CMS Issues Its First Hospital Price Transparency Fines: Is Your Hospital Ready for an Audit?

On June 7, 2022, the Centers for Medicare and Medicaid Services (CMS) imposed its first civil monetary penalties for violations of the Hospital Price Transparency Rule when it issued fines of more than $1 million on two Georgia hospitals.

Under the Hospital Price Transparency Rule, hospitals have been required since January 1, 2021, to create and maintain an updated list of their standard charges. The purpose of the Rule is to make the likely cost of healthcare services transparent to patients in order to allow the patient and the patient’s family to calculate their financial obligations and to compare costs among facilities before receiving healthcare services. Hospitals must publish the standard charges for items and services in two formats on
their websites: 1) a comprehensive machine-readable file; and 2) a consumer-friendly display of standard charges (or a price estimator tool) for at least 300 shoppable services that patients can schedule in advance (or as many as the hospital provides if less than 300) grouped with ancillary services that are customarily provided by the hospital. CMS defines “standard charges” as the regular rate established by a hospital for an item or service, including all payer-specific standard charges.

CMS has a wide array of enforcement tools at its disposal. The agency may enforce compliance via warning notices, corrective action plans, and civil monetary penalties (CMPs). CMS’ implementation of the rule included a transition period with lower fines and an initial emphasis on warnings over fines. In 2021, the maximum CMP was $300 per day. As a result, many hospitals were willing to forgo compliance and pay the $300 per day penalty, $109,500 per year, to protect pricing information from competitors.

After continued resistance and notably low compliance by hospitals, CMS increased the CMPs for 2022. The CMPs for violations occurring on or after January 1, 2022, are determined by a hospital’s bed count:

• A maximum of $300 per day for hospitals with 30 beds or less;
• A maximum of $10 per bed per day for hospitals with 31 to 550 beds; and
• A maximum of $5,500 per day for hospitals with more than 550 beds.

CMS also just sent a message to non-compliant hospitals by issuing large CMPs: 1) Northside Hospital Atlanta received a CMP of $883,180; and 2) Northside Hospital Cherokee in Canton, GA received a CMP of $214,320. These two hospitals also provide cautionary tales of what not to do.

According to CMS, both hospitals were issued warning notices and subsequent Requests for Corrective Action Plans for failing to publish comprehensive machine-readable files and consumer-friendly lists of standard charges on their websites. During separate technical assistance calls with both Northside locations, hospital representatives confirmed that the hospital system intentionally removed all previously posted pricing files. Neither hospital submitted a corrective action plan, nor took steps to comply with the price transparency requirements. CMS calculated the fines based upon the date it determined that the hospitals were non-compliant through the date of the Notice of Imposition of a Civil Monetary Penalty, i.e., September 2021 through June 7, 2022.

In its Notice of Imposition of Civil Monetary Penalties, CMS required both hospitals to notify CMS once they made the necessary changes to comply with the rule. If they failed to do so, a CMP would continue to accrue. As of June 20, 2022, the hospitals have yet to come into compliance.

Although the American Hospital Association and other hospital groups challenged CMS’ Hospital Price Transparency Rule, the D.C. Circuit affirmed its validity under the Affordable Care Act in American Hosp. Ass’n v. Azar, No. 20-5193 (D.C. Cir. Dec. 29, 2020). According to a February 2022 report from PatientRightsAdvocate.org, only 14% of hospitals have fully complied with CMS’ price transparency requirements. For the 86% of hospitals that failed to comply, CMS’ first fines indicate that the agency is ramping up enforcement efforts via substantial penalties for noncompliance. The Northside Hospital fines highlight CMS’ shift from passive to active enforcement as a push toward its ultimate price transparency goals. Hospitals should promptly review their websites and confer with experienced counsel to ensure compliance with the Hospital Price Transparency Rule.