Monetary penalties loom for Texas hospitals noncompliant with price transparency rule

With a recent study illuminating many Texas hospitals’ noncompliance with federal price transparency laws, as well as a new state transparency law about to take effect, noncompliant hospitals could soon face both federal and state-level monetary penalties.

The Centers for Medicare and Medicaid Services (CMS)’s final rule on hospital price transparency, existing under the authority of the Affordable Care Act, took effect in Jan. 2021 under the Trump administration. The rule requires hospitals to provide a machine-readable standard charges list for all services and a charge list or price estimator tool for the 300 most common shoppable services.

 

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Under the rule, CMS will request a “corrective action plan” from noncompliant facilities, which details the facility’s plan to comply with the rule. The request will be included in a “notice of violation” issued by CMS, which will also include the form, manner, and deadline for the plan. CMS will then review the plan and, if approved, monitor the facility’s compliance with it.

If a facility fails to either submit a corrective action plan or comply with its plan, it is subject to civil monetary penalties of up to $300 per day, and no more than $109,500 per year.

CMS hasn’t yet issued any civil monetary penalties, but they could begin doing so soon, says a CMS spokesperson. The agency began issuing warnings to noncompliant hospitals in April. Hospitals have 90 days to address the warning, after which CMS will re-review the warning. 

In July, CMS proposed increasing this penalty to a minimum of $300 per day for hospitals with 30 or less beds, and $10 per bed per day for hospitals with over 30 beds, with maximum daily penalties not exceeding $5,500.

The Texas Hospital Association recently told State of Reform these “voluminous new requirements” are easier said than done, especially during a pandemic.

“Texas hospitals have been subject to voluminous new requirements effective this year to disclose negotiated rates with payors both at the federal and state levels. Hospitals are working diligently to comply with these new laws as fast as possible, and some have made more progress than others.”

Charles Miller, senior policy advisor for Texas 2036, suspects there are two reasons why these Texas hospitals haven’t complied with federal transparency rules. The first is that hospitals’ payment arrangements with insurance companies make producing a single price for services a challenge.

“I think that there is some truth to those arguments. What is required is for them to put out specific prices for specific procedures based on billing codes. And what a lot of hospitals have said is, ‘Well, that’s not how we get paid. We have complicated, complex payment arrangements with insurance companies that take into account a lot of factors, and take into account outcomes at a population level, so we don’t have a single price…’”

However, he says facilities have already been listing the specific prices of services for individuals with high-deductible plans, and should be able to do so to comply with transparency rules.

“They’ve already figured this out for people who have high-deductible plans, and they should be able to provide that price, whatever it is. Even if it may not reflect [hospitals’] actual underlying financial reality, the purpose of this is to make sure that when people are getting bills, they are getting billed on something that is predictable and knowable in advance.”

Miller’s second theory is that, since the cost of noncompliance is relatively low, some facilities might prioritize other things — even if they’re monetarily penalized for failing to meet these rules.

“So if you’re looking at competing objectives during a pandemic [and] over the course of treatment … it may not be the highest priority to comply…”

Miller said different facilities have taken different approaches to the rule. For instance, CHRISTUS Health has announced that it won’t be complying with federal rules because they say it would benefit their competitors.

The CHRISTUS Health website reads:

“We haven’t invested our resources into this because it provides something that will only be useful for our competitors. We aren’t in it for them. We are in it for you and believe you deserve to know what’s important to your personal situation. That’s why we remain dedicated to keeping prices low for you.”

In addition to the federal rule, Texas hospitals will soon have to comply with state price transparency laws. SB 1137 will become effective Sept. 1, 2021, imposing state-level price transparency rules. However, Miller says the bill’s language is ambiguous, and the maximum penalties for noncompliant facilities — based on a sliding scale dependent on a hospital’s size — are unclear.

The language isn’t clear on whether or not the penalties will stack, Miller said.

“Depending on how you read it, the maximum penalty could be either $365,000, which would be about three times as much as the federal rule, or $66.7 million, depending on whether or not the penalties stack on top of each other.”

He said he contacted the Texas Health and Human Services Commission (HHSC) for clarification, who agreed the language was ambiguous and is still deciding how to enforce the new law. SB 1137 also requires HHSC to have a template in place by Sept. 1, to which state hospitals submit their price data.