Price Transparency: Legal Considerations for Healthcare Providers

CMS’ Pricing Transparency final rule takes effect 1/1/21.

Are you ready?

James Cervantes, associate vice president at Jarrard Inc., Emily Jane Cook, partner at McDermott Will & Emery and Steven Schnelle, associate at McDermott Will & Emery, discuss the legal and communications aspects of the new CMS price transparency rule. They also offer actionable steps hospitals and health systems can take to prepare for the January 1, 2021 start of the rule.

Watch the video or read the transcript below.

Read the transcript

Steven Schnelle: When thinking about the hospital price transparency rule, it’s helpful to remember that this requirement was actually first created in the Affordable Care Act in 2010. So this is a long standing requirement for hospitals to publish their standard charges. But we didn’t see the hospital price transparency rule come about until November of 2019, which seemed to have expanded in many hospitals eyes what the actual requirements are that were imposed by the statute.

When thinking about the legal implications and how we can focus on the legal analysis related to the rule, we want to think about how are we interpreting the rule. And ultimately, because the rule was promulgated by a federal agency, we’re going to be applying administrative law principles when thinking about the interpretation.

Another important point to think about from a legal perspective is that the rule doesn’t actually prohibit hospitals from challenging government enforcement actions in federal court. And as a result, if you do have hospitals who are challenging what exactly the interpretation of the rule is, then the ultimate interpretation will be a judicial or legal interpretation coming from a federal court. So for that reason, it’s pretty important to work with a hospital’s in-house legal team and work with outside counsel, as maybe helpful to think about what does the rule actually mean when looking at the language that’s created by CMS in the preamble, and how might a hospital make informed decisions regarding what charges they’re going to publish and how they’re going to publish those charges.

Emily Cook: An important factor in evaluating implementation of the rule, as well as the risk, is the enforcement landscape. CMS has developed an escalating enforcement framework based on the regulations. They have established three separate ways in which they will engage in enforcement.

The first is a warning letter followed by an opportunity for corrective action . And then failing implementation of that corrective action by the hospital, administrative penalties. The administrative penalties are $300 per day per hospital. There will be an opportunity to appeal any penalties that are implemented and those enforcement actions are expected to be made public.

It’s also important to consider the risks outside of those imposed penalties within the regulation, including what compliance may mean in terms of other contractual obligations for compliance with laws.

James Cervantes: In addition to the legal risks, there are very real reputational risks. Particularly if a hospital is the only provider in that market who chooses not to comply. Remember, the penalties will be made public. We anticipate local and national media outlets will be digging into the data to highlight any variations in pricing information, both regionally and even nationally.

Consider how your pricing relative to competitors will sit with patients and consumers. On the flip side, we believe this is an opportunity to connect with patients and consumers in a way that hospitals aren’t doing today. It’s an opportunity to educate your consumers and patients about the difference between price charge and the cost of care that they ultimately pay.

It’s an opportunity to articulate the unique value of services that you’re providing and why it’s worth receiving care at your facility versus someone down the road. Done right, you can set yourself apart from others and create a better understanding of not only costs, but overall healthcare value.

Steven Schnelle: If we were to think about three important notes for executives who are tasked with implementing changes for the hospital price transparency rule, our first would be to have a really clear sense of where the rule is clear and areas where the rule is unclear.

Many parts of the rule are unclear or give hospitals a fair amount of interpretive flexibility. And at the same time, the rule can present certain principles for application to particular facts. So while the rule may not be particularly clear, certain principles can flow through and have a…present a certain rationale .While at the same time, it can be challenging because this rationale may not align clearly with the actual intent of the rule that is to make hospital costs more transparent to users – in other words, to patients who are coming to the hospital or considering coming to the hospital. In areas where the rule is unclear, or it gives hospitals interpreted flexibility, we recommend establishing your hospital’s interpretation in a written document.

This could be a policy and procedure document, and we would suggest that you include in this document any rationale that you’re using in interpreting the statute regulation and CMS’ sub-regulatory guidance. We would also recommend that these particular policies and procedures are applied consistently. This document can be utilized in various circumstances to support your hospital’s position.

James Cervantes: We couldn’t agree more that having policies and procedures in place is important.

We would also recommend having very clear language around what pricing information includes and, more importantly, what it doesn’t include, so patients have a very clear understanding of their insurance coverage, copay, deductibles, et cetera, influence their out-of-pocket costs. And that the price they see online is just one part of that.

Having clear disclaimer language should also be visible on your website and your price estimator tool, or any application that you use today to communicate with patients around the price information they see.

Steven Schnelle: And then we’d also recommend that you pay attention to legal developments as time goes on surrounding the rule.

CMS has continued to release guidance regarding interpreting the rule, and its regional offices are continuing to hold webinars for providers who are trying to wrap their heads around what the rule means. There’s also ongoing litigation related to the rule that will be important to follow. And we expect the contours of the rule are going to develop as CMS sees how different hospitals are interpreting the rules, requirements and response to those interpretations.

James Cervantes: While the legalities are sorted, we know that based on a recent consumer survey, we feel that patients are more likely to source price information by calling their doctor than searching on a hospital website or even calling their insurance company. This tells us that regardless of any outcome of the rule or litigation related to the rule, hospitals still need to be prepared to communicate price information to patients and consumers who are shopping for this information today.

Hospitals and providers who go further than just publishing the required data, those who simplify the complex and foster patient understanding and interaction and build connectivity, we believe will reap an advantage. Because even though a medical professional’s advice is the best influencer on consumer choice, we know that cost increasingly matters.

James Cervantes
jcervantes@jarrardinc.com