable service): (i) plain language description; (ii) indication of any CMS-specified shoppable services that are not offered by the Hospital; (iii) payer-specific negotiated charge; (iv) discounted cash price (or undiscounted gross charge if a discounted cash price is not offered); (v) de-identified minimum negotiated charge; (vi) de-identified maximum negotiated charge; (vii) location where the service is provided, including whether the standard charge applies at that location in the inpatient setting, outpatient setting, or both; and (viii) any primary code used by the Hospital for purposes of accounting or billing.
Hospitals have some discretion in the format for making the above information public, but the shoppable services must be published online without barriers (free of charge; without requiring a user account or password; and without having to submit personally identifiable information), and be searchable. However, a Hospital is deemed to meet these consumer friendly disclosure requirements if the Hospital maintains an internet-based price estimator tool that: (i) allows users to obtain an estimate of the amount they will be obligated to pay the Hospital for the shoppable service; and (ii) is prominently displayed on the Hospital's website and accessible to the public without charge and without having to register or establish a user account or password.
4. Penalties for Non-Compliance - If CMS concludes a Hospital is noncompliant with its obligations under the Transparency Rule, CMS may provide a written warning notice to the Hospital, request a corrective action plan from the Hospital, and/or impose a civil monetary penalty of up to $300 per day (which amount will be adjusted annually).
5. Estimated Cost of Compliance - CMS estimates that the total burden for a Hospital to review and post its Standard Charges for the first year will be 150 hours per Hospital, at an estimated cost of $11,898.60 per Hospital, with the annual burden to review and update such charges in subsequent years being 46 hours per Hospital at $3,610.88 per Hospital. CMS anticipates that the Transparency Rule will affect approximately 6,002 Hospitals.
6. Legal Challenges to the Transparency Rule. The American Hospital Association (among other industry groups and certain hospitals) filed a lawsuit on December 4, 2019 against the Secretary of Health and Human Services (HHS) challenging the Transparency Rule as unenforceable by asserting: (i) CMS exceeded its authority, which is limited to disclosure of hospitals "standard charges" (asserting that standard charges do not include the charges privately negotiated between hospitals and insurers); (ii) the Transparency Rule violates the First Amendment because it mandates speech that fails to directly advance a substantial government interest (and that the means chosen aren't narrowly tailored) by compelling Hospitals to reveal confidential and proprietary information; and (iii) the Transparency Rule is arbitrary and capricious, lacks any rational basis, and does not reflect the product of CMS's reasoned decision making.
Stay tuned for updates as to whether or not the legal challenges to the enforceability of the Transparency Rule are successful. In the meantime, Hospitals may want to start planning efforts towards compliance with the Transparency Rule.
Anthony Romano practices with Burr & Forman LLP in the firm's Health Care Industry Group. Anthony may be reached at aromano@burr.com.
