November 15, 2019

Brief: CMS issues final hospital price transparency rule

Jordana Choucair

Jordana Choucair

November 17, 2019 – On November 15, the Centers for Medicare & Medicaid Services (CMS) released two rules to carry-out President Trump’s Executive Order on Improving Price and Quality Transparency in American Healthcare. The first is a final rule that would require hospitals to publish payer-negotiated prices beginning in January 2021. The second is a proposed rule that would mandate insurers post online real-time cost to allow patients to get advanced estimates of their out-of-pocket costs before they see a doctor or go to the hospital.

Calendar Year (CY) 2020 Outpatient Prospective Payment System (OPPS) & Ambulatory Surgical Center (ASC) Price Transparency Requirements for Hospitals to Make Standard Charges Public Final Rule

The original proposed rule, released as part of the hospital outpatient payment rule in July, required hospitals to post prices starting in 2020. The final rule extends the effective date by one year to give hospitals more time to comply with the new regulations. Hospitals will have two obligations:

  1. Provide insurer-specific negotiated rates in a computer-readable file. Hospitals will be required to post a single, searchable data file containing all hospital standard charges for all services – including drugs, supplies, facility fees and care by doctors who work for the facility – as well as common billing or accounting codes and a description of services in a prominent location online. Standard charges include gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges
  2. Display shoppable services in a consumer-friendly manner. Hospitals will have to post negotiated charges online for 300 specific services that patients typically shop around for. Shoppable services are defined as “services that can be scheduled by a health care consumer in advance such as x-rays, outpatient visits, imaging and laboratory tests or bundled services like a cesarean delivery, including pre- and post-delivery care.” Seventy of those services are stipulated in the rule; hospitals can select the other 230.

Hospitals could be forced to pay a $300 per day fine if they don’t comply with the new disclosure policies. The final rule estimates the requirements would cost hospitals more than $23 million annually in 2016 dollars. Annual costs range from $38.7 million to $39.4 million in 2019 dollars.

Transparency in Coverage Proposed Rule

The proposed rule, issued by the Departments of Health and Human Services, Labor, and Treasury, would require most insurers to disclose price and cost-sharing information to consumers up front. If finalized, insurers would be subject to two main stipulations:

  1. Provide consumers with an “explanation of benefits” upfront. The proposed rule would require insurers to outline how much the service would cost, including an estimate of the consumer’s cost-sharing liability for all covered health care items and services. The information would have to be accessible through an online tool, empowering consumers to shop and compare costs between specific providers before receiving care.
  2. Disclose negotiated rates for in-network providers and allowed amounts paid for out-of-network providers. The information would need to be posted in regularly updated, machine-readable files on a public website. The proposed rule notes that disclosing the information would not only encourage innovation to drive price comparison and consumerism in the health care market, but also create new opportunities for researchers, employers, and other developers to build new tools to help consumers.

The proposed rule would also allow issuers to take credit for “shared savings” payments in their medical loss ratio (MLR) calculations. The departments believe that this specific proposal would encourage insurers to offer innovative value-based plan designs that support competition and consumer engagement in health care, while preserving the integrity of the MLR program.

The departments are soliciting feedback on two specific areas:

  1. Whether group health plans and health insurance issuers should also be required to make cost-sharing information available via a standards-based application programming interface (API); and
  2. How health care quality information can be incorporated into the price transparency proposals.

Comments are due 60 days from the release of the proposed rule. The departments are proposing that all components of the rule would be applicable for plan years (or in the individual market policy years) beginning one year after the rule is finalized. The MLR provision would be applicable beginning with the 2020 MLR reporting year.

Industry reactions

Thus far, hospitals and insurers are pushing back on the final and proposed rule. Some health care groups have argued that the approach could cause prices and premiums to increase. Others have noted that if is not clear if the rules will actually go into effect; earlier this year a federal judge ruled that the administration exceeded its regulatory authority with a similar price transparency rule directed at pharmaceutical companies, and a similar health care transparency law in Ohio remains stuck in the courts.

Larry Levitt, a health policy expert at the Kaiser Family Foundation, questioned the enforcement of the proposal: “While the Trump administration’s new hospital price transparency requirement is quite sweeping, the enforcement of it is quite weak — a maximum fine of $300 per day.” He further posted, “The technical term for that is ‘chump change.’ I wonder how many hospitals will just pay the fine.”

Four major hospital organizations — the American Hospital Association (AHA), Association of American Medical Colleges (AAMC), Children’s Hospital Association (CHA), and Federation of American Hospitals (FAH) – quickly promised to challenge the administration in court, as alluded to in July. “Instead of helping patients know their out-of-pocket costs, this rule will introduce widespread confusion, accelerate anticompetitive behavior among health insurers, and stymie innovations in value-based care delivery,” the groups said.

According to America’s Essential Hospitals, the final rule “would unfairly advantage health plans in negotiations with providers and threaten essential hospitals’ ability to participate in networks and maintain access to services.” Beth Feldpush, senior vice president of policy and advocacy said, “Information without context—for example, how and why the cost of patient care varies among hospitals—is of little practical use to consumers.”

Shortly after the rules were released, America’s Health Insurance Plans released a statement criticizing the rules. “Transparency should aid and support patient decision-making, should not undermine competitive negotiations that lower patients’ health care costs, and should put downward pressure on premiums for consumers and employers,” Matt Eyles, president and CEO of America’s Health Insurance Plans, said.

“The rules the administration released today will not help consumers better understand what health services will cost them and may not advance the broader goal of lowering health care costs,” said Scott Serota, president and CEO of the Blue Cross Blue Shield Association, in a statement. Serota added that requiring disclosure of negotiated rates could lead to price increases “as clinicians and medical facilities could see in the negotiated payments a roadmap to bidding up prices rather than lowering rates.”

Jordana is the senior vice president of communications and executive advisor. In this role, she collaborates closely with the CEO and president to design and implement policies, practices, and communications plans to help the firm shape a future system that actualizes a sustainable culture of health nationwide. Jordana has over 17 years of health, communications, and strategic planning experience in the private and public sector. She is certified to teach group fitness through the American Council and Exercise and holds a RYT-200 yoga teacher certification.