On November 16th, 2021 the Centers for Medicare and Medicaid Services (CMS) published a ‘final rule with comment period’ to increase hospital compliance with the Hospital Price Transparency Rule.[1] The new rule goes into effect on January 1, 2022.
While hospital price transparency is a big step, it falls short of telling “consumers what they most want to know: What will I have to pay out-of-pocket if I need health care? Is there a lower-cost alternative to hospital care that will meet my needs?”[2] For this to occur there needs to be transparency from the insurance company side as well. Unfortunately, for consumers, this may have to wait.
The push for price transparency in healthcare gained national importance on June 24, 2019, when Trump issued “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First.”[3] The Order’s purpose was to “enhance the ability of patients to choose the healthcare that is best for them” and “increase competition, innovation, and value in the healthcare system.”[4],[5] The Order, and the push for more transparency in healthcare in general, is one of the many attempts to rein in the astronomical prices connected to healthcare in the US.[6]
The Biden administration, picking up on the strong bipartisan support for price transparency[7], has continued the push for price transparency from hospital and insurance companies, but has found the latter to be more of a challenge.[8]
Hospital Price Transparency
The original Hospital Price Transparency Rule was issued by CMS on November 27, 2019, and went into effect on January 1, 2019. The rule, codified in 45 CFR 180[9], requires that hospitals provide clear and accessible “pricing information about the items and services they provide in two ways: (1) Comprehensive machine-readable file with all items and services. (2) Display of shoppable services in a consumer-friendly format.”[10]
While direct legal challenges from hospital and medical groups were rejected by the Court of Appeals for the D.C. Circuit[11], hospitals’ responses to the rule have been mediocre at best.[12] The new CMS rule attempts to remedy this and increase hospital compliance.
Under the current rule, hospitals not in compliance with the Hospital Price Transparency are required to pay $300/day per hospital or $109,500/year per hospital.[13] This low amount – for reference, the top 50 hospitals brought in a combined $123 billion in net patient revenue[14] – has been described as “chump change” and the “cost of doing business” by some.[15] The new rule, to go into effect at the start of 2022, provides a sliding scale of fines. Larger hospitals, with more than 30 beds, will now be required to pay $10/day per bed, with a maximum of $5,500/day or $2,007,500/year. Time will tell whether this will be enough of an incentive to change hospital practices.
Other hospitals have taken to more unsavory methods of noncompliance. Some hospitals imbedded “code in their websites that prevented Google and other search engines from displaying pages with the price lists.”[16] The new rule specifically cites these practices by hospitals and proposes “to amend the regulations…to specify that the hospital must ensure that the standard charge information is easily accessible, without barriers, including, but not limited to, ensuring the information is accessible to automated searches and direct file downloads through a link posted on a publicly available website.”[17]
The Biden administration has also started to crack down on noncompliance in hospitals.[18] While 100% compliance is unlikely by the end of 2022, the new rule will hopefully, increase compliance and the quality of information posted by hospitals.
Transparency in Coverage
The Transparency in Coverage (TiC) rule was put forth by Trump in October 2020.[19] The rule, to be phased in from January 2022 to January 2024, would require insurance companies to “publish the underlying negotiated rates paid to healthcare providers, historical information on charges from and payments to out-of-network providers, and negotiated rates and historical prices for covered prescription drugs.”[20]
While the Biden administration is leaning in on the Hospital Price Transparency Rule, they postponed the start of the TiC enforcement from January 1, 2022 to July 1, 2022.[21] In a FAQ sheet released by CMS on August 20, 2021, the agency explained that it would be pushing off the start date due to concerns of tight deadlines, and Congress’s passing title II (Transparency) of Division BB of Consolidated Appropriations Act, 2021 (the CAA) which “significantly changed the regulatory landscape since the TiC Final Rules were adopted.”[22]
The release of the FAQ sheet comes weeks after legal challenges were filed by lobbying groups such as the U.S. Chamber of Commerce and the Pharmaceutical Care Management Association (PCMA) against TiC. [23] These lawsuits, both filed in early August 2021, argued that various sections of the TiC rule exceed the authority of the Health and Human Services and that the TiC rule would raise healthcare costs.[24] On August 25, in response to the FAQ sheet release, the Chamber of Commerce dropped its lawsuit, and the PCMA, which applauded the FAQ sheet announcement, said it was reviewing the status of its suit.[25]
Going Forward
American leaders are finally taking actions to improve healthcare in the US.[26] Time will tell whether these initiatives are successful. There is hope though, that after January 1, 2022 one may finally be able to look up the price of a procedure or blood test on their local hospital’s website – whether this will have an effect on the astronomical and varied prices[27] is still unanswered.
