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Price transparency enforcement is here – Hospitals beware Foley & Lardner LLP

Special thanks to summer associates Jared Pilner and Ilana Meyer for their contributions to this article.

On June 7, 2022, after months of written warnings, the US Centers for Medicare & Medicaid Services (CMS) imposed its first nationwide penalty on two affiliated Georgia hospitals for violating the CMS Hospital Price Transparency Rule (Rule). Effective January 1, 2021.

As discussed in our previous posts available here and here , the rule requires hospitals to make public in machine-readable form five categories of “standard charges” for all hospital goods and services. In the case of Georgia hospitals, CMS first provided each hospital with a warning letter and time to respond with supporting documentation. Four months after the initial warning, CMS again reviewed each hospital’s website and found continuing deficiencies. CMS then issued a request for a corrective action plan to each hospital. No hospital has submitted a corrective action plan. A hospital offers to provide patients with estimates of expected out-of-pocket costs upon request by phone and/or email. CMS rejected the offer as not conforming to the rule’s requirements.

CMS imposed civil penalties on Northside Hospital Atlanta and Northside Hospital Cherokee, fining the organizations $883,180 and $214,320, respectively, for the same five alleged violations:

  1. Each hospital location fails to separately make public the standard charges applicable to that location;
  2. Failure to make public a machine-readable file containing a list of all standard charges for all items and services. Items and services include, but are not limited to, supplies, room and board, facility use and other items (commonly described as facility fees);
  3. Failing to publish required data in a single digital file in machine-readable form;
  4. CMS fails to follow the specified naming convention, specifically:
    1. __Standard Charges.[json|xml|csv];
  5. Failure to make available a consumer-friendly list of standard charges for limited shoppable services.

The federal government said it resorted to the following penalties after hospitals confirmed compliance and failed to respond to CMS’s requests for corrective action. Most of the 2022 penalties reflect the enhanced penalties that the rule included when CMS amended the rule in 2021.

  • Northside Hospital Atlanta was fined $300 per day for 121 days of noncompliance in 2021 (from the date CMS re-inspected the website for compliance after the initial warning), plus $10 per day. times Number of beds times 158 days follow up in 2022.
  • Northside Hospital Cherokee was fined $300 per day for 114 days of noncompliance in 2021, plus $10 per day. times Number of beds times 158 days follow up in 2022.

In a June trade press release, Foley and Lardner partner Fred Geilfuss discussed a study in the Journal of the American Medical Association that found fewer than six percent of hospitals fully complied with the rule in the early months of its implementation in 2021. A report from PatientRightsAdvocate.org found compliance at 14.3 percent one year after the rule first took effect. Guilfuss noted that some large hospital systems initially calculated that the penalty for noncompliance was “low,” but considered the “potential impact on competitive harm” to be potentially “significant.”

The federal government issued more than 350 warning letters and more than 150 corrective action plan requests to hospitals as of early June. Georgia hospitals have 60 calendar days from the date of CMS’s most recent correspondence to pay the penalty. Penalties will continue until hospitals comply with the rule.

For many in the health care space, these civil monetary penalties are a wake-up call that, despite CMS’ year-and-a-half delay, is now in effect.

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