Preparing for Hospital Price Transparency Rule Compliance

A global pandemic may not be enough to stop one of CMS’ more controversial rules from taking effect in just a couple of months.

On January 1, 2021, US hospitals will need to comply with the agency’s new hospital price transparency rule that requires facilities to create and maintain a public list of their standard charges, including private payer-negotiated rates, for 300 “shoppable” services.

Since its publication last year, the rule has been at the center of a legal battle brought on by the several industry groups and hospitals that argue the disclosure of private payer rates would violate their First Amendment rights and potentially lead to more provider consolidation.

Recently, however, a federal judge dismissed the case, paving the way for the rule’s implementation at the start of the new year.

Hospitals have not given up. The hospitals filed an appeal and several industry groups including the American Hospital Association (AHA) also urged HHS to delay implementation until the COVID-19 public healthcare emergency is over.

But not even COVID-19 is likely to stop what the White House considers one of its greatest healthcare reforms, according to Andrew Selesnick, a shareholder in Buchalter and a member of the Healthcare Practice Group.

“I don't think COVID, in and of itself, will do it. The government could always decide that they're not going to move forward, but that seems unlikely, especially in this political season,” Selesnick said in the latest Healthcare Strategies podcast.

For hospitals, that begs a serious question: Do we comply with the hospital price transparency rule even though the court case is ongoing?

Selesnick advised hospitals that plan to comply to “starting working now.”

“Hospitals are, by nature, compliant organizations and healthcare is one of the most heavily regulated, if not the most heavily regulated, industry now in our country,” the healthcare lawyer explained.

“So, they're used to following the law, but this one's a little bit different. HHS has not given great guidance on what these standard charges mean and how they're going to be interpreted. So, I think hospitals have to take a fresh look at it and decide what they think is appropriate for the interpretation. Then, they literally have to assign people and start crunching big data.”

Compliance will be a major big data project. Hospitals believe collecting the pricing information and establishing a consumer-friendly list will cost between $400,000 to $500,000 a year even though HHS only estimates $12,000 in costs per hospital.

Dropping that kind of money on hospital price transparency will be especially challenging considering hospitals and health systems are projected to lose at least $323 billion in 2020 as a result of the pandemic, according to the AHA. And those losses could grow if positive cases spike again, the group warns.

With such dramatic financial losses, Selesnick would not be surprised if some hospitals forgo hospital price transparency rule compliance altogether.

“We calculated the daily fine for not posting is about $300 a day, which to you and I, sounds like a lot,” Selesnick said. “It works out to about $110,000 a year, roughly. So, I wouldn't be surprised if you see some hospitals that say, ‘We're going to wait and see what happens even if we don't get a ruling from the Court of Appeals staying it. We're just going to pay the fine and see what happens because it's cheaper for us to do it.’”

A fine of $300 a day is also a small price to pay for hospitals that don’t want to reveal their chargemasters.

Chargemaster rates have been spotlighted in recent media reports, drawing negative attention to some hospitals. The rates can also be used by competitors as leverage in private payer negotiations and private payer reimbursement rates may drop for some hospitals as a result.

“For a billion dollar a year institution, what's a hundred thousand dollars? It's not much,” Selesnick said.

The compliance question brings up a lot of issues with the hospital price transparency rule and whether it is the solution to rising healthcare costs for patients. But if it is not the right solution to the problem, then what is?

“Only including one leg doesn't help. We need multiple legs in order to really make this thing work and get some additional fairness in the system,” Selesnick shared. In other words, payers need to play a large part of the solution by providing out-of-pocket cost transparency.

“Payers need to step up,” Selesnick concluded. “I don't think they're going to do so willingly and I think HHS has the ability to force them to the table and have that great discussion that we all want them to have, which is: Can't you all just collaborate and figure out the best way to deliver healthcare with great outcomes at an efficient price?”

Listen to the full podcast to hear more hospital price transparency compliance strategies and what an appeal means for rule implementation. And don’t forget to subscribe on iTunes, Spotify, or Google Podcasts.