Keenan Briefings


New Rules to Impose Price Transparency Requirements for Health Care Services

November 21, 2019

On November 15, 2019, the Centers for Medicare and Medicaid Service (CMS) made announcements with regard to two rules intended to increase the transparency of pricing for medical services. Both rules follow on President Trump’s June 24, 2019 executive order directing the Secretary of Health and Human Services (HHS) to promulgate regulations improving price and quality transparency in healthcare. Taken together, the rules will impose new price transparency requirements on both payers and providers of health care services.

Proposed Transparency in Coverage Rule

On November 15, 2019, HHS, the Department of Labor, and the Department of the Treasury (together, the departments) proposed rules that, if enacted, will require non-grandfathered health plans in the group and individual markets to provide personalized out-of-pocket cost information to participants, beneficiaries and enrollees, and make available to the public the in-network negotiated rates with their network providers and historical payments of allowed amounts to out-of-network providers. The departments are seeking comment on these rules within 60 days and can be expected to finalize the rules in 2020.

Finalized Hospital Price Transparency Rule

HHS also finalized the Hospital Outpatient Prospective Payment System (OPPS) Hospital Transparency Requirements, which will require hospitals to make public data regarding standard charges for items and services. These finalized rules implement Section 2718(e) of the Public Health Service Act, which provides:

Each hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital's standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1395ww(d)(4) of this title. (42 U.S.C.A. § 300gg-18(e)).

Added as part of the Affordable Care Act (ACA) and as originally implemented, Section 2718(e) required hospitals make public their standard charges upon request beginning in 2015, and subsequently online in a machine-readable format starting in 2019.

The rules as finalized define “hospital,” “standard charges and “items and services.” They also set the requirements for making public a machine-readable file online that includes all standard charges for all hospital items and services and for making public discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges for at least 300 “shoppable” services in a consumer-friendly manner. Finally, the rules set forth the processes for monitoring and addressing non-compliance.

The rules apply to all hospitals licensed by any of the fifty states, territories, and the District of Columbia. It includes all Medicare-enrolled institutions that are licensed as hospitals or approved as meeting licensing requirements. It does not apply to federally-owned or operated hospitals that do not treat the general public and whose rates are not subject to negotiation.

The new rules state that the “items and services” for which a hospital must publish standard charges are all the items and services (whether provided individually or as packages) that could be provided by a hospital to a patient in connection with either an inpatient admission or an outpatient visit for which the hospital has established a standard charge. Examples include supplies, procedures, room and board, facilities fees, professional charges and any other items or services for which a hospital has established a standard charge.

Under the new rules, “standard charges” with regard to any item or service include:

  • The “gross charge” that is reflected on a hospital’s chargemaster, absent any discounts;
  • The discounted cash price;
  • The payer-specific negotiated charge;
  • The de-identified minimum negotiated charge (the lowest charge that a hospital has negotiated with all third-party payers); and
  • The de-identified maximum negotiated charge, (the highest charge that a hospital has negotiated with all third-party payers).

List of Standard Charges

The rules require that for each hospital location, hospitals must make public all their standard charges for all items and services available online in a single digital file and in a machine-readable format. The file must contain a description of each item or service (or package of services) including any code used by the hospital for accounting or billing purposes. To comply, a hospital must display the file prominently on a publicly available website and clearly identify the hospital location with which the information is associated. A hospital must ensure that the data is easily accessible without barriers—the data must be available free of charge, without the necessity of creating an account or password. A hospital cannot require a person to submit personal identifying information (PII) to access the information. Lastly, the information must be digitally searchable.

Thereafter, the data must be updated at least annually, and the list must clearly indicate the date of the last update, either within the file or otherwise clearly associated with the file.

List of Shoppable Services

Additionally, hospitals must make public standard charges (as defined above) for at least 300 “shoppable services,” defined as services that can be scheduled by a health care consumer in advance. Services on this list must include 70 CMS-specified services and 230 selected by the hospital, based on the utilization rate of such services. CMS states that the services selected should be commonly provided to the hospital’s patient population. If the hospital does not provide one or more of the 70 CMS-specified services, it must (1) indicate that service is not provided on the list, and (2) select additional shoppable services so that the total number is at least 300. If a hospital does not provide at least 300 shoppable services, it must list as many as it does provide.

The list of shoppable services must include a plain-language description of each service, and the location at which the service is provided, including whether the standard charges for the service applies at that location to provision of the service in the inpatient setting, outpatient, or both. This list is subject to the same standards with regard to accessibility and updating as the standard charges list. Additionally, it must be searchable by service description, billing code and payer.

A hospital will be deemed as having met the requirements for making public standard charges for 300 shoppable services in a consumer-friendly manner if it maintains an internet-based price estimator tool that:

  • Provides estimates for the 70 CMS-specified services and hospital-selected services such that it does so for at least 300 services
  • Allows consumers to obtain an estimate of the amount they will be obligated to pay for the service by the hospital
  • Is prominently displayed on the hospital’s website, accessible to the public without charge, and without having to register, establish a user account or a password

Compliance Steps and Penalties for Non-Compliance

These rules will go into effect on January 1, 2021. Hospitals are impacted as both employee health plan sponsors and as providers of services covered by these rules. Health plans are also impacted by these rules, inasmuch as the rates they pay for items and services will be made public. Employers and employees will be able to compare hospital charges.

The rules give CMS the authority to monitor hospital compliance. Civil monetary penalties may be assessed for noncompliance, up to $300 per day. Noncompliance penalties will be published on the CMS website.

To begin compliance, hospitals will need to develop lists of items and services and work with billing, contracting and other personnel to ensure that they have access to the five different types of “standard charges.” They will also need to coordinate the compilation and posting of the charge list with their IT professionals to ensure compliance with CMS rules regarding accessibility.

Keenan & Associates is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.