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Morris Manning & Martin, LLP

New HHS Healthcare Price Transparency Rules Revealed

11.20.2019

2020 OPPS & Ambulatory Surgical Center (ASC) Price Transparency Requirements for Hospitals to Make Standard Charges Public Final Rule (CMS-1717-F2)

On Friday, November 15, President Trump’s administration issued the final rule on healthcare price transparency. The rule will face industry challenge, but if it survives legal challenge the rule will have broad ramifications for hospital systems. Beginning January 1, 2021, all hospitals will be required to establish, update and publish a list of their standard charges for items and services as a means of increasing price transparency and informed patient decision making. The Final Rule, found in full here, builds on the previously implemented requirement that hospitals make public a chargemaster with standard charges. In addition, the Final Rule clarifies: (a) which facilities and systems are considered “hospitals” for the purposes of this requirement; (b) defines five types of “standard charges”; (c) specifies which “items and services” must be included in the published list; and, (d) also discusses the requirements for making the contents of the list public, among other things. In announcing the final rule, CMS Administrator Seema Varma explained: “Thanks to President Trump's vision and leadership, we are throwing open the shutters and bringing to light the price of care for American consumers. Kept secret, these prices are simply dollar amounts on a ledger; disclosed, they deliver fuel to the engines of competition among hospitals and insurers.” We analyze and summarize below the most salient parts of the rule.

Who Does the Final Rule Apply To?

The Final Rule applies to all hospitals; that is, any institution that is licensed as a hospital under the applicable state law or is approved as meeting the standards for such licensing. This may include Medicare-enrolled hospitals, critical access hospitals, inpatient psychiatric facilities, sole community hospitals, inpatient rehabilitation facilities, as well as other types of facilities even if not enrolled in Medicare. Ambulatory surgical centers that are not licensed as a hospital are exempt from the Final Rule. Hospitals with multiple locations and different sets of standard charges must separately publish the standard charges for each location even if the hospital locations operate under the same license.

What Are the “Items and Services” For Which Prices Must Be Published?

“Items and services” means all items and services that could be provided to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a charge. Examples include supplies and procedures, room and board, and services of employed physicians and non-physician practitioners.

What Constitutes a “Standard Charge”?

A “standard charge” is the regular rate established by the hospital for an item or service. The five types of standard charges are gross charges, payer-specific negotiated charges, discounted cash price, de-identified minimum charges, and de-identified maximum charges. Different types of standard charges include different calculated prices for the same items and services. Hospitals should take care to review the requirements for each type of standard charge to ensure accurate calculations and inclusion under each of the five types:

  • Gross Charge: A gross charge, sometimes called a billed charge or billed amount, is the charge for an individual item or service that is reflected on the hospital’s chargemaster, absent any discounts. Hospitals should note that the chargemaster itself does not include certain negotiated charges, such as service packages, per diem rates, DRGs or other common payer service packages.
  • Payer-Specific Negotiated Charge: A payer-specific negotiated charge, also known as a negotiated rate, is a charge that the hospital has negotiated with a third-party payer for an item or service. A payer-specific negotiated charge must be listed for all negotiated charges, including charges negotiated with Medicare Advantage plans. The posting of the payer-specific negotiated charge is not itself intended to provide patients with an individualized out-of-pocket estimate but to help patients choose which services to purchase or if they are better off under self-pay than with their insurance provider.
  • Discounted Cash Price: The charge that applies to an individual who pays cash or a cash equivalent for a hospital item or service. Hospitals that do not offer self-pay discounts may display the undiscounted gross charges found on the hospital chargemaster.
  • De-Identified Minimum Negotiated Charge: The lowest charge that a hospital has negotiated with all third-party payers for an item or service.
  • De-Identified Maximum Negotiated Charge: The highest charge that a hospital has negotiated with all third-party payers for an item or service.

To identify the minimum and maximum negotiated charges, the hospital must consider the distribution of all negotiated charges across all third-party payer plans and products for each hospital item or service. The distribution should not include non-negotiated charges even if that is the amount paid by a third-party payer. The hospital must then select and display the lowest and highest de-identified charge for each item or service. Therefore, the de-identified minimum and maximum negotiated charges will be a piecemeal list from all third-party payers who have negotiated rates with the hospital for some or all items or services offered by the hospital.

Standard Charge Publishing Requirements

All five types of standard charges must be made public according to the specifications of the Final Rule. Hospitals must publish their standard charges in two ways: (1) a comprehensive machine-readable file that makes public all standard charge information for all hospital items and services; and (2) a consumer friendly display of common “shoppable” services derived from the machine-readable file. The data must be published in a single data file, likely resulting in a very large file. The list of standard charges must also comply with standardization requirements. This includes the following corresponding information for each item or service: a description of each item or service, the corresponding gross charge for each item or service in the inpatient and outpatient setting, the corresponding payer-specific negotiated charge for each item or service for the inpatient and outpatient setting along with the name of the associated third-party payer and plan, the corresponding de-identified minimum negotiated charge for each item or service in the inpatient and outpatient setting, the corresponding de-identified maximum negotiated charge for each item or service in the inpatient and outpatient setting, the corresponding discounted cash price for each item or service in the inpatient and outpatient setting and any code used by the hospital for billing or accounting purposes (CPT, HCPCS, DRG, etc.).

What is a “Shoppable Service”?

A “shoppable service” is what its name implies - a service that can be scheduled by a healthcare consumer in advance. If a shoppable service is customarily accompanied by ancillary services, the shoppable service must be presented as a group of related services. HHS has published a list of 70 shoppable services and hospitals must provide standard charges for any of the 70 services that they provide (see Table 3, p. 190 of the Final Rule for a complete list of shoppable services). Additionally, hospitals must provide as many additional shoppable services as is necessary for a combined total of at least 300 shoppable services.

Enforcement

Lastly, the Final Rule includes a monitoring system for detecting hospital noncompliance and allows HHS to take action to address noncompliance, which can include written warnings, corrective action plans, and civil monetary penalties.

It is likely that industry groups will challenge the rule, but the Trump Administration is prepared to defend it under what it considers to be delegated authority under The Public Health Act. If finally enacted, the rule will require significant planning and analysis by hospital systems to meets its varied and broadly encompassing requirements.