CMS Penalties & Requirements For Hospital Price Transparency Rule - McDermott

CMS Proposes Heightened Penalties and Additional Requirements under the Hospital Price Transparency Rule


On July 19, 2021, President Joseph R. Biden’s administration released a proposed rule that would increase penalties for hospitals that do not comply with the Hospital Price Transparency Rule, effective January 1, 2022. The proposed rule also provides certain potentially burdensome clarifications and requests comment on further rulemaking activity relating to the Hospital Price Transparency Rule. Public comments to the proposed rule will be accepted until September 17, 2021.

In Depth

The 2022 Medicare Outpatient Hospital Prospective Payment Rule (the proposed rule), includes a proposal from the Biden administration to dramatically increase penalties beginning on January 1, 2022, for hospitals that do not comply with the Hospital Price Transparency Rule. The proposed rule also includes additional, potentially burdensome, clarifications of the requirements for compliance with the Hospital Price Transparency Rule. For background on the Hospital Price Transparency Rule, please refer to our prior On the Subjects, CMS Finalizes Hospital Price Transparency Requirements, Disclosure of Negotiated Rates and Federal District Court Upholds Hospital Price Transparency Rule; Implementation and Compliance Questions Remain.

The Centers for Medicare and Medicaid Services (CMS) makes a number of proposals in the proposed rule, including variable penalties for noncompliance with the Hospital Price Transparency Rule, prohibitions on certain barriers to accessing the machine-readable file, and clarified requirements for price estimator tools. CMS also requests proposals on how CMS can ensure consumers understand the descriptions of shoppable services and that machine-readable files are standardized across hospitals. Public comments on the proposed changes and clarifications are due to CMS by September 17, 2021.

1. Sliding Penalties

The proposed rule includes changes that, if finalized, would increase potential civil monetary penalties (CMPs) for noncompliance with the Hospital Price Transparency Rule from a maximum of $109,500 per year to a sliding scale that would reach over $2 million per year for the largest hospitals. The CMP proposals are set forth in the following table:

Number of Beds Penalty Applied Per Day Total Penalty Amount for Full Calendar Year of Noncompliance
30 or less $300 per hospital $109,500 per hospital
31 up to 550 $310 – $5,500 per hospital (number of beds times $10) $113,150 – $2,007,500 per hospital
>550 $5,500 per hospital $2,007,500 per hospital

CMP amounts would be adjusted annually using a multiplier determined by the Office of Management and Budget based on the Consumer Price Index.

CMS notes in the proposed rule that it is concerned with a high rate of hospital noncompliance with the Hospital Price Transparency Rule, as identified by CMS through sampling and reviews to date. After considering a sliding CMP scale based on either hospital revenues or bed counts, CMS proposes using hospital bed counts, as specified in the most recently available, finalized cost report data.

CMS explains that its proposed daily penalty of $300 to $5,500 per day is commensurate with the level of severity of the potential violation, taking into consideration that nondisclosure of standard charges does not rise to the level of harm to the public as do other violations. It notes that the proposed maximum amounts generally align with other Department of Health and Human Services (HHS) initiatives, such as HIPAA-related CMPs.

CMS requests comments on the proposed sliding scale approach, including the penalty amounts, scaling factor (i.e., beds) and data sources (i.e., cost report). CMS requested comments on various questions relating to other aspects of the proposal, including the following:

  • How should the nature, scope and severity of noncompliance be determined and applied for purposes of assessing CMPs?
  • How should a hospital’s reason for noncompliance be determined, and are there bases for imposing lower CMPs, such as resource limitations or extreme or unusual circumstances?
  • If multiple factors are used to scale the CMP amount, should there be a priority or weighting applied to specific factors?

2. Removing Barriers to the Machine-Readable File

CMS also proposes specifying in its regulations that hospitals must ensure standard charge information is easily accessible and without barriers, including, but not limited to, ensuring information is accessible to automated searches and direct file downloads through a link posted on a publicly available website. CMS notes a number of example “barriers,” including the following:

  • Use of form submissions to access data
  • Use of a “locked door” in front of content that makes it difficult or impossible for search engines to identify the data
  • Use of Blocking codes, such as NOINDEX and “rel canonical” tagging, disallow statements, or removing the URL from the search index through the use of webmaster tools URL removal service
  • Use of anti-automation tools that require users to pass tests proving they are human users, such as CAPTCHA and reCAPTCHA applications
  • Use of pop-up windows that require a user to agree to all terms and conditions in a legal disclaimer
  • Developing file constructs and web forms to obscure access to the data in a single machine-readable file through the use of Application Programming Interfaces (APIs), for example, using APIs calling for data that will not return a complete data file, do not provide supporting documentation on the use of the API, and do not allow a single query to return all data in a single machine-readable file

CMS requests comment on whether there are additional barriers that CMS should prohibit, and reserves the option to identify and add additional barriers in the future. CMS also requests comment on specific criteria that should be considered when evaluating whether a hospital displayed the machine-readable file in a “prominent manner,” and whether CMS should require hospitals to post machine-readable files using a CMS-specified URL or a standardized location (e.g., the hospital’s homepage).

