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News | Price Transparency

Price transparency update: 6-figure fines have been handed down for hospital noncompliance

News | Price Transparency

Price transparency update: 6-figure fines have been handed down for hospital noncompliance

  • Two hospitals were penalized for violations of federal price transparency regulations.
  • Compliance by hospitals was sporadic at best in 2021, a new study found.
  • Price transparency mandates are expanding to health plans and also are central to the ongoing implementation of the No Surprises Act.

The federal price transparency requirements for hospitals entered a new phase this month, with CMS not only issuing the first fines for noncompliance but also publicizing those penalties.

Two hospitals were levied combined penalties of just under $1.1 million, according to a CMS posting. In the final rule establishing the price transparency regulations that began in 2021, CMS stated it would publicly announce the imposition of penalties for noncompliance.

A key issue in these cases seemed to be the hospitals’ lack of expediency in making corrections.

In a letter dated June 7 to one of the hospitals, CMS stated that it had issued an initial warning notice in April 2021, about three months after the regulations took effect. The agency completed a subsequent review of the hospital’s website on Sept. 2 and issued a “Request for Corrective Action Plan” on Sept. 30.

CMS said the hospital had not posted a machine-readable file with the requisite information as stipulated in the regulations. In addition, certain information was not displayed correctly in the required presentation of prices for of shoppable services.

CMS wrote that instead of specifying corrective actions it would take, the hospital advised that patients should call a dedicated phone line or send an email to receive a price estimate. During an ensuing call and correspondence with CMS, the hospital did not commit to making the required updates, according to the letter.

The hospital’s penalty of $883,180 is based on fines of:

  • $300 per day from Sept. 2, 2021, through Dec. 31
  • $5,360 per day from Jan. 1, 2022, through June 7, accounting for the penalty increase from a flat rate of $300 per day to $10 per bed per day (up to a daily maximum of $5,500), as described in updated regulations

Payment is due within 60 days of the notice, but the hospital is entitled to appeal the penalty via a hearing before an HHS administrative law judge. In the event of a successful appeal, the posting about the penalty will be updated.

However, the letter also states that the hospital will be subject to additional penalties if it doesn’t make the necessary updates and notify CMS about the corrections.

Compliance proving difficult

A research letter published this month in JAMA was the latest among multiple studies since early 2021 to find widespread noncompliance with the regulations.

According to the findings, fewer than 6% of hospitals were fully compliant between July and October 2021. Of 5,239 hospitals, the researchers found:

  • 729 (13.9%) had the required machine-readable file but no display of shoppable services
  • 1,542 (29.4%) had the required display of shoppable services but no machine-readable file
  • 2,668 (50.9%) had neither a machine-readable file nor a display of shoppable services as required
  • 300 (5.7%) were fully compliant

Among the 3,223 acute care hospitals in the study, those “with lesser revenue per patient-day, within unconcentrated healthcare markets and in urban areas were more likely to be transparent. Greater scrutiny of hospitals without these characteristics may be needed to ensure hospital transparency,” the researchers wrote.

Research on 2022 compliance rates will be useful to gauge the impact of the increased penalties, they added.

In a blog post, Ariel Levin of the American Hospital Association said the requirement to post machine-readable files that include negotiated rates for services is cumbersome and unnecessary.

The requirement “continues to pose challenges in terms of cost and complexity. These files add little to no direct benefit to patients, who have made clear in their requests to hospitals and health systems that they are most interested to know what they will actually have to pay,” he wrote.

Levin also said some studies on compliance “mischaracterize what is happening in the field. These groups ignore CMS’s guidance on aspects of the rule, such as how to fill in an individual negotiated rate when such a rate does not exist due to patient services being bundled and billed together. In this instance, CMS has said a blank cell would be appropriate since there is no negotiated rate to include. In spite of this, some outside groups still count any file with blank cells as ‘noncompliant.’ This is a fundamental misrepresentation of the rules.”

He added, “CMS, the only true arbiter, has indicated about 160 hospitals remain out of compliance, a much smaller number” than studies suggest.

In a recent interview on HFMA’s Voices in Healthcare Finance podcast, Jonathan Blum, principal deputy administrator and chief operating officer with CMS, said efforts to ensure compliance are evolving.

Price transparency “is a real area that you’ll see the agency think through more of,” Blum said in the interview with HFMA President and CEO Joe Fifer. “We are certainly getting better compliance today than, say, maybe six months ago, but there’s still more work to do.”

Blum said a common issue is that hospital leaders aren’t always in the loop on where things stand with their organization’s compliance: “Our team calls the CEO and says, ‘By the way, you’re out of compliance, did you know that?’ The common response is, ‘No.’ And then we see action.”

CMS is looking to do more to ensure that senior leaders “understand what the responsibilities are,” he added.

Next up for price transparency

Transparency regulations for health plans take effect July 1 with a requirement to post machine-readable files that disclose:

  • In-network rates for all covered items and services
  • Allowed amounts for out-of-network providers and billed charges from those providers

The start of 2023 brings a mandate for plans to offer a tool that helps consumers estimate their cost-sharing responsibility for 500 items and services from any given provider. In 2024, that requirement expands to all items and services.

“Cost estimates must be provided in real-time based on cost-sharing information that is accurate at the time of request,” according to CMS guidance.

For both providers and health plans, there’s also a significant price transparency component to the No Surprises Act. The obligation to provide a good-faith estimate of charges to uninsured and self-pay patients has been in place since Jan. 1, and enforcement looms for a similar requirement pertaining to insured patients.

The new law directs providers to notify the patient’s health plan of the expected charges for an item or service, with the plan then sending the patient an advance explanation of benefits. HHS thus far has delayed enforcement of the requirement due to stakeholder feedback about the difficulty of setting up the infrastructure needed to transmit the information. Enforcement could begin in early 2023 pending the release of additional regulatory guidance.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

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