How Does the CY22 OPPS Proposed Rule Change Price Transparency?

As new Price Transparency regulations went into effect this year, most hospitals quickly adjusted to become compliant under the new rules. However, many were confused on some points, and some decided not to post their prices, choosing instead to see how CMS would approach enforcement and what, exactly, it regarded as compliance.

The new proposed CMS rule (CY 2022 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule (CMS-1753-P)) clarifies several of the points where hospitals had questions, but it also emphasizes the importance of compliance and the seriousness of penalties. They stated, “CMS expects hospitals to comply with these legal requirements and is enforcing these rules to ensure Americans know what a hospital charges for items and services.”

The Penalty

First of all, they’re increasing the penalty amount for some hospitals.

The minimum penalty remains $300 per day but would apply to small hospitals (bed count of 30 or fewer). For hospitals with more than 30 beds this would include a penalty of $10 per bed per day, maxing out at a daily penalty of $5,500.

This means, for a year of noncompliance, hospitals are looking at a total penalty amount of $109,500 and a maximum penalty of $2,007,500 per hospital.

Clearly CMS is doubling down on its enforcement of the letter of the rule. However, this may change, as CMS is seeking comments on alternative or additional criteria that could be used to scale the penalty. Other options include:

  • Hospital Revenue
  • The nature, scope, severity, and duration of noncompliance
  • The hospital’s reason for noncompliance

File Access

We’ve seen several articles pointing out the difficulty in searching for machine-readable files. The rule proposes a requirement that the machine-readable files can be accessed by automated searches and direct downloads. Furthermore, CMS plans to update the list of what it considers barrier to access.

CMS also clarified that, should a hospital use an online price estimator tool, it must take the patient’s insurance information into account. The estimate must show the amount the hospital expects the patient to pay for the shoppable service, absent unusual or unforeseen circumstances.

Finally, CMS has also made itself open to public comments on several transparency issues, including best practices for price estimator tools, improving “plain language” descriptions of shoppable services,” ways to highlight exemplar hospitals, and improvements to the standardization of machine-readable files.

The rule would go into effect January 1, 2022. You can read CMS’ summary here.

To comment, go to regulations.gov, search for the CMS CY2022 Proposed Rule, and click on the Comments tab. The deadline is September 17, 2021.

As the rule evolves and we receive more information, we’ll pass it along. If you have any questions or concerns for your hospitals, let us know!

Cleverley + Associates covered the new Price Transparency regulations in depth in our spring summit. You can view the whole thing for free here.

CMS Sends Out Price Transparency Warnings

Since the passage of the ACA, Price Transparency has largely been a bipartisan issue, meaning that new rules and regulations have appeared, regardless of administration. CMS’ goal is to make it easier for patients to compare prices between hospitals. However, their final rule, which went into effect January 1st, had not yet been followed up by enforcement. CMS’ website claimed they were running audits and reviews of hospital websites, and the industry waited to see if they would start cracking down. 

And they have. Well… gently. Last month, CMS began sending its first warning letters out to hospitals that were not compliant with their Price Transparency rules.  

This is in line with their planned escalation. Each hospital will have 90 days to address the letter and CMS will then re-review. After that, the hospital will either be found compliant or receive a second letter from CMS, possibly with a plan to address how they can become compliant. CMS may choose to fine the facility up to $300 a day and make their non-compliance public on a CMS website.  

Although some hospitals may plan to take the monetary hit rather than comply, the negative publicity may be concerning. CMS has said this plan is a last resort, and they plan to be careful not to publicize hospitals that are taking corrective action but have not yet achieved full compliance. 

This first step sends a loud and clear message to the hospital finance community that CMS is serious and intent on taking action. Now is a good time to reevaluate your price transparency and make sure it is compliant and patient-friendly.  Want to learn more about the history of Price Transparency, what hospitals are doing to become and stay compliant, what you can do now that CMS is cracking down, and how we can help? Sign up for our free Spring Summit!

How do Hospitals Compete with Free Standing Clinics?

The continued pressure on shoppable services has heightened the competition between hospitals and freestanding facilities. But what effect does this have on their day to day business? We analyzed the rate at which hospitals and their freestanding competitors have increased charges in four key groups from 2015 to 2019: imaging, procedures, labs, and therapies and found some interesting trends!

The chart below compares U.S. averages from Medicare data for 2015 and 2019. To account for the difference in charges due to case mix, we have adjusted procedure prices by their Medicare Ambulatory  Patient Classification (APC) relative weight. We mapped the HCPCS to the appropriate group, calculated total charges and total APC Relative Weight (RW), and finally divided total charges by total RW to arrive at the average charge per RW of one.

Average Charge per APC Weight of One

In imaging, we see hospitals have slightly closed the gap, increasing their average charge by 25% compared to 29% at their freestanding counterparts. This is a small difference and suggests that hospitals may not believe price elasticity in this area is very high and they are willing to maintain a price premium. 

Looking at procedures, hospitals have increased their average charge by 15% compared to 2015, as opposed to ambulatory surgical centers where the rate of increased remains nearly flat at 1%. It should be noted that while the average charges in this area look competitive between hospitals and ASCs, hospitals often do not include surgical supplies or anesthesia in their pricing for procedures. This differs from ASCs where the price is more inclusive. The relatively low rate of increase for ASCs (1%) suggests that ASCs may see little association between price and net revenue, or they may perceive a highly competitive price market with hospitals. 

