PYA – “CMS Price Transparency Rule: What hospitals need to know”


The DFW Hospital Council posts guest blogs by Associate Members. The following was provided by PYA, PC.

Blog by Kathy Reep, Senior Manager, PYA

Rising healthcare costs have long plagued the U.S., with consumer, employer, provider and even the federal government bearing the financial burden. But the charges and payments for certain healthcare services have not always been clear or easy to compare. A new rule set to take effect January 1, 2021, aims to address price transparency in healthcare. The Centers for Medicare & Medicaid Services’ (CMS) Price Transparency Final Rule (Final Rule, or Rule), finalized in November 2019, will require U.S. hospitals to establish, update and make public a list of their standard charges for the items and services they provide. While ambiguities exist in the Rule, there are definitive actions hospitals should take now to prepare for the January 1 effective date.

The Final Rule defines a hospital as “an institution in a State in which State or applicable local law provides for the licensing of hospitals, that is licensed as a hospital pursuant to such law, or is approved, by the agency of such State or locality responsible for licensing hospitals, as meeting the standards established for such licensing.” A hospital as defined by CMS is not limited to an institution enrolled in Medicare, but, for the applicability of the Rule, excludes federally owned and operated hospitals such as the Veteran’s Administration and hospitals operated by the Indian Health Service.

In addition to the current requirement to post standard charges (chargemaster) on their websites, the Final Rule requires hospitals to publish online, in a machine-readable file, their payer-specific negotiated rates for 300 “shoppable services” and the hospital’s standard charges. Of those published services, CMS has identified 70 that must be included if the services are provided by the hospital. Additionally, the standard charges they must publish include the gross charge, payer-specific negotiated charge, discounted cash price, and the de-identified minimum and maximum negotiated charge.

CMS will monitor compliance by reviewing complaints submitted to CMS regarding hospitals’ non-compliance with the Rule. If after investigating such complaints CMS finds a hospital to be non-compliant, CMS may take additional actions—issuing a written warning, requesting a corrective action plan to address the non-compliance, and potentially issuing a civil monetary penalty (CMP).

Items and Services –
All items and services—including individual items and services and service packages a hospital could provide to a patient visit—for which the hospital has established a standard charge. Examples include: supplies and procedures, room and board, use of the facility, services of employed physicians and non-physician practitioners, and any other items or services for which a hospital has established a standard charge.

Standard Charge – CMS acknowledges that a hospital may not have a “standard charge” for an item or service, as charges may vary depending on the circumstances. Therefore, CMS has defined standard charges to mean “gross charges” and “payer-specific negotiated charges.” All of the following types of prices must be posted:

• Gross charges;
• Payer-specific negotiated charges;
• Discounted cash price;
• De-identified minimum and maximum negotiated charge.

Machine-Readable File – The five types of standard charges must be published in two ways. The first is a comprehensive machine-readable file that makes public all standard charge information for all hospital items and services. The second is a consumer-friendly display of common “shoppable” services derived from the machine-readable file. CMS’ intent is for the second option to be a shorter list for consumers seeking to compare costs for common shoppable services by hospital. The following must be included in the machine-readable file:

• Description of each item or service;
• The corresponding gross charge;
• The corresponding payer-specific negotiated charge;
• The corresponding de-identified minimum negotiated charge;
• The corresponding de-identified maximum negotiated charge;
• The corresponding discounted cash price;
• Any code used by the hospital for purposes of accounting or billing for the item of service.

Additionally, the file must be a single digital file in a machine-readable format. A portable document format (PDF) would not meet this definition because the data contained within the PDF file cannot be easily extracted without further processing or formatting.

Shoppable Services – In addition to including all standard charges for items and services in the machine-readable file, hospitals must also make public in a consumer-friendly manner their payer-specific negotiated charges for 300 common services for which consumers may have the opportunity to shop. A shoppable service is a service that can be scheduled by a healthcare consumer. When the shoppable service is customarily accompanied by the provision of ancillary services, a hospital must present the shoppable service as a grouping of related services, meaning that the charge for the primary shoppable service is displayed along with the charge for ancillary services. Examples of shoppable services include certain imaging and laboratory services, medical and surgical procedures, and outpatient clinic visits.

CMS has specified 70 shoppable services for which corresponding standard charges must be made public. A hospital must select the additional 230 shoppable services based on the services’ utilization or billing rates in the previous year. It must take into consideration the frequency with which it provides services to the population when determining the hospital-selected shoppable services. The hospital must publish a minimum of 300 shoppable services.

While there is always a potential for additional appeals and changes in legislation, presently hospitals must prepare for the January 1, 2021 date or risk facing the CMP. If you have questions related to the CMS Price Transparency Final Rule, or need assistance with evaluating how your organization will comply, contact one of our PYA professionals at (800) 270-9629.