On July 13, 2023, the Centers for Medicare & Medicaid Services (CMS) proposed key changes to the hospital price transparency rule. These proposed changes are meant to strengthen standards for disclosing hospital prices and provide more enforcement authority to regulators, and if finalized, will go into effect on January 1, 2024. This article provides an overview of the original rule and its implementation to date and describes the current changes being proposed by CMS.

What Is The Hospital Price Transparency Rule And Whom Does It Benefit?

In 2019, CMS enacted the hospital price transparency rule requiring hospitals to publish the following types of charges for all items and services in a machine-readable file: (1) gross charges (or “prices”), (2) discounted cash prices for self-pay patients, (3) payer-specific negotiated prices, (4) de-identified minimum and maximum negotiated rates. Additionally, hospitals are also required to publish similar information for 300 “shoppable services” in a consumer-friendly manner, such as through an online price estimating tool. The rule gives CMS authority to monitor hospital noncompliance, issue written warnings, request corrective action plans, impose monetary penalties, and make information about penalties public on a CMS website. The rule went into effect on January 1, 2021.

Though the rule was initially enacted with the goal of helping patients shop for lower-cost, higher-value services, it is unclear how useful price transparency actually is to patients. Patients have no choice when it comes to picking providers for emergency care, and even when seeking a “shoppable,” non-emergency service, patients tend to mostly rely on referrals from trusted doctors. Studies show that patients rarely make use of online shopping tools for health care.

However, price transparency can be very useful for employers, researchers, and policymakers. Employers pay for the health care of almost 153 million (or 57 percent of) non-elderly people, and having access to information about how much local providers are charging other payers can help them push provider prices down. Policymakers and researchers concerned with rising health care prices can also make use of hospital pricing data to understand cost drivers and develop informed policy solutions.

Issues With Initial Implementation: Compliance And Data Quality

Within the first year of the hospital price transparency rule going into effect, several researchers and reporters raised alarm about hospitals not complying with the rule. A CMS assessment from early 2021 found that only 27 percent of hospitals were fully compliant. In November 2021, CMS responded to this by increasing the monetary penalty for noncompliance from $300 a day (approximately $110,000 a year) for all hospitals to $5,500 a day (over $2 million a year) for the largest hospitals (with over 551 beds). These higher penalties went into effect on January 1, 2022 and by the fall of that year, CMS found that 70 percent of hospitals had fully come into compliance. As of April 2023, CMS has issued 730 warnings, 269 requests for corrective action plans, and imposed penalties on four noncompliant hospitals.

Even as CMS has made steady progress on securing higher levels of compliance from hospitals, the bigger and more difficult issue to address has been the quality of the data that hospitals are publishing. Researchers have described the data as “messy” and “consistently inconsistent,” and even experienced researchers have found it to be “difficult, if not impossible” to use it. Reported issues with the data include:

• Difficulty finding the files;
• Use of varied file formats;
• Lack of standardization in how payers and plans are identified;
• Lack of standardization in how services are identified—hospitals sometimes use their own codes instead of more commonly used Current Procedural Terminology (CPT) or Diagnosis-related Group (DRG) codes to identify services;
• Lack of standardization in how prices are reported—for example, reporting some prices per day and others per service or reporting prices for bundled services in different ways;
• Lack of key contextual information necessary to interpret the pricing data, such as the setting for the service (inpatient or outpatient), or what kind of provider is providing the service (facility or professional); and,
• Errors in the data

CMS has made resources available to hospitals to help them format the data and minimize errors, but hospitals are not required to use these templates and recommendations.

What CMS Is Proposing Now

In its recently proposed rule, CMS seeks to: (1) standardize the data elements required in the machine-readable file, (2) make the machine-readable file for each hospital easier to find, (3) improve enforcement of the hospital price transparency rule, and (4) gather information on the best ways to align the requirements of this rule with certain other recently enacted federal disclosure requirements.

