Effective January 1, 2021, hospitals must comply with HHS’ new hospital price transparency rule that requires facilities to create and maintain a public list of their standard charges, including private payer-negotiated rates, for 300 “shoppable” services.

The American Hospital Association (AHA) and others have argued that the requirement for disclosing private payer rates exceeds the current administration’s authority and would violate their First Amendment rights. This argument continues with the most recent appeal to the final rule set for opening arguments on October 15, 2020. Appeal No. 20-5193.

While the industry is challenging the rule, the clock is ticking. We suggest that providers do not put preparations on hold. Below we have included some important details of the new requirements with implementation considerations.

Which Hospitals Must Comply?

CMS defines a hospital for purposes of this requirement as an institution in any state that is licensed as a hospital pursuant to governing law or is approved, by the agency of the state or locality responsible for licensing hospitals, as meeting the standards established for such licensing.

 Applies to:

• Non-governmental hospitals, including but not limited to critical access hospitals, sole community hospitals, psychiatric hospitals, and rehabilitation hospitals
• All locations operating under a hospital license, including off-campus outpatient departments

Does not apply to:

• Governmental hospitals (e.g., Veterans Affairs, Indian Health Services)
• Entities such as ambulatory surgical centers or other non-hospital sites-of-care

Items and Services

CMS finalized the proposal to define hospital “items and services” to mean all items and services, including individual items and services and service packages, that could be provided by a hospital to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a standard charge.

Examples include, but are not limited to, the following: 

• Supplies and procedures
• Room and board
• Use of the facility and other items (generally described as facility fees)
• Services of employed physicians and non-physician practitioners (generally reflected as professional charges)
• Any other items or services for which a hospital has established a standard charge

The definition of “items and services” includes not just all DRGs, but also all other “service packages” provided by the hospital, including, for example, service packages the hospital provides in an outpatient setting, for which a hospital may have established a standard charge. Therefore, the definition of “items and services” includes both individual items and services and service packages.

CMS declined to provide any guidance about when a physician or non-physician practitioner is considered to be “employed” by the hospital, leaving open for interpretation whether charges for physicians employed by an affiliated entity or working as independent contractors of the hospital would need to be disclosed.

Payment rates for professional services are often part of a separately negotiated contract which will require hospitals to consider even more agreements when posting their charges.

Reporting of Standard Charges

CMS finalized the definition of ‘standard charges’ to include the following: 

• Gross Charge: The charge for an individual item or service that is reflected on a hospital’s chargemaster, absent any discounts.
• Discounted Cash Price: The charge that applies to an individual who pays cash, or cash equivalent, for a hospital item or service. CMS confirmed that this price is the discounted cash rate unrelated to any charity care or bill forgiveness reductions. If a hospital has not established a lower cash price for an item or service, the hospital’s gross charges for the item or service would be considered the discounted cash price.
• Payer-Specific Negotiated Charge: The charge that a hospital has negotiated with a third-party payer for an item or service. Medicare and Medicaid fee-for-service rates are not considered to be payer-specific negotiated rates because they are not subject to negotiation. However, Medicaid managed care and Medicare Advantage rates are within the scope of this definition.
• De-Identified Maximum and Minimum Negotiated Charges: The lowest and highest charge that a hospital has negotiated with all third-party payers. CMS believes that consumers would be able to compare the negotiated charge for their insurance product with this range to assess the value of the provider and the insurance product.

Two Required Ways for Making Public Standard Charges

The rule requires hospitals to make their standard charges available publically in two formats:

• Comprehensive File of Standard Charges
• Consumer-Friendly Shoppable Services

The display of information must be: 

• In a machine-readable format such as .XML
• Prominently displayed on a publically-available website
• Clearly identifies the hospital location with which the standard charges information is associated
• Openly accessible. The website must not require an individual to create a user account or password or disclose personally identifiable information to access the data.
• Comprehensive machine-readable file of standard charges
  • All of the information must be included in a single digital file. There is flexibility. For instance, each type of standard charges may be presented on separate tabs of a spreadsheet.
  • Required naming convention for the file:
    • <ein>_<hospital-name>_standardcharges.[json|xml|csv] in which the EIN is the Employer Identification Number of the hospital, followed by the hospital name, followed by ‘‘standardcharges’’ followed by the hospital’s chosen file format.
  • Hospitals must update the data file at least once every 12 months and indicate the date of the last update in the file or on the webpage linking to the file.

