By Anastasia Gnezditskaia
Since the federal hospital price transparency rule was adopted last January, the average compliance rate has increased, but not significantly. The rule, which aims to boost healthcare price transparency and offer patients ways to price shop for services online, currently has an average compliance rate of 13.4%, according to a recent study by the Journal of the American Medical Association (JAMA). The study has evaluated the adherence to price transparency by hospitals in the six to nine months after the rule became effective.
This level shows an increase from 6%, a compliance rate seen among hospitals during the very early months of the rule’s implementation. Despite this increase, not that many hospitals post prices for common procedures, particularly in more concentrated markets and non-urban areas.
“Evidence suggests that compliance is increasing, albeit more slowly than it should,” says Alan Gilbert, vice president of policy at Purchaser Business Group on Health.
“While it seems pretty straightforward to list prices for services rendered, it isn’t all that straightforward in healthcare,” said Jacob Konitzer, a senior manager at ECG Management Consultants.
According to Konitzer, what is needed to boost compliance is additional guidance and clarity on the rule and publishing pricing files. Also, additional investments would be needed to bring the data to consumers in a more easy-to-understand form, which would make pricing data a competitive differentiator for organizations. And, finally, the actual enforcement of penalties would also help as the Centers for Medicare and Medicaid Services (CMS) has only started to do it recently.
Added to that, some believe penalties might be set at levels that are hardly sufficient for incentivizing compliance. “The fines may simply be too low to motivate hospitals with large profit margins or revenue to comply,” says Sophia Tripoli, director of healthcare innovation at Families USA. “For large hospital systems the max fine of $2 million is really not significant when we are talking about multi-million or billion dollar revenues.”
Currently, penalties range from $109,500 to over $2 million per hospital. Under the rule, for hospitals with 30 or fewer beds, the minimum penalty for failure to comply is $300 per day. For hospitals with more than 30 beds, the minimum penalty is $10 per bed per day, capped at $5,500 per day.
The JAMA study also concluded that the fines for noncompliance are relatively low. What is needed is a “drastic increase in penalties for non-compliance,” says Terence O’Brien, president and CEO at O’Brien Healthcare Consulting. What could be sufficient penalty levels? “My guess is that penalties to be effective should be in the 2 to 4 % of Medicare revenue and double every three months until compliance is reached,” says O’Brien.
Konitzer believes the penalty levels set by CMS are enough to incentivize hospitals to provide the requisite information. “I think it’s a little less clear on what compliance means and that lack of clarity results in inconsistency in the data being provided and ultimately its usefulness,” he said.
Apart from the amounts of fines, their enforcement was not carried out until recently. “Another way to boost compliance is to enforce penalties for non-compliance, which we have started to see,” says Konitzer. In fact, the first instances of enforcement by CMS were only observed earlier this month.
Atlanta-based Northside Hospital became the first health system in the country to be fined by CMS for violating the federal price transparency rule. It had to pay more than $1 million, according to CMS. Its flagship hospital in Atlanta was fined $883,180, while its Cherokee facility in Canton, Georgia, was fined $214,320.
Added to that is the issue of the format of the pricing data as required by CMS, as well as the issue of clarity of what exactly is required to be included by hospitals in the pricing data they submit. “Data often exists in different locations and in different formats where a number of decisions need to be made to meet compliance. Those decisions are the result of certain grey areas and can result in inconsistencies and ultimately usefulness of the pricing files,” says Konitzer.
As of January last year, hospitals are required to post machine-readable, consumer-friendly files of the charges they negotiate with payers and rates for 300 “shoppable services.”
The CMS rule includes 70 mandatory “shoppable” services that must be reported by hospitals. They cover services that include psychotherapy, preventive medicine, basic lab tests, CT and MRI tests, mammography, obstetrics, and surgical services. For the remaining 230 items, however, hospitals have more discretion as to what they chose to include.
“A reasonable approach would be to create a standard template that all hospitals would have to follow and narrow down the list to say the top 50 diagnostic-related groups and top 20 outpatient procedures,” says O’Brien.
Apart from the uniform format for pricing files, a user-friendly way of presenting the data is something that needs work. That means making investments “to bring the data to consumers in a more easy-to-understand form thus resulting in pricing data becoming a competitive differentiator for organizations,” believes Konitzer.
“The files in and of themselves are of limited usefulness to the individuals they are intended to support. So creating the files is the first step in a much larger process. We need tools that help consumers understand what they are looking at. Ultimately I think that’s how you boost compliance. Pricing information is delivered to consumers in a way that it becomes part of their routine in shopping for services. At that point, it can become a differentiator for healthcare organizations.”
Once these conditions are met healthcare participants will have more incentives to comply with posting their pricing information as it would also offer them a competitive advantage. This, in turn, is expected to offer consumers ways of making more informed choices and ultimately bring the costs down. “I do think the obstacles can be overcome,” says Tripoli. “These are groundbreaking regulations that are paving a new way forward.”