Standardizing The Data Elements

Based on the recommendations provided by a technical expert panel convened by the Health Federally Funded Research and Development Center, CMS proposes requiring hospitals to use a standard template (available only in certain standard file formats) and adhere to accompanying technical specifications. Hospitals will also be required to attest to the “accuracy and completeness” of their data. While the original rule requires hospitals to publish the gross charges and negotiated charges for each item and service on a machine-readable file, the proposed rule additionally requires that each machine-readable file include the following standardized elements:

• The hospital’s location name, address, and license number.
• The file version and date of the most recent update.
• Payer and plan name, as specified in contract.
• Type of contracting method used to establish each charge, for example per day or per service.
• Whether the charge should be interpreted as a dollar amount, and if not, an algorithm or percentage used to determine the dollar amount (for example, “50 percent of total gross charges”). When a charge can only be expressed as an algorithm or percentage, hospitals must display a consumer-friendly expected allowed amount, which is the average dollar amount the hospital expects to be paid for an item or service depending on its contract with the payer.
• Description of the item or service corresponding to the charge along with information about whether it is associated with an inpatient admission or outpatient visit.
• For prescription drugs, the drug unit and type of measurement.
• Codes used by the hospital to identify items and services.

A hospital’s failure to display its information according to these specifications could result in a compliance action. In the proposed rule, CMS requests comments from hospitals on whether providing a validation tool to check files for compliance with formatting requirements would be useful. If the proposed rule is finalized, CMS would give hospitals a 60-day enforcement grace period, until March 1, 2024, for adoption of these technical requirements.

Making It Easier To Find The Data

CMS is proposing the adoption of certain requirements that would allow sophisticated researchers to automatically compile the machine-readable files from different hospital websites without having to navigate to each individual page and find the file. CMS is seeking comment on their proposed provisions as well as suggestions on potentially better ways to achieve this goal.

Strengthening Enforcement

Building upon its prior efforts to ramp up enforcement, CMS is seeking certain additional enforcement authorities in this proposed rule. First, it proposes requiring an authorized hospital official to certify that the information in the machine-readable file is correct and complete. CMS would be allowed to ask hospitals to submit additional documentation to help them make a determination on compliance.

Second, under the proposed rule, when hospitals receive a warning letter about noncompliance from CMS, they will be required to acknowledge receipt of this notice within a certain amount of time.

Third, when a hospital is part of a bigger health system, the proposed rule would allow CMS to notify health system leadership about any compliance actions it takes against the hospital. CMS would also be allowed to work with the health system leadership to improve compliance across all hospitals in that system.

Finally, through the proposed rule, CMS seeks to publicize on its website all CMS assessments about a hospital’s compliance and information about any related action taken.

Requesting Information

CMS is also seeking comment on the best ways to align the hospital price transparency rule’s consumer-friendly price disclosure requirements with these other federal rules, given their shared goals.

As mentioned above, the hospital price transparency rule also requires hospitals to provide price information about 300 shoppable services in a consumer-friendly format. Since this rule went into effect, the federal government has enacted other rules that also require certain disclosures to consumers about health care prices.

The insurer transparency rule, also known as the Transparency in Coverage rule, requires plans to provide consumers with personalized pricing information incorporating the consumer’s cost-sharing obligations upon request. By January 1, 2024, health plans will be required to make this pricing information available for all items and services through internet-based self-service tools.

The No Surprises Act, enacted as part of the Consolidated Appropriations Act of 2021, requires providers to give uninsured patients a good faith estimate of expected charges for health care services. For patients with insurance, providers must provide this good faith estimate to the patient’s plan, and the plan must use this estimate to provide the patients with an advanced explanation of benefits, which tells the patient what they will owe out-of-pocket for the services.

CMS is hoping to reduce the administrative burden on providers and plans by streamlining reporting requirements across these various rules and statutes.

Looking Ahead

Bringing transparency to hospital prices is a necessary, if insufficient, first step to curbing provider prices, which have made health care unaffordable for many. With these proposed changes, CMS signals its continued commitment to ensuring that hospitals release their data in ways that are useful for payers, policymakers, researchers, and patients.