Legal Intelligencer article by Lamb McErlane PC Health Law Attorneys Vasilios J. Kalogredis^I and Rachel E. (Lusk) Klebanoffⁱⁱ

On June 23, 2020, a federal district court upheld the Centers for Medicare and Medicaid Services’ (CMS) Hospital Price Transparency Final Rule, which will require hospitals to provide patients with easily accessible information about standard changes for items and services offered by the hospital, including privately negotiated payment rates with insurers. Am. Hosp. Assoc. v. Azar, No. 19-03619 (D.D.C. June 23, 2020). The Rule also requires hospitals to provide similar price information for at least 300 “shoppable services” in a consumer-friendly, searchable format on their websites.

The Final Rule, which takes effect on January 1, 2021, one year later than initially proposed, was promulgated as part of the Trump administration’s efforts to provide information to patients on the cost of health care services and lower health care costs. The American Hospital Association (“AHA”) and other hospital groups challenged the Rule on the grounds that CMS exceeds its authority in requiring disclosure of negotiated payment rates.

Definition of ‘Hospital’

For purposes of the rule, CMS defines ‘hospital’ to mean an institution in any 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.

This includes all Medicare-enrolled institutions that are licensed as hospitals (or approved as meeting licensing requirements) as well any non-Medicare enrolled institutions that are licensed as a hospital (or approved as meeting licensing requirements). Federally owned or operated hospitals (for example, hospitals operated by the U.S. Department of Veterans Affairs) that do not treat the general public, except for emergency services and whose rates are not subject to negotiation, are deemed to be in compliance with the requirements for making public standard charges because their charges for hospital provided services are publicized to their patients (for example, through the Federal Register).

Public List of Standard Charges for Items and Services

CMS outlined the following five types of standard charges that hospitals must report for each item or service provided by the hospital, whether in the inpatient or outpatient department setting:

1. The gross charge (the charge for an individual item or service that is reflected on a hospital’s chargemaster, absent any discounts);
2. The payer-specific negotiated charge (the charge that a hospital has negotiated with a third-party payer for an item or service);
3. The de-identified minimum negotiated charges (the lowest charge that a hospital has negotiated with all third-party payers for an item or service);
4. The de-identified maximum negotiated charges (the highest charge that a hospital has negotiated with all third-party payers for an item or service); and
5. The discounted cash price (the charge that applies to an individual who pays cash, or cash equivalent, for a hospital item or service).

Hospitals must also include a description of each item or service provided by the hospital and any code used by the hospital for accounting or billing purposes related to the item or service, such as a CPT code, HCPCS code, DRG, NDC, or other common payer identifier.

The information must be in a single digital file, in a machine-readable format, posted in a publicly available internet location, displayed prominently and clearly identify the hospital location associated with the charge information. Hospitals are required to update their postings at least once annually.

Consumer-Friendly List of Standard Charges for Shoppable Services

Hospitals must make public standard charges for “shoppable services” – which CMS defines as services that can be scheduled by a health care consumer in advance – including as many of the 70 shoppable services specified by CMS that are provided by the hospital and as many additional shoppable services selected by the hospital, for a combined total of at least 300 shoppable services.

The 70 CMS-specified shoppable services are divided into four broad categories: E&M Services, Laboratory and Pathology Services, Radiology Services, and Medicine and Surgery Services.

Hospitals are required to include a description of each shoppable service, an indication if the hospital does not provide the service, and standard charge information including the payer-specific negotiated charge, discounted cash price, de-identified minimum negotiated charge, and de-identified maximum negotiated charge. Hospitals must also identify the location where the shoppable service is provided, including whether each type of standard charge applies at that location with regard to the inpatient setting, outpatient setting, or both. Hospitals must identify any primary code used for accounting or billing purposes for the shoppable service.

Charge information must be included for each “ancillary service” associated with the shoppable service, which CMS defines as an item or service a hospital customarily provides as part of or in conjunction with a shoppable primary service. Hospitals should present the charge for the primary shoppable service along with charges for ancillary services in a grouping of related services. Ancillary items and services may include laboratory, radiology, drugs, delivery room, operating room, therapy services, hospital fees, room and board charges, and charges for employed professional services. Hospitals are not required to post professional fees for non-employed providers, although CMS encourages hospitals to do so to improve transparency for consumers.

Like the public list of standard charges, hospitals may use any format of their choosing to make the shoppable service information public online, so long as it is easily accessible through a publicly available internet location, is displayed prominently, and identifies the hospital location with which the information is associated. Hospitals must also update the standard charge information for shoppable services at least once annually.

Monitoring and Enforcement

CMS will monitor compliance and is authorized to take a number of actions related to non-compliance, including: (1) provide a written warning notice; (2) request a corrective action plan for material violations; and (3) if a hospital fails to respond to a request for a corrective action plan or fails to comply with the terms of a corrective action plan, impose civil monetary penalties of up to $300 per day and publicize the penalty on the CMS website.

Next Steps for Hospitals

The Final Rule is a massive step from previous price transparency requirements, which have generally been limited to information regarding billed charges. These changes have been met with criticism from the hospital industry. The AHA has filed a Notice of Appeal in the U.S. District Court for the District of Columbia, and at least four hospital groups have written to the Department of Health and Human Services (HHS) urging the agency not to implement the Final Rule on January 1, 2021, largely due to the challenges faced by hospitals due to the COVID-19 pandemic. The groups asked HHS to delay implementation until the courts have resolved the legality of the Final Rule, given the financial and operational challenges hospitals will face creating systems to implement the reporting requirements while the pandemic is straining hospital resources.

Although hospitals are asking for a delay in implementation, the requirements of the current price transparency Final Rule will take time to implement. By now, hospitals should have started to establish procedures to ensure full implementation by January 1, 2021.

Click here to view the Legal Intelligencer article.

_______________________________________________

Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other health care professionals and their businesses for over 40 years. He is Chairman of Lamb McErlane PC’s Health Law Department. bkalogredis@lambmcerlane.com. 610-701-4402.

Rachel E. (Lusk) Klebanoff, Esq. is a senior associate at Lamb McErlane PC who focuses on health law and health care litigation. She represents physicians, dentists, medical group practices, and other health-related entities in transactional, regulatory, and compliance matters. rlusk@lambmcerlane.com. 610-701-4416.

#healthcarelaw #healthlaw