CMS is sending warning letters to hospitals breaking new federal rules requiring them to make public the prices they negotiate with insurers, a CMS spokesperson confirmed.
The regulation took effect on Jan. 1 and forces hospitals to publish a machine-readable file online containing their payer-negotiated rates. It also requires them to make available a consumer-friendly display of at least 300 shoppable services, including 70 specified by CMS. But hospitals don't need to post a list of shoppable services if they allow consumers to use a price estimator tool to calculate their out-of-pocket costs for all shoppable services.
But around two-thirds of the country's largest hospitals are not complying with the new price transparency regulations, a Health Affairs study found in March. More than 50 hospitals either did not include the payer-specific negotiated rates with the payer's name and plan or were non-compliant in some other way. A dozen didn't post any files or provide links to searchable databases that weren't downloadable.
After an investigation into hospital pricing websites revealed hundreds of providers were using code to block information from showing up on search engines, CMS issued new guidance warning health plans and insurers that all files uploaded by them must be "available to the public without restrictions that would impede the re-use of that information."
Now the agency is going after hospitals that aren't following the rules.
According to a CMS spokesperson, the agency started auditing hospital websites and reviewing complaints submitted to CMS shortly after the rule took effect. It began issuing its first round of warning letters to hospitals in April.
But CMS said it was too soon to name and shame hospitals that aren't following the new rule.
"While the hospital price transparency final rule indicates that once CMS issues a civil monetary penalty, CMS will make public the name of the hospital on a CMS website, releasing this information prematurely could identify hospitals that have already taken corrective actions and come into compliance after issuance of a warning letter," a CMS spokesperson said in a statement.
According to the agency, hospitals have up to 90 days to correct issues identified in the warning letter. CMS will carry out a second review when the 90-day period ends or when a hospital notifies the agency that it fixed the problems, whichever comes sooner. If CMS determines that the hospital is still out of compliance, it will send another warning letter or a corrective action plan. CMS can also fine hospitals up to $300 per day for violating the disclosure requirements.
During the Trump administration, CMS had said the purpose of the hospital price transparency rule was to give consumers price information to help them cross-shop and make informed decisions about their care. But many experts believe the underlying motivation was to increase competition among providers and payers.
Some hospitals have been fighting price transparency regulations, arguing that consumers don't use price estimators to determine their care plans and releasing payer-specific rates could increase prices as the "lowest cost providers adjust to the average."
Independent experts, on the other hand, think increased transparency will probably cause prices to level out. But there may not be a decline in costs because the regulation doesn't address the key drivers of cost growth.
The American Hospital Association recently lost a suit to block the rule but called the regulation a "subjective, oversimplified analysis" of hospital transparency efforts during the pandemic.
The agency's rule targeting insurers seems to be a better fit for helping consumers because it compels payers to give personalized out-of-pocket cost information for all covered services, which is what consumers care about, experts say. It's harder for hospitals to provide that information.
The insurer-facing rule takes effect next year.