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June 10, 2022

Almost 95% of hospitals fell short of price transparency. Now, the fines are starting.

Daily Briefing

    Fewer than 6% of hospitals complied with a federal price transparency law after it first went into effect in 2021, according to a new study published in JAMA—and now some hospitals are beginning to face fines for their noncompliance.

    The price transparency trifecta: 5 takeaways from our expert panel

    Few hospitals comply with price transparency rules

    For the study, researchers analyzed data from 5,239 hospitals between six to nine months after the Hospital Pricing Transparency Law went into effect on Jan. 1, 2021. Under the law, hospitals are required to post machine-readable, consumer-friendly files of payer-negotiated rates, gross charges, and discounted cash prices for 300 "shoppable" services.

    Overall, the researchers found 13.9% of hospitals had a machine-readable file but no consumer-friendly display, 29.4% had a consumer-friendly display but no machine-readable file, and just 5.7% had both and were fully compliant with the law. More than half of the hospitals had not posted any of their prices by the time of the study.

    When looking at over 2,700 acute care hospitals, the researchers found that hospitals with less revenue, those in urban areas, or those in areas with fewer health care clinics or hospitals were more likely to be compliant with the price transparency rule. In comparison, hospitals that were in moderately or highly concentrated health care markets were significantly less likely to comply with the rule.

    According to the researchers, hospitals in more concentrated health care markets, rural hospitals, and with those with higher revenue may require "greater scrutiny" to ensure they are compliant with the hospital price transparency law.

    The study's findings are in line with other price transparency analyses over the past several months, Fierce Healthcare reports. For example, an analysis from Patient Rights Advocate similarly found that only 5.6% of hospitals were fully compliant with transparency requirements six months after the law went into effect, which later increased to 14.3% at the one-year mark.

    CMS issues first fines to noncompliant hospitals

    As of June, CMS has issued 352 warning notices and 157 requests for corrective action plans to hospitals for lack of compliance. In addition, the agency recently began issuing fines to noncompliant hospitals. Under the law, larger hospitals could face a maximum yearly fine of $2 million, while hospitals with fewer than 30 beds could face a maximum fine of $110,000 for lack of compliance.

    So far, CMS has issued fines to two hospitals in Georgia after they did not submit corrective action plans. However, some health care lawyers say large health systems may prefer to pay CMS' fines rather than gather and publish price transparency data.

    "Larger systems have said the fines for noncompliance are pretty low and the possible impact on competitive harm could be much more significant," said Fred Geilfuss, a partner and health care lawyer at Foley & Lardner. "The sensitivity to what managed care contracts say and what hospitals would potentially have to give up in negotiations is an issue that is completely unknown."

    Going forward, federal regulators have suggested they will increase the penalties to ensure hospital compliance. In addition, some states have implemented their own laws to boost compliance. For example, Colorado has banned hospitals from using debt collection agencies if they don't comply with price transparency requirements, and Texas has implemented a law that will issue state-administered fines on top of the federal fines.

    "States are being more threatening around penalties, and I think that is what is going to move the needle," said Kelly Arduino, health care leader at Wipfli, an accounting and consulting firm.

    For their part, hospitals and health systems have defended their low compliance with the rule, arguing that implementation is costly, and the language of the requirements is vague and difficult to interpret.

    "Many organizations are not investing beyond the bare minimum requirements, and they don't plan to do more until there is further clarity around the regulations and the expectations going forward," KLAS Research wrote in an April report that surveyed 66 hospital leaders on price transparency compliance.

    According to Morgan Henderson, the principal data scientist at the Hilltop Institute at the University of Maryland, Baltimore County, a new price transparency law for health insurers, which goes into effect next month, may give hospitals and health systems more clarity about their own data requirements.

    "CMS offered much more guidance about the exact structure of the data files for the insurer price transparency law, which could offer a good model going forward," Henderson said. (Reed, Axios, 6/8; Cass, Becker's Hospital CFO Report, 6/8; Kacik, Modern Healthcare, 6/9; Sullivan et al., NBC News, 6/8; Muoio, Fierce Healthcare, 6/8; Haque et la., JAMA, 6/7)

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