Labs are moving at similar rate of increase with hospitals increasing their average charge by 31% compared to 28% at the freestanding facilities.

When looking at therapies, hospitals are closing the gap with freestanding facilities, increasing their charges by 11% compared to 16% at the freestanding sites.

The critical question for healthcare providers in these four outpatient service areas is to what extent does price drive market share?  In the four areas that we reviewed, the relative difference between hospital and free-standing prices remained relatively constant.  Only in the procedure area was there a significant variance between hospital and free-standing price changes which may suggest market stabilization in these areas.  Price transparency could provide some significant future price movement as hospitals modify prices to enhance their relative marketplace image.

Is your facility interested in understanding your pricing position relative to freestanding competitors? We can help!

Is CMS Auditing For Price Transparency?

Last year the hospital industry faced major changes to the availability and accessibility of their prices. Now that 2021 is here, and the new CMS rules are officially in effect, CMS plans to audit how successfully the industry achieved compliance.

According to the CMS website they have already selected hospitals for their initial audits. We’re not sure how hospitals were selected for audits, or what criteria went into CMS’ decisions, but we do know that some of the audits will probe specific complaints and patients can submit complaints on the CMS website. Additionally, we don’t yet know if hospitals found outside of compliance have been informed or fined.

Because there’s no single place to find the information, making sure every hospital is compliant and up-to-date may be a laborious, if not impossible task. That won’t stop CMS from investigating individual hospitals and systems, especially if they suspect, or have a report, that they are not compliant.

Noncompliance isn’t without risk. Should a hospital fail to post their prices, or decide not to do so, they could face a fine of $300 per day. CMS’ website states that there will be several steps before this, however, including a written warning notice and requesting an action plan.

Of course, hospitals can appeal before a judge, and have 30 days to do so. It is up to each facilities’ administration to determine how much risk they are willing to take.

What does this mean for you and your organization? Well, it depends on how much work you’ve already done. How close are you to compliance? What work still needs to be done?

We can help! We have experience with the types of files CMS requires as well as building price estimator tools. Give us a call at 888.779.5663 or see our price transparency resources here.

What Would Die Hard Cost John McClane (and His Hospital) (This Year)

Every year, as the winter holiday season rolls around, the greatest debate of our time resurfaces – is Die Hard a Christmas movie?

We at Cleverley + Associates believe that the answer to this question may be beside the point. What’s important are the traditions we create for ourselves, especially around the holidays. What really matters is what brings us together and make us feel happy and fulfilled.

But also, yes. It’s a Christmas movie.

Plus, it’s a totally awesome action movie, which means injuries…a lot of injuries. That got us thinking – we assume that John McClane went to a hospital eventually, and considering what he’d gone through, what would his treatment cost him and the hospital?

Last year, we speculated wildly on Mr. McClane’s bill. Let’s see what would change this year! As we pointed out last year, we’re not doctors, we’re data nerds, so our diagnosis and treatments are only tangentially related to real life medical advice.

Our hero sustains his first injury (or probably injuries) as he falls down the stairs while fist fighting. There are a lot of injuries that can occur from both a fall and a fight, but since Mr. McClane goes on to punch several other people, we can rule out fractures, spinal injuries, and basically anything that would put in him in traction.

But we can’t rule out a concussion, or a subdural hematoma.

He’d probably get an MRI and CT scan (Let’s go ahead and do both, since he’s a hero.)

We’d also want to do an ImPACT test.

This year the hospital saved a whopping $11, while Mr. McClane will owe $917 more than last year.

Next up, the most famous injury, deep cuts to our hero’s feet, because he walked across broken glass.

Ow.

So, we’re talking lacerations to the feet.

We’re going to need a lot of antiseptic, bandages, and probably stiches. Also foreign body removal from the wounds.

Again, ow.

It looks like Mr. McClane saved $466 on his terrible and iconic podiatric injury! It cost our fantasy hospital $104 more.

Next up, poor McClane is shot in the shoulder! The following scenes, where he still manages to win in hand-to-hand combat with the villain, show that the bullet likely grazed him. Of course, we can’t rule out that the bullet is still there, or a shard of it. So, we’re going to have to explore the wound to make sure it’s clean, and probably take an x-ray to make sure we got all the bullet bits out.

This year that procedure looks cheaper for both John and the hospital! Mr. McClane will save a total of $1,553 while the procedure will be $402 cheaper for the hospital!

Lastly, in the grand finale, John McClane wraps a fire hose around himself and bungee jumps off the building. This is, generally speaking, a terrible idea. He then breaks through a window using his already battered body. Again, not a great idea.

This could, of course, cause a variety of injuries, but let’s go ahead and just assume the worst – a fracture of the vertebrae and ribs. There would probably also be internal damage as well, but considering he’s still walking around being witty, let’s assume he’s miraculously okay-ish.

These procedures will cost McClane $112 more than last year, and cost the hospital $28 more.

The end of the movie seems to suggest that McClane rides off into the sunrise with his wife, triumphant and filled with the Christmas spirit. I assume they didn’t go straight home with the hope that he would survive until morning. More likely they stopped at the ER to at least make sure he wasn’t bleeding internally.

So here’s everything all together! Overall, both John and the hospital saved money this year. John spent $970 less and the hospital saved a total of $281!

Happy Holidays everyone! Yippee-ki-yay!