New Hospital Cost Transparency Rule Now in Effect
New federal rules promise to make it easier for consumers to know the true costs of a hospital service or item, as well as the in- and out-of-network costs of health insurance benefit plans.
The Hospital Price Transparency rule issued by the Department of Health and Human Services (HHS) went into effect Jan. 1, 2021. The rule affects all hospitals operating in the United States. Federally owned and operated hospitals such as Veteran’s Administration, Indian Health or Department of Defense operated hospitals are exempt.
The Centers for Medicare & Medicaid Services (CMS) issued a separate rule that imposes price transparency requirements on health insurers, including employers who offer self-funded plans. Insurers must ensure that members have access to information about out-of-pocket costs and other vital price information before they receive treatment.
Both rules are in response to an executive order issued by President Donald Trump on June 24, 2019. Trump directed HHS to adopt regulations improving price and quality transparency and implement statutes added by the Affordable Care Act. Trump said the new rules were a major victory for patient choice and affordable health care because they would stop people from getting “ripped off.”
Consumers will now be able to shop and compare prices between hospitals. Previously, patients often didn’t know the cost of a service until after it was performed.
The “2020 Outpatient Prospective Payment System and Ambulatory Surgery Price Transparency Requirement for Hospitals to Make Standard Charges Public” requires hospitals, including non-Medicare and non-Medicaid hospitals, to make their “standard charges” public (including rates negotiated with third parties).
Hospitals must provide the information on their website in two ways:
- As a single data file that can be read by other computer systems.
- As a display of shoppable services (that can be scheduled in advance). The display must be in a prominent location online and described in plain language.
The obligations of hospitals under the Final Rule also include:
- A description of each item and service and any code used for accounting or billing.
- Cost information for free and without the need to use a password.
- A listing of at least 300 “shoppable services.”
The list must be updated annually. CMS has the authority to monitor hospitals’ compliance and audit their websites. CMS also can issue warnings and levy a fine of $300 per day for hospitals that don’t comply.
States that already have price transparency mandates in place are required to ensure their disclosures are consistent with the new federal requirements.
“Transparency in Coverage” directs health insurers and group health plans to give insured members information about negotiated rates with in-network providers, as well as out-of-network pricing. This includes a lot of proprietary information that formerly was not available to the public.
This rule affects non-grandfathered group health plans, including plans in existence after March 23, 2010, when the Affordable Care Act was adopted. However, non-grandfathered employer-sponsored health plans must publish what they pay for benefits beginning Jan. 1, 2022.
Proponents hope consumers will use this information to shop for lower-cost, high-value providers and that insurers will share the savings with consumers.
The plan assumes health providers will lower their costs to be more competitive, but there is concern that already low cost providers will increase their prices to match the competition.
Another concern is that the data sharing system will be costly to implement and could drive up costs.
Another point some experts make is that a list of costs does not address quality or explain why some hospitals’ costs are higher (such as focus on expertise).
As expected, there is legal opposition to the plan. The American Hospital Association and other hospital groups have filed a lawsuit challenging the regulation as a violation of the First Amendment of the Constitution and contractual confidentiality provisions.
The American Hospital Association, Association of American Medical Colleges, Children’s Hospital Association and Federation of American Hospitals issued a statement calling the rule “a setback in efforts to provide patients with the most relevant information they need to make informed decisions about their care.”
They believe that instead of helping patients know their out-of-pocket costs, this rule will:
- Introduce widespread confusion because the costs will be presented without context or explanation
- Accelerate anti-competitive behavior among health insurers, and
- Discourage innovations in value-based care delivery.
In October 2020, the AHA responded to Department of Justice’s Oct. 1, 2020 letter saying that the rule’s two requirements for machine-readable files and shoppable-services lists exceeds the department’s authority to require “a list” of standard charges.