Hospital price transparency: fines or full compliance?

By Alex Kacik / January 24, 2023

Hospitals’ compliance with the 2021 price transparency law has improved over the past year, but some operators remain reluctant to publicize their pricing data or do not have the resources to do so. 

As of the end of September, 65% of U.S. hospitals had posted the rates they negotiated with commercial insurers, according to data from data aggregator Turquoise Health. That marks a significant improvement from June 2021, when researchers from Michigan State University and Johns Hopkins University found fewer than half had posted machine-readable files with negotiated prices.

Still, many hospitals fall short of full compliance, as defined by the Centers for Medicare and Medicaid Services' 21-point checklist. Hospital and health system administrators claim the administrative burden is not worth it and will not achieve CMS’ goals.

The price transparency law for hospitals took effect in January 2021. CMS hoped data analysts would use machine-readable files to compare prices across hospitals and that patients would scan consumer-friendly documents before they received care. Ideally, the data on prices that hospitals negotiated negotiate with payers, gross charges and discounted cash prices for 300 "shoppable services" would reduce overall healthcare costs and curb high-priced providers. CMS threatened a maximum yearly fine of more than $2 million for larger hospitals that didn't comply and almost $110,000 for noncompliant hospitals with fewer than 30 beds.

It took about 10 full-time workers at Evansville, Indiana-based Deaconess Health System and the help of a third-party data analysis firm over the course of year to meet the requirements, said Rebecca Conen, director of revenue cycle at the 16-hospital regional nonprofit system.

“We tried to do it in-house, but we didn’t have the bandwidth,” she said. “The issue is keeping it up to date. That is a challenge because our contracts with insurers change at different time periods.”

Third-party data aggregators' definition of what is most beneficial to patients and CMS' compliance standards vary, Conen noted. "Everyone has a different take on what meets CMS' compliance standards versus what is most beneficial to patients," she said. 

Many hospital administrators contend that patients rarely shop for healthcare. If they do, they are more concerned with their out-of-pocket costs than negotiated rates, which don’t capture patients' comorbidities and other specific patient characteristics, providers argue. 

“While I applaud the policy’s aim to gain transparency, I don’t think the law accomplishes the desired effect of informing the consumer of what they will pay when they get to the hospital because it doesn’t factor in their specific clinical variables,” said Dr. Jeremy Cauwels, chief physician at Sanford Health, a 47-hospital system based in Sioux Falls, South Dakota.

Turquoise data shows 55% of hospitals were fully compliant with the transparency law at the end of September. 

However, a peer-reviewed study published earlier this month in the Journal of General Internal Medicine concluded that only 19% of a nationally representative sample of 64 hospitals met CMS’ definition of fully compliant, according to the analysis of November data. Still, the authors noted that at least 72% of those hospitals complied with key pricing metrics, such as publishing negotiated rates, gross charges, descriptions of procedures and discounted cash prices. 

The metrics with relatively low compliance are the ones containing less critical information, such as adhering to the CMS naming convention, said Ge Bai, an accounting and health policy professor at Johns Hopkins. Bai wasn’t affiliated the study but has co-authored related research. 

While hospitals have made considerable progress in fulfilling key elements of the price transparency law, it has required a lot of work from hospitals, particularly smaller facilities that have been acutely impacted by labor shortages and other financial pressures, she said. 

"The federal government should make the compliance burden as low as possible while maintaining the usability of the data," Bai said. 

To improve compliance, CMS could consider posting a sample template for the machine-readable file with clearly labeled columns, she added.

CMS has fined only two hospitals in Georgia. The fines were less than $1.1 million, amounting to roughly 0.04% of their 2021 collective net patient revenue. CMS has issued 437 warning notices to hospitals and 263 corrective action plan requests to hospitals that did not correct issues outlined in those warnings, an agency spokesperson said.

Other than Northside Hospital in Atlanta, Georgia, and Northside Hospital Cherokee in Canton, Georgia, “every other hospital that has come under compliance review has resolved its deficiencies, or is in the process of doing so. Therefore, it has not been necessary for CMS to issue penalties to any additional hospitals," an agency spokesperson said.

Going forward, CMS needs to take a more active stance in penalizing noncompliant hospitals and systems, Turquoise researchers said in an October report. The agency should also outline a specific format for hospitals to present the data, they said.

Some hospitals and health systems were waiting to see whether CMS would strictly enforce the law before complying. Compared with this time last year, hospitals are putting more effort into meeting the requirements, said Tim Gary, a healthcare attorney and CEO of Crux Strategies, an advisory firm that helps hospitals and health system navigate compliance issues.

Some hospitals, especially smaller facilities, would like to comply but do not have the resources, Gary said. Still, some health systems maintain they would rather pay the fines than publish their prices, he said.

“This is kind of like asking a hospital chief financial officer for the nuclear launch codes,” Gary said. “Providers and payers have grown up protecting these prices, which is why the payers’ pricing data is so camouflaged.”

CMS staggered the price transparency law for hospitals and for insurers, with the latter kicking in on July 1, 2022. The agency required insurers to publish public, machine-readable files including the negotiated prices they pay to in-network providers and the allowed rates for out-of-network providers.

But parsing through the massive data files requires sophisticated software and insurers aren't using standardized file formats, muddying potential comparisons.