It has been nearly three years since hospitals in the U.S. were required by the Price Transparency Rule to publicly provide clear, accessible pricing information online about the items and services they provide. The rule is intended to make it easier for patients to determine the cost of hospital services before they receive them so they can compare prices across hospitals and shop for lower-priced care.
On top of this, the U.S. Departments of Health and Human Services, Labor and the Treasury released the Requirements Related to Surprise Billing in 2021. Commonly referred to as the No Surprises Act, this requires hospitals and some other health care providers to share good faith estimates with uninsured and self-pay patients for most scheduled services.
The Price Transparency Act defines several different types of standard hospital charges including gross charges, discounted cash prices and charges negotiated between the hospital and third-party vendors.
According to the Act, hospitals must provide pricing information to patients in two ways: as a comprehensive machine-readable file and in a consumer-friendly display of standard charges for up to 300 shoppable hospital services. This requirement can be met through the release of a shoppable services file or by offering patients a cost estimator that generates a personalized out-of-pocket estimate that considers insurance information.
Compliance Requires Extensive Investments
“Complying with the hospital Price Transparency Rule requires extensive investments of personnel and finances, both of which have been impacted over the past few years by the COVID-19 pandemic, workforce shortages and inflationary cost pressures,” says Ariel Levin, a director of policy at the American Hospital Association (AHA). “For the machine-readable files, hospitals have had to pull together data from different sources to create large new databases.”
Ariel Levin, a director of policy at the American Hospital Association (AHA)
According to Levin, many hospitals have chosen to comply with the shoppable service requirement by implementing cost estimator tools. “These tools provide patients with the most consumer-friendly information about their expected costs,” says Levin. “While a worthwhile investment, they often require adoption of new technologies with both upfront costs and ongoing investments.”
Cleverley + Associates is working closely with hospitals to help them comply with the Price Transparency Rule. “When the requirements were first initiated several years ago, there was some confusion around exactly how to comply,” says President Jamie Cleverley. “But these have now largely been resolved.”
Earlier this year, the Centers for Medicare & Medicaid Services (CMS) released data about hospital compliance with the Price Transparency Rule. In 2022, 70% of U.S. hospitals were in compliance with both components of the rule. This was nearly triple the number of hospitals that were in compliance (27%) in 2021.
“This dramatic increase in compliance continues in 2023 as the requirements and reporting activities become more established into hospitals’ operational and compliance processes,” says Cleverley.
Levin agrees.
“Despite considerable strains on the hospital workforce over the past three years due in large part to the COVID-19 pandemic, the hospital field has made important progress in adopting these federal price transparency requirements,” she says.
Levin stresses that the AHA supports price transparency efforts that help patients access clear, accurate cost estimates when preparing for hospital care.
“We also support aligning federal price transparency requirements to avoid patient confusion and duplication of effort that adds unnecessary cost and burden to the health care system,” she says.
A Health Tracking Poll conducted by the Kaiser Family Foundation found that the majority of patients are unaware of the Price Transparency Rule’s requirements. Only one out of 10 patients said they are aware that hospitals are required to disclose the prices of treatments and procedures on their websites.
This low level of awareness is consistent across various demographics, including among patients with chronic conditions who would be more likely to need hospital care, according to the poll.
Cleverley + Associates President Jamie Cleverley
Numerous Sources of Pricing Information
In a Fact Sheet published earlier this year, the AHA stated that patients face numerous and potentially conflicting sources of hospital pricing information. “The Price Transparency Rule, the health insurer Transparency in Coverage Rule and the No Surprises Act’s price transparency policies each feature one or more ways in which patients can access pricing information in advance of care,” states the Fact Sheet.
“As a result, the reported rate information may be inconsistent and patients do not have a clear indicator as to which source should be relied upon,” the Fact Sheet continues. “The overabundance of tools may create patient confusion rather than provide value.”
An analysis performed by the Kaiser Family Foundation examined some of the challenges hospitals face in complying with the Price Transparency Rule, as well as the quality and usefulness of the data and how well it facilitates comparison of hospital prices for patients. It identifies several reasons why using the data is so challenging.
For one thing, specification of what hospital services prices correspond with is inconsistent, especially for episodes of care. For example, negotiated rates attached to a treatment episode for a knee replacement might correspond to a per diem charge instead of the entire episode.
Also, data quality can vary widely, with questionably low and high values for negotiated rates. For example, negotiated rates representing a proportion or multiplier of a rate may appear as less than one dollar.
In addition, crucial pieces of information for interpreting the applicability of price are missing, such as contracting method and payer class (e.g., Medicare, Medicaid, commercial). Certain payer classes generally have lower rates.
These challenges don’t necessarily result from a lack of compliance with the rule. “Rather, these findings highlight its shortcomings in facilitating price comparisons,” states the analysis. “The complexity of using the data is largely due to a lack of standardization and specification in the reporting requirements.”
Consistent specification of the following elements would improve reliability and usability of the price data, states the analysis:
- The charge’s applicable hospital setting (inpatient or outpatient)
- The charge type (facility or professional)
- Any associated charge modifiers that affect pricing or payment of a service
- The time period covered by the charge
- Any bundles of which the charge is a part
- The type of health plan
- How the charge differs from the base rate
“In situations where a consumer could shop for hospital care, the complexity of reimbursement mechanisms, plan designs and out-of-pocket cost responsibility limits price-based shopping for consumers,” states the analysis.