Comprehensive File of Standard Charges

The file must include the following information:

• The gross charges, payer-specific negotiated charges for each payer, de-identified minimum and maximum negotiated charges, and discounted cash prices for all items, services, and service packages. The file must identify these charges in the inpatient and outpatient settings, as applicable.
• A description of each item, service, or service package. In the case of items and services that are associated with common billing codes (such as HCPCS codes), the hospital could use the code’s associated short text description.
• Any code used by the hospital for purposes of accounting or billing (e.g., CPT code, DRG, or NDC).
• Hospitals are not required to include revenue codes, but if the same service has different standard charges based on the department that furnishes the service, the list will need to include separate lines for each standard charge.

Example Format

• The above example (from the final rule) shows only one type of standard charge (specifically the gross charges) that a hospital would be required to make public in the comprehensive machine-readable file. Hospitals must also make public the payer-specific negotiated charges, the de-identified minimum negotiated charges, the de-identified maximum negotiated charges, and the discounted cash prices for all items and services.
• If a hospital has a payer-specific negotiated charge (base charge) for a DRG code, the hospital will list that payer-specific negotiated charge and associated DRG code as a single line-item on its machine-readable file.
  • Gross charges for DRGs or service packages are not required for reporting.
• CMS FAQ article:
  • “Q: Is a hospital required to post its standard charges for drugs, biologicals, or other items and services that it provides if those standard charges are not reflected in its chargemaster?
  • A: Yes, it is the responsibility of the hospital to establish (and update) and make public a list of the hospital’s standard charges for all items and services provided by the hospital, including all drugs, biologicals, and all other items and services provided by the hospital.”
• Information is not expected to be used by consumers, but rather by employers, other providers, and tool developers.

Consumer-Friendly Shoppable Services

Hospitals are required to display pricing for at least 300 “shoppable” services.

The 300 shoppable services must include 70 services identified by CMS (if the hospital offers those services) with the balance selected by the hospital from the most commonly provided services.

• If a hospital does not provide one or more of the 70 CMS-specified shoppable services, the hospital must indicate that the service is not offered by the hospital and select additional shoppable services such that the total number of shoppable services is at least 300.
• If a hospital provides less than 300 shoppable services, the hospital must list as many shoppable services as it provides.

Criteria for hospital-selected shoppable services:

• Service is often scheduled in advance (e.g., imaging, labs, colonoscopy, cesarean delivery and related care), and
• Most commonly performed. In other words, hospitals should take into consideration the frequency with which they provide services (within the past year) that meet the definition of ‘shoppable’ to the patient population they serve.

For each shoppable service displayed, the hospital must include: 

• A plain-language description of each shoppable service.
• An indicator when one or more of the CMS-specified shoppable services are not offered by the hospital.
• The discounted cash price that applies to each shoppable service (and corresponding ancillary services, as applicable). If the hospital does not offer a discounted cash price for one or more shoppable service(s) (or corresponding ancillary services), the hospital must list its undiscounted gross charge.
• The payer-specific negotiated charge that applies to each shoppable service (and to each ancillary service, as applicable). Each list of payer-specific negotiated charges must be clearly associated with the name of the third-party payer and plan.
• The de-identified minimum and maximum negotiated charges that applies to each shoppable service (and to each corresponding ancillary service, as applicable).
• The location at which the shoppable service is provided, including whether the standard charges for the hospital’s shoppable service applies at that location to the provision of that shoppable service in the inpatient setting, the outpatient department setting, or both.
• Any primary code used by the hospital for purposes of accounting or billing for the shoppable service, including, as applicable, the CPT code, the HCPCS code, the DRG, or other common service billing codes.
  • MS-DRGs should be cross-walked to APR-DRGs, where applicable.