[1] https://www.federalregister.gov/d/2021-24011; https://www.cms.gov/newsroom/fact-sheets/cy-2022-medicare-hospital-outpatient-prospective-payment-system-and-ambulatory-surgical-center-0
[2] https://jamanetwork.com/journals/jama-health-forum/fullarticle/2778428
[3] https://www.federalregister.gov/documents/2019/06/27/2019-13945/improving-price-and-quality-transparency-in-american-healthcare-to-put-patients-first
[4] Id.
[5] See generally Nudge by Richard H. Thaler & Cass R. Sunstein p.93 for a discussion of RECAP (Record, Evaluate, and Compare Alternative Prices). RECAP is a method, similar to the one taken by the Hospital Price Transparency Rule, proposed in Nudge to help consumers make better choices when buying cell phones, credit cards, mortgages, and more.
[6] Overall healthcare costs in the US reached $3.8 trillion in 2019. The largest percentage of that number is the costs connected with hospital care – 31% or $1.2 trillion (https://www.cms.gov/files/document/highlights.pdf); Price inflation of hospital costs has risen 200% in the last 20 years (https://econlife.com/2021/08/transparent-hospital-prices/)
[7] https://www.patientrightsadvocate.org/blog/blog-post-title-one-d23bk
[8] https://www.washingtonpost.com/politics/2021/07/12/health-202-biden-says-he-enforce-trump-era-rules-requiring-hospitals-post-their-prices/
[9] https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-E/part-180
[10] https://www.federalregister.gov/d/2019-24931; https://www.cms.gov/files/document/hospital-price-transparency-frequently-asked-questions.pdf
[11] https://www.beckershospitalreview.com/legal-regulatory-issues/hospitals-lose-appeal-in-price-transparency-case.html
[12] A study in JAMA found that of 100 randomly selected hospitals, 83 were noncompliant with at least one requirement of the Hospital Price Transparency Rule (https://jamanetwork-com.ezproxy.cul.columbia.edu/journals/jamainternalmedicine/fullarticle/2781019). Another study can be found here: https://www.ajmc.com/view/availability-of-prices-for-shoppable-services-on-hospital-internet-sites.
[13] 45 CFR 180.90(c)(2)
[14] https://www.definitivehc.com/resources/healthcare-insights/top-50-hospitals-by-net-patient-revenue
[15] https://www.healthleadersmedia.com/finance/enforcing-hospital-price-transparency-300-max-daily-fine-big-enough; A Freakenomics Podcast on Healthcare, quoting a study on the effects of small fines for parents who did not pick up their child from school on time, explained how small fines can often lead to worse outcomes than no fines because “a fine is also just a price, and if the price is low enough, it’s worth paying.” https://freakonomics.com/podcast/healthcare-costs/
[16] https://www.wsj.com/articles/hospitals-hide-pricing-data-from-search-results-11616405402?mod=article_inline
[17] https://www.federalregister.gov/d/2021-24011/p-4242
[18] https://www.bricker.com/insights-resources/publications/cms-begins-enforcement-of-hospital-price-transparency-rule; https://www.wsj.com/articles/hospitals-draw-warning-on-price-disclosure-rule-compliance-11620442193?mod=article_inline
[19] https://www.cms.gov/newsroom/fact-sheets/transparency-coverage-final-rule-fact-sheet-cms-9915-f
[20] https://www.forbes.com/sites/debgordon/2021/08/29/biden-administration-delays-new-health-insurance-price-transparency-rules-at-least-6-months/?sh=f248ec36a651; This requirement was set to start on January 1, 2022. See https://www.cms.gov/newsroom/fact-sheets/transparency-coverage-final-rule-fact-sheet-cms-9915-f for details of the other services to be provided in later years.
[21] https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-49.pdf
[22] Id.; https://www.healthcarelawbrief.com/2021/09/the-surprises-continue-the-biden-administration-delays-implementation-of-certain-provisions-of-the-no-surprises-act-and-transparency-in-coverage-final-rules-applicable-to-providers-and-insurers/
[23] https://www.wsj.com/articles/business-groups-sue-over-healthcare-price-transparency-rule-11629464688; https://medcitynews.com/2021/08/insurer-price-transparency-rule-faces-legal-challenges-4-takeaways/
[24] Id.
[25] https://www.proquest.com/docview/2568209375?accountid=10226&pq-origsite=summon
[26] See https://www.jdsupra.com/legalnews/employer-checklist-for-new-health-plan-3614583/ for a list of various healthcare initiatives planned for the future.
[27] See https://www.wsj.com/articles/how-much-does-a-c-section-cost-at-one-hospital-anywhere-from-6-241-to-60-584-11613051137?mod=article_inline