How the CMS price transparency rule challenges hospitals

CMS rolls out hospital price transparency requirements

Compliance with the CMS price transparency rule has undergone several iterations over the last few years.

Originally, hospitals just had to publicly post gross charges, discounted cash prices, payer-specific negotiated charges and de-identified minimum and maximum negotiated charges in a machine-readable file. Hospitals also needed a consumer-friendly list of at least 300 shoppable services.

In July 2024, the next phase of CMS price transparency compliance rules for hospitals took effect. In this rollout, hospitals had to post required pricing data in a standard, machine-readable format and include some new data elements, such as the negotiated rate methodology and an accuracy and completeness statement.

Finally, CMS rolled out the third phase in which hospitals had to add three new data elements:

• Estimated allowed amount, or the average dollar amount a hospital has historically received from a third-party payer.
• Drug pricing information, including the drug unit and unit of measurement.
• Modifiers, which alter a standard charge for situations like telehealth versus in-person appointments.

Hospitals must include these new data elements in their machine-readable files on their websites as of Jan. 1, 2025.

Failure to fully comply with any of the CMS price transparency rule requirements could result in civil monetary penalties, as well as a public notification about noncompliance on the CMS website. Still, compliance has been lagging over the last four years.

Compliance with price transparency rule still lacking

Historically, compliance with CMS price transparency rules has been low, and new requirements for hospitals have pushed that rate even lower, according to PatientRightsAdvocate.org's Ilaria Santangelo, director of research.

PatientRightsAdvocate.org, a nonprofit focused on "systemwide healthcare price transparency," regularly analyzes compliance rates among 2,000 hospitals that are part of the largest health systems in the U.S. Their most recent report -- published before the January 2025 requirements took effect -- found that only about a fifth of selected hospitals are fully compliant.

"That's a massive drop from 36%, our highest compliance rate we recorded last July," Santangelo said.

Getting up to speed with evolving price transparency requirements is a learning curve, Santangelo acknowledged. She attributed many of the compliance issues to "unintentional technical errors." In fact, the most common reasons for noncompliance among the hospitals recently analyzed by PatientRightsAdvocate.org were not passing the CMS Validator Tool (532 hospitals), missing significant pricing data by payer and plan names (415 hospitals), not following the CMS-mandated file name format (393 hospitals) and not posting a compliant TXT file (305 hospitals).

"Our low compliance number, in my opinion, is due to a lot of relatively easy fixes," Santangelo added.

Joe Wisniewski, assistant vice president of channel partnerships at Turquoise Health, agrees that fine-tuning could help hospitals become fully compliant. His company specifically tracks technical requirement adoption with the CMS price transparency rule and has found that while nearly all hospitals (95.9%) have posted a machine-readable file, only 61.4% are compliant with text file adoption and 71.3% with the V2.0 schema adoption.

"What that tells me is there are tiny little details that we have to help hospitals on," Wisniewski explained. "And it might just literally be: Hey, let's go to your website and make sure your text record is tied to your real primary domain and not your subdomain. Or let's go into your V2 schema and make sure you didn't accidentally misspell one of the column headers."

"Some of these things are so detailed but so simple to fix that I'm pretty confident you're going to see another jump [in compliance soon]," he continued.

Why is price transparency in healthcare important?

Price transparency in healthcare is important. Medical debt is the leading cause of bankruptcies in the U.S., especially as patient financial responsibility continues to grow under high-deductible health plans and other cost-sharing arrangements.

With patients on the line for more of their healthcare costs, being able to shop around for services is key. CMS designed its hospital price transparency requirements to do just that: find high-quality care at prices they can afford.

However, critics of the CMS price transparency rule argue that hospital requirements don't actually empower patients enough to reliably shop around for healthcare.

"My dad can't open an Excel, so he's certainly not going to know to pair DRG 470 for a knee replacement with an anesthesiology code and a rev operating code [to get a full cost estimate]," Wisniewski said. "And there's no way you're ever going to educate the public on how to do that."

Even if there was a way for the public to understand, Santangelo doesn't find the data hospitals put in their files to be accurate or easy to understand. For example, hospitals can post pricing data for services as a percentage of a cost or an algorithm the hospital has negotiated with a payer, rather than a dollar amount.

Consumers need dollars-and-cents pricing data to understand healthcare costs, she stated. Yet, the PatientRightsAdvocate.org report found that only 16.8% of hospitals had sufficient dollars-and-cents pricing data.

Santangelo also believes the requirements do not hold hospitals accountable for their estimates, even if they are consumer-friendly and easily available.

"Hospitals may suggest you use their price estimator tool," she explained. "But to even access an estimate, you have to click a box that says, 'I agree, this isn't going to be my final price.' And the estimate doesn't include anesthesiology, facility and professional fees, so what good is an unaccountable incorrect price when you're trying to shop comprehensively for your healthcare?"

The CMS price transparency rule is more of a stepping stone to empowering patients to shop for healthcare, suggests Wisniewski.

"The CMS regulation is the equivalent of pouring concrete before you build the first floor of your house … and that first floor is having this data be more usable for patients," he explained. "So, we're in that awkward phase of sitting there waiting for the concrete to dry because you need every hospital in the country to put those J codes down to one millimeter or all the modifiers for telehealth visits. Yes, a patient doesn't know what a modifier 95 is, but we need it there if we want patients to eventually know how cheap a telehealth service is."

However, Wisniewski added that this is slow-drying healthcare concrete. Compliance in healthcare tends to lag because of the highly regulated, complex nature of the system compared to other industries. It might be some time before all hospitals catch up with price transparency requirements and then some more time until consumers find the information digestible and useful.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.