The sample above shows the prices for one payer and one plan. So, hospitals would have to post each payer and each payer’s plan if those charges are different. And you could do that as separate files, or you could do that as different columns. The format is flexible to determine how best to create that display in a way that is consumer friendly.

Hospitals that offer internet-based price estimator tools are deemed to have met the requirement to post charges in a consumer-friendly format.

To qualify, the price estimator tool must: 

• Allow healthcare consumers to, at the time they use the tool, obtain an estimate of the amount they will be obligated to pay the hospital for the shoppable service.
• Provide estimates for as many of the 70 CMS-specified shoppable services that are provided by the hospital, and as many additional hospital-selected shoppable services as is necessary for a combined total of at least 300 shoppable services.
• Be prominently displayed on the hospital’s website and be accessible without charge and without having to register or establish a user account or password. A price estimator tool would be considered internet-based if it is available on an internet website or through a mobile application.

Monitoring and Enforcement

CMS has the authority to monitor hospital compliance, by evaluating complaints made by individuals or entities to CMS, reviewing individuals’ or entities’ analysis of noncompliance, and auditing hospitals’ websites.

• CMS has established an email address (PriceTransparencyHospitalCharges@cms.hhs.gov) through which individuals and entities may report to CMS concerns about hospital compliance with requirements to make public standard charges, including complaints about and analysis of noncompliance.
• Should CMS conclude a hospital is noncompliant with one or more of the requirements to make public standard charges, CMS may assess a monetary penalty after providing a warning notice to the hospital or after requesting a corrective action plan from the hospital if its noncompliance constitutes a material violation of one or more requirements.
• If the hospital fails to respond to CMS’ request to submit a corrective action plan or comply with the requirements of a corrective action plan, CMS may impose a civil monetary penalty on the hospital not in excess of $300 per day, and publicize the penalty on a CMS website.
• The rule establishes an appeal process for hospitals to request a hearing before an Administrative Law Judge (ALJ) of the civil monetary penalty.

Implementation Check List

• Create a task force and review the final rule requirements in detail,
• Develop an action plan,
• Assemble all payer contracts within one database,
• Review your chargemaster and contracts along with the organization’s pricing strategy,
• Assess chargemaster for market defensible charges. Consider performing a market-based pricing analysis,
• Evaluate whether to partner with external resources,
• Prepare and publish charge files,
• Modify your cost reporting data set, where applicable, to include transparency requirements,
• Develop training programs and scripts to help staff with patient communications, and
• Enhance clinical and financial reporting dashboard analytics.

Market-Based MS-DRG Relative Weight Data

Despite opposition from various stakeholders, CMS finalized its proposal to require that hospitals report on the Medicare cost report the median payer-specific negotiated rates for inpatient services, by MS-DRG, for Medicare Advantage organizations. This policy is effective for cost reporting periods ending January 1, 2021, or after. CMS plans to use the reported Medicare Advantage data to revise its method of setting the relative weights for DRGs, beginning with FFY 2024.

Key References

•  CMS–1717–F2: Federal Register, Wednesday, November 27, 2019. Final Rule: CY 2020 Hospital Outpatient PPS Policy Changes and Payment Rates and Ambulatory Surgical Center Payment System Policy Changes and Payment Rates. Price Transparency Requirements for Hospitals To Make Standard Charges Public.
•  CMS FAQ article – Additional frequently asked questions regarding requirements for hospitals to make public a list of their standard charges via the Internet.
•  CMS-1735-F: Federal Register, September 2, 2020. Final Rule: Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Final Policy Changes and Fiscal Year 2021 Rates; Quality Reporting and Medicare and Medicaid Promoting Interoperability Programs Requirements for Eligible Hospitals and Critical Access Hospitals.

If you have any questions regarding this information, or any other issue affecting your organization, please contact Scott Treida, Michael Alessandrini, or your Blue & Co. advisor.