Hospital Standard Charges

Hospital Standard Charges On July 29, 2019, the Centers for Medicare & Medicaid Services (CMS) published the Calendar Year (CY) 2020 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule.

Among several notable changes, the Proposed Rule builds on CMS’s updated guidelines requiring hospitals to disclose a list of their standard charges, as reflected in their chargemaster, in a machine-readable format online beginning on January 1, 2019.  83 Fed. Reg. 41144.

Hospital Standard Charges

CMS proposes an expansion to the definition of “standard charges” to include a hospital’s gross charge and payor-specific negotiated rates. Therefore, in addition to providing the prices on its chargemaster, hospitals would also have to include the rates that it negotiates with third-party payors in the list of standard charges for all items and services that they are currently required to post online.

Specifically, under the Proposed Rule, hospitals would be required to disclose:  (i) a description of each item or service; (ii) the gross charge that applies to each individual item or service in the inpatient or outpatient setting; (iii) the corresponding payor-specific negotiated charge that identifies the payor by name; (iv) any codes used by the hospital for accounting or billing purposes; and (v) the revenue code.

In addition, hospitals would be required to publish the payor-specific negotiated charges for 300 “shoppable services” in a consumer-friendly and searchable manner.  A “shoppable service” is defined in the Proposed Rule as a service package that can be scheduled by a health care consumer in advance, such as those that are routinely provided in non-emergent situations.

The list would be comprised of 70 shoppable services selected by CMS and 230 shoppable services selected by the hospital. If a hospital does not provide one or more of the 70 CMS-selected shoppable services, it must select additional shoppable services to reach a total disclosure of at least 300. Regarding the 230 hospital-selected shoppable services, CMS has recommended that hospitals select these services based on their utilization or billing rate of the services in the last year.

CMS recognizes that many contracts between hospitals and third-party payors contain “gag clauses,” or confidentiality provisions, prohibiting hospitals from disclosing their negotiated rates, and that the impact resulting from such a disclosure is largely unknown. However, CMS believes that publishing negotiated rates is necessary for consumers to determine their potential out-of-pocket costs in advance, which it believes will ultimately help drive down health care costs.

The proposed enforcement measures to ensure compliance with the new price transparency requirements including monitoring, auditing, corrective action plans, and civil monetary penalties of up to $300 per day for violations.

Altogether, the Proposed Rule represents a significant expansion of CMS’s prior guidance which only required hospitals to make public a list of their standard charges as reflected in their chargemaster.  The new requirement to disclose payor-specific negotiated rates will undoubtedly impact the manner in which hospitals negotiate with private payors.  Hospitals should carefully evaluate the extensive changes proposed by CMS and consider submitting comments on the Proposed Rule. Comments are due by September 27, 2019 and the Final Rule will likely be released in early November.