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January 1, 2021: Hospital Pricing May Not be Clear, but it Must be Transparent

fhlf hospital pricing transparencyBy: David J. Davidson

On January 1, 2021, every hospital in the United States (with very few exceptions) will be required to post clear, accessible pricing information online about the items and services they provide.  These “standard charges” must be provided in two ways: first, as a comprehensive list of all items and services offered by the hospital in a machine readable format; and second, as a display of “shoppable services” in a consumer friendly format.  According to CMS, the stated goal of the new rule is to empower patients “with the necessary information to make informed health care decisions.”

With the first requirement, the list must include gross charges, discounted cash prices, payor-specific negotiated charges, and de-identified minimum and maximum negotiated charges.  The items and services covered are basically anything for which the hospital has established a standard charge, regardless of location or whether the item or service is provided on an inpatient or outpatient basis.  These include, but are not limited to, supplies, surgical implants, procedures, room and board, and professional charges.

The second mandate requires hospitals to group their items and services into at least 300 categories of shoppable services (or less if the hospital does not provide that many services).  These groupings must include the information provided in the first requirement, but must also include any ancillary services that might be required as part of the primary service.  CMS has said that hospitals can satisfy this requirement by using a price-estimator tool, so long as certain conditions are met.

Effective January 1, CMS will begin monitoring hospital compliance with the rule, which was initially proposed by the Affordable Care Act.  Failure to comply could result in written warnings, corrective action plans, Civil Monetary Penalties, and publication of the enforcement action on a CMS website.

The rule has not been widely accepted by the hospital industry.  Issues concerning trade secrets, disclosure of negotiated charges, the cost of compliance, and the actual efficacy of the rule with consumers were raised.  In 2019 the American Hospital Association filed a legal action challenging the law.  In June of this year, the federal trial court granted summary judgment in favor of the government and the AHA appealed. Oral arguments were heard in October, but to-date, no opinion has been issued.  The rule therefore takes effect the first of next month.

The approaching effective date and the nature of the requirements require immediate action.  Hospitals should be well-versed in the requirements of the law. CMS has put together some fairly robust resources to help with compliance, so hospitals should be ready with price transparency as they ring in the new year.