Medicine & Health

Some hospitals will opt to pay fine for not publishing prices, lawyers say

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While most providers say they agree with the intent of the price transparency law, smaller hospitals are struggling to gather the data and present them in a useful format.

Hospitals were required as of Jan. 1 to post machine-readable files of the rates they negotiate with payers, gross charges and discounted cash prices, which the Centers for Medicare and Medicaid Services hopes will curb higher-than-average prices.

CMS recently sent a second round of warning letters to hospitals that haven’t disclosed the rates of 300 “shoppable services” in a consumer-friendly form, threatening a maximum yearly fine of more than $2 million for larger hospitals and almost $110,000 for those with fewer than 30 beds.

The earliest CMS would issue any fines would be late November or early December, hospital officials expect. Most of those hospitals are still in the corrective-action stage and have 45 days to respond.

Regulators and health policy experts believe that once the data are analyzed across all U.S. hospitals, consumers will be able to compare cost and quality metrics, forcing high-priced providers to adjust. But hospital executives are generally skeptical of “shopping” for healthcare. They are also concerned about the administrative work, their rivals undercutting them on price and the legal ramifications if a bill doesn’t match the data.

Large systems have the luxury of working with companies such as Epic Systems and Cerner to organize claims and prices. It’s harder to crunch the data with smaller electronic health record vendors that Bibb Medical Center uses, said Joseph Marchant, CEO the 35-bed community hospital in Centreville, Alabama. The COVID-19 pandemic further complicates matters, he said.

“We are making modifications with them instead of doing it just to say we did it so we can make it beneficial and get to the root of what CMS wants to do,” Marchant said. “It’s not only a big burden with limited infrastructure, but the disruption in healthcare has also overwhelmed many of the things we would’ve liked to focus on. We would’ve loved to focus on [electronic health record] efficiency and price transparency instead of figuring out how to set up curbside testing, infection control protocol and isolation wings.”

The penalties could cripple rural hospitals and further exacerbate service gaps in underserved communities, said Brock Slabach, chief operations officer at the National Rural Health Association.

The law is well-intentioned but not always practical, said Don Lilly, chief network and affiliates officer of University of Alabama-Birmingham Medicine.

Some health systems will likely prefer to pay the fines, said Timothy Gary, CEO of the consultancy Crux Strategies and a lawyer at Dickinson Wright. The transparency mandate is a “gross oversimplification of a complex issue,” he said.

“There is a whole lot of room for confusion and misunderstanding,” Gary said. Hospitals may face breach of contract lawsuits if the data don’t match a patient’s final bill, he said. “Hospitals are trying to comply but, at the end of the day, price transparency is difficult to achieve in this medium. Some operators are saying, ‘It is a whole lot cheaper for me to write a check for $2 million.'”

Although the correlation between price transparency and lower healthcare costs isn’t definitive, disseminating pricing data is generally viewed as a step in the right direction. Transparency has a modest downward pressure on prices, although price estimators aren’t yet widely used, policy experts said.

President Joe Biden has doubled down on the previous administration’s price transparency rule and it’s not going away, said Robert Ramsey, an attorney at Buchanan Ingersoll & Rooney.

“The time for sitting on the sidelines is over. This is a serious issue,” Ramsey said. “I suspect that CMS’ patience is quickly waning regarding the apparent continued noncompliance. The up-to-$2 million fine and having the hospital’s name published for noncompliance should get the board of directors’ attention, if not the CEO and all of the senior management.”

The U.S. Chamber of Commerce sued HHS to block the transparency regulations that apply to health insurers, but withdrew the lawsuit after the Biden administration delayed enforcement. The provision, which applies to almost all health insurers and self-insured plans, will be carried out incrementally after July 1, 2022. The provider-facing law survived a similar lawsuit filed in district court and appeals court.

Less than 6% of hospitals were fully compliant, according to a Patient Rights Advocate analysis conducted from May to July. The overwhelming majority of hospitals did not post all payer-specific and plan-specific negotiated rates, the report found.

“Hospitals that have taken a ‘go-slow’ approach to compliance with the price transparency rule risk incurring significant financial penalties when they take effect next year,” said Christopher Kenny, a partner in King & Spalding’s healthcare practice.


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