Hospital Pricing Transparency - Frequently Asked Questions (FAQs)

October 05, 2020

Q:  When do the new Price Transparency Requirements become effective? 

A: The new Price Transparency rule as promulgated by the Centers for Medicare and Medicaid Services (CMS) becomes effective on January 1, 2021.

 Q: What is the purpose of this new rule?

A: CMS believes that transparency in healthcare pricing is critical to enabling patients to become active consumers so they can lead the drive towards value. Further, CMS believes that if consumers were to have better pricing information for healthcare services, providers would face increased pressure, lower costs and provide higher quality care.

Q: What is the definition of a “Hospital” for purposes of the new Requirements? 

A: A Hospital is any institution licensed as such, pursuant to applicable state or local law; or, (2) by the agency of the state or locality responsible for licensing hospitals.  The definition is intended to be broad. A hospital does not have to be a participant in the Medicare program to be subject to this rule. 

Q: What are hospitals required to disclose?

A: Hospitals are required to post on a publicly-available website (a) a machine-readable file containing their standard charges for all services and service packages, and (b) a list of standard charges in a consumer-friendly format for 300 “shoppable” services.

Q: What does the term “Standard Charges” mean? 

A:  The Standard Charge is the regular rate established by the hospital for items and services provided to a specific group of paying patients. CMS has defined three types of Standard Charges (1) gross charges, (2) payer-specific negotiated charges and (3) the discounted cash price. Beginning on January 1, 2021, hospitals are required to publish gross charges, payer-specific negotiated charges (for every payer for which the hospital has a contract), the de-identified maximum and minimum payer-specific negotiated charge and the discounted cash price for all items and services provided by the hospital. Definitions greatly expand the disclosure requirements for hospitals and for the first-time hospitals will be required to post all of their negotiated prices for every payer contract.

Q: How is this different from previous pricing transparency efforts by CMS? 

A: This new rule is far more reaching in that it required hospitals to disclose their payer-specific negotiated prices for all services and service packages. Prior rules only require disclosure of gross charges.

Q: What must be included in “Items and Services” in the public disclosure? 

A: Items and Services means all items and services, including individual items and services and service packages that could be provided to an inpatient and/or to an outpatient for which the hospital has a standard charge. Examples include, but are not limited to, supplies, procedures, room and board, use of the facility, services of employed physicians and non-physician practitioners (referred to a professional charges) and any other items or services for which the hospital has established a charge. 

Q: How are service packages defined? 

A: A service package is an aggregation of individual items and services into a single service with a single charge. Service packages may be identified by a DRG code, an APC code, or other types of identifiers and codes such as a CPT. CMS has left it to hospitals to determine which codes and types of codes to use to define service packages.

Q: What machine-readable file format is required to be used? 

A:  A machine-readable format is a digital representation of data or information in a file that can be imported or read into a computer system for further processing. Examples include, but are not limited to the, .XML, .JSON and .CSV formats. CMS considered specifying a single format to be used but elected instead to give the hospitals the latitude to use any available format, as long as it meets the definition of being machine readable. A Portable Document Format (PDF) is not a machine-readable format. 

Q: What is a “consumer friendly” format? 

A: CMS has allowed flexibility to hospitals in determining the consumer-friendly format for the list of “shoppable” services as long as the information is publicly available on the hospital’s website and is easily accessible. The hospital is still required to post a separate file containing the standard charges for all payers and services. (see prior question).

Q: How much is the Civil Monetary Penalty (CMP) for non-compliance? 

A: CMS may impose a maximum penalty of up to $300 per day for non-compliance with this new rule, even if the hospital is in violation of multiple discrete requirements. If CMS determines that hospitals are forgoing meeting the requirements because they would rather just pay the penalty, CMS may adjust the penalty amount.

Q: Who can I call for help?

A:  JTaylor’s Pricing Intelligence solutions will give you insights into your market position and will help you capitalize on the market opportunities that will present themselves as a result of Price Transparency. JTaylor’s experts leverage actionable data to provide insights and intelligence that drive value for their client.