CMS updates price transparency guidance

The Centers for Medicare & Medicaid Services (CMS) has released new Guidance on price transparency, presenting significant challenges for hospitals.

The Guidance, issued under Executive Order 14221, requires hospitals to provide detailed and accurate healthcare price disclosures and to comply with new standardization measures. Hospitals now face the complex task of updating their systems and processes to meet these requirements, ensuring that pricing information is both clear and accessible for patients. This shift demands substantial administrative effort, potential technology upgrades and ongoing compliance monitoring, all of which may strain hospital resources and operations.

Background

The Trump administration became the fourth administration to implement price transparency measures under Public Service Act Section 2718(e), which was enacted as part of the Affordable Care Act (ACA). The ACA requires US hospitals to annually establish, update and publicize a list of standard charges for items and services they provide.

Price transparency was a focus under the first Trump administration. The 2020 Outpatient Prospective Payment System (OPPS) final rule established comprehensive requirements for the publication of standard charges. Under this rule, hospitals are required to make pricing information for hospital services publicly available in a machine-readable format. Additionally, the rule requires that pricing information be presented in a consumer-friendly format for patients to access, review and understand the costs of hospital services.

The Biden administration sought to strengthen price transparency requirements in the 2022 OPPS final rule, which enhanced the statute’s enforcement mechanisms. This eliminated the warnings previously issued to noncompliant systems and began the practice of publicizing the names of systems in violation. Additionally, CMS began issuing civil monetary penalties for infractions.

Executive Order 14221 reaffirmed the administration’s commitment to implementing and enforcing price transparency requirements. Noting that “progress on price transparency at the Federal level has stalled since the end of my first term,” the President has directed the Secretaries of Treasury, Labor and Health and Human Services to “rapidly implement and enforce the healthcare price transparency regulations.”   

However, there was still an issue of illusory transparency through placeholder pricing. Hospitals have expressed concern regarding the publication of previously proprietary data which has proven burdensome and resource intensive for providers. Previous CMS guidance permitted healthcare providers to encode nine 9s (999999999) as a service’s cost if there was insufficient reimbursement history. According to CMS, hospital systems used this code significantly more than expected, resulting in thousands of incidences of nine 9s. CMS believes this undermined the core principle of price transparency mandates, as prospective patients could not identify the true price differences among hospital systems.

New price transparency requirements

The CMS Guidance implements two new interpretations relating to hospitals’ obligations to provide “meaningful, accurate information about their charges for health care items and services.” 

• Actual dollar amounts required. Hospitals are now required to report charges in actual dollar amounts, including where charges are based in methodologies such as case rates or fee schedules. In situations where the payer-specific negotiated charge is a percentage of a fee schedule, hospitals should include adequate information about the fee schedule and encode an estimated allowed amount. Additionally, hospitals using estimated amounts must substantiate their estimates through historical claims and remittance data. When this is not possible, hospitals must make thorough documentation of their methodologies. Estimates without this support may be deemed as noncompliant.
• Elimination of placeholder pricing. Nine 9s should no longer be used, even if there is insufficient reimbursement history. Rather, hospitals should disclose the average dollar amount the hospital has received for an item or service, based on the electronic remittance advice transaction data from the 12 months prior, unless a negotiated percentage has been used for only part of the 12-month period, in which case they should only calculate the average over that specific period. If the service has not been used in the last 12 months, the hospital should estimate what the charge would be for that service and note that it had not been performed in the last year.

Implications for hospital systems

With Executive Order 14221 and this new CMS Guidance, the administration is signaling a renewed and more rigorous approach to price transparency. Hospitals should expect increased scrutiny and stricter enforcement of disclosure requirements. The CMS Guidance provides an opportunity for providers to reassess their compliance programs and ensure that all price disclosures are accurate, substantiated, and in line with the latest federal expectations. Flexibility in reporting is likely to decrease, and noncompliance may result in public identification and financial penalties.

Our team of experienced lawyers and professionals at Norton Rose Fulbright will be closely monitoring the Administration’s implementation of the CMS Guidance. If you have any questions concerning hospital price transparency, please don’t hesitate to contact us.

Special thanks to Summer Associate, Willa Scanlon for assisting in the preparation of this article.