3. Price Estimator Tool

CMS clarifies in the proposed rule that price estimator tools must provide a single dollar amount that is tailored to the individual seeking the estimate, taking the individual’s circumstances into consideration when developing the estimate. CMS further notes that the estimate must reflect the amount the hospital anticipates will be paid by the individual for the shoppable service, absent unusual or unforeseen circumstances. CMS notes that its reviews identified hospital price estimator tools that did not tailor a single estimated amount based on the individual’s circumstance, but instead provided estimated average amounts or ranges for the price of a shoppable service that appeared generated based on a broad population of patients, including outliers.

CMS requests comments on additional requirements for online price estimator tools, including best practices, common data elements and technical barriers to access.

4. Plain Language of Shoppable Services

The Hospital Price Transparency Rule required hospitals to provide a “plain language” description of each shoppable service for which it was posting standard charges and, in the proposed rule, CMS notes that some hospitals have used internal code descriptions instead of terminology that consumers may readily understand. CMS requested comment on whether it should require specific plain language standards, and if so, what those plain language standards should be.

5. Standardizing the Machine-Readable File

CMS recognizes in the proposed rule that the Hospital Price Transparency Rule took a relatively non-prescriptive approach to standard charge information to be displayed in the machine-readable file, but feedback from stakeholders indicates that more standardization of the machine-readable file may be necessary to meet the goal of permitting comparisons of standard charges from one hospital to the next. CMS requests comment on questions relating to a number of aspects of the machine-readable file, including the following:

  • What are best practices for formatting data and should specific formats be required?
  • Are there additional data elements that should be required (in addition to the charge, description, and common billing and accounting code)?
  • What policies or incentives should CMS consider to improve standardization and comparability of these disclosures?
  • What other policies should CMS consider to ensure the data posted by hospitals is accurate and complete?

Analysis and Takeaways

The proposed rule’s provisions relating to the Hospital Price Transparency Rule illustrate that price transparency holds bipartisan interest and that the Biden administration is seeking to further bolster a transparency framework initially developed by the Trump administration. Considering the conceptual alignment between the Hospital Price Transparency Rule and the Transparency in Coverage Rule set to become effective on January 1, 2022, it would appear unlikely that the Biden administration plans to pull back that correlating rule prior to its effective date.

Because the proposed rule would take a significantly different approach to CMPs as compared to the original Hospital Price Transparency Rule, certain stakeholders may view the proposed changes, if finalized, as grounds for litigation. At the same time, it would appear CMS’s underlying rationale for the increased penalties—that is, studies and reports of hospital noncompliance with the Hospital Price Transparency Rule—provide some support for the stated justification for the changes. Litigation against CMS may encounter headwinds, as the US Court of Appeals for the DC Circuit agreed with CMS’s expansive interpretation of its statutory authorization in prior Hospital Price Transparency Rule litigation (refer to the above-linked On the Subject for our analysis of that case).

In light of the significantly greater potential penalties for large hospitals and enhanced compliance obligation, we expect there will be a renewed focus on the mechanics of CMS’s authorization to impose CMPs. For example, CMS may impose a CMP only in cases where a hospital fails to respond to CMS’s request to submit a corrective action plan (CAP) or comply with the requirements of a CAP. CAPs are required in cases of “material violations” and CMS has established specific requirements for CAPs and provisions relating to noncompliance with CAPs. Interpretation and implementation of these provisions will be critical for hospitals that become subject to a CMS inquiry.

Stakeholders with an interest in the requirements of the machine-readable file should also take this opportunity to provide comments to CMS. The scope of CMS’s request for comments relating to the machine-readable file are broad, and we anticipate CMS may issue clarifications or requirements that create greater administrative burdens for hospitals that might involve a further review of commercial payor contracts. Comments and suggestions are most likely to be effective in cases where they can articulate how a proposal would further CMS’s transparency goals while also bringing clarity and reducing administrative burdens.