According to Cleverley, some hospitals still have questions about the useability of the data that’s being disclosed.
“Two of the biggest challenges so far to creating useful data from disclosures have been differences in reporting structure and consistency of content,” he says. “At present, there isn’t a defined format to display the hospital data and there is no way to understand if the contents are reported in the same manner.”
Cleverley says that CMS is aware of this problem and continues to evolve the price transparency requirements to address some of these issues.
“For example, the Calendar Year 2024 Hospital Outpatient Prospective Payment System (OPPS) Proposed Rule proposes a standardized file schema for hospitals to use to address file format differences,” he says.
Content consistency, especially with the payer negotiated charges, will continue to be an issue. “But CMS has taken a significant step forward to address this issue by proposing the addition of the Consumer Friendly Expected Allowed amount to the file,” says Cleverley. “This field has a narrower definition that should help in the construction of consistent and meaningful data across hospitals.”
How CMS is Monitoring Hospital Compliance
Since CMS began auditing hospital compliance with the Price Transparency Rule in 2021, it has reviewed more than 835 hospitals’ websites. It monitors and assesses hospital compliance with the rule in one of three ways:
- By evaluating public complaints.
- Through a review of individuals’ or entities’ analysis of noncompliance.
- Via internal audits of hospitals’ websites.
CMS is now conducting more than 200 comprehensive hospital reviews each month. It prioritizes hospitals for comprehensive reviews based on the degree to which they appear to be out of compliance. The case cycle consists of a first warning notice with instructions to correct deficiencies within 90 days.
If a hospital fails to act, CMS will issue a corrective action plan (CAP) request with a 45-day deadline. It then must propose a completion date for CMS approval, which ranges from 30 to 60 days on average. If a hospital still fails to take the necessary steps to come into compliance, CMS will issue a civil monetary penalty (CMP).
As of this past April, CMS had issued more than 230 warning notices and 269 CAP requests. However, only four civil monetary penalties for noncompliance had been issued to hospitals. CMS provides extensive technical assistance throughout the compliance process to help hospitals come into compliance.
CMS recently implemented updates to its enforcement process that will shorten the average time by which hospitals must come into compliance after a deficiency to no more than 180 days, or 90 days for cases with no warning notice.
Some Reporting Mischaracterizes Compliance
According to the AHA, some third parties continue to issue reports that mischaracterize whether hospitals are complying with the Price Transparency Rule. These reports fail to acknowledge CMS requirements such as how to fill in an individual negotiated rate when such a rate doesn’t exist due to patient services being bundled and billed together.
According to CMS, leaving a blank cell is appropriate in this situation since there isn’t a negotiated rate. However, some third parties count any file with blank cells as noncompliant.
“This fundamental misrepresentation of the rules has only served to advance misinformation and confusion on the issue and distract from genuine productive discussions and efforts around what patients want in terms of transparency data and how best to provide that information,” states the AHA.
The AHA has made the following recommendations to Congress and the Administration to help hospitals and health systems provide the best possible price estimates for patients:
- Review and streamline existing transparency policies, with a priority on reducing potential patient confusion and unnecessary regulatory burdens on providers.
- Continue to convene patients, providers and payers to seek input on how to make federal price transparency policies as patient centered as possible.
- Refrain from advancing additional legislation or regulations that may further confuse or complicate providers’ ability to provide meaningful price estimates while adding unnecessary costs to the health care system.
What Best Practice Hospitals Are Doing
Cleverley says that the Price Transparency Rule was initiated, at least in part, to address real concerns by consumers regarding how hospitals charge for services.
“Therefore, best practice hospitals are considering not only how to comply with current requirements, but they’re also thinking about how they can continue to address financial concerns from patients,” says Cleverley.
Cleverley + Associates has been partnering with hospitals to create ancillary service frequency views to highlight services that are typically done in conjunction with the primary service.
“These views help patients understand the likelihood that related services could be done within their treatment that could impact their financial obligations,” says Cleverley. “There’s a wealth of data from internal systems that can be leveraged to create some really powerful reporting tools for patients.”
Hospitals are also integrating charge simplification initiatives to reduce the number of disparate lines and prices for related services. “With CTs, for example, should there be hundreds of distinct price points for all the different types of scans or could these be reduced to a handful of unique prices?” says Cleverley. “Simplifying the CDM’s pricing structure can significantly improve the way these rates are shared with consumers.”
Cleverley believes that many hospitals have used the Price Transparency Rule as an opportunity to have some forward-thinking conversations to help patients navigate a very complex reimbursement picture. “But it’s important to recognize that payers likely have an even more significant role in helping patients understand the financial implications of their care,” he says.
“There’s much more to be done to make the contents of disclosed files more accessible and useful,” Cleverley adds. “For example, there are common-sense solutions that involve displaying data by primary inpatient and outpatient encounter. Content consistency for these files is key. We ultimately need common definitions for how to display payer negotiated charges if we ever hope to have these elements meaningfully created and disclosed.”
CMS recently requested feedback on how to better align the different price transparency requirements across hospitals and payers. “We believe the development of these common definitions and reporting methods will be key,” says Cleverley.
