Federal government issues first two fines on hospitals for violating price transparency rules

The Centers for Medicare & Medicaid Services (CMS) imposed the first fines, totaling over $1 million, on two Georgia hospitals for violating federal requirements to publicly post their prices. These fines follow from over a year of widespread delay and resistance from hospitals and likely represent only a tiny portion of the hospitals that have yet to fully comply with the rule.

As part of the Trump administration’s historic steps to finally make health care pricing transparent to patients, CMS issued regulations requiring hospital to publicly post the prices they negotiate with each health plan. Hospitals aggressively fought the finalization of this rule and challenged it in court. The Court of Appeals for the D.C. Circuit found their arguments “without merit” and upheld the rule on Dec. 29, 2020. Three days later, on Jan. 1, 2021, the rule went into effect.

While hospitals’ failure to immediately comply just three days after this court ruling is understandable, a review of a representative sample of 470 hospitals published in Medical Care Research and Review estimated only 23.7 percent of hospitals were in full compliance with the rule as of May 14, 2021. Only a third of hospitals provided any health plan-specific pricing data at the time. The organization PatientsRightsAdvocate.org similarly reviewed 500 hospitals from May 15, 2021 through July 8, 2021 and estimated only 5.6 percent of hospitals were fully compliant. This much lower compliance finding may be due to applying a stricter compliance standard. For instance, PatientsRightsAdvocate.org looked at whether the hospital posted pricing data from all relevant payers, whereas the other study appears to have focused on the format and not the full content of the data.

In a rare showing of bipartisanship, President Biden issued an executive order directing his administration to support Trump price transparency policies. At this direction and recognizing the incredibly high levels of non-compliance, CMS then finalized rules in the fall of 2021 to increase the fines on hospitals that continued to violate the agency’s price transparency rules.

PatientsRightsAdvocate.org then conducted a second review of 1,000 hospitals from Dec. 7, 2021 to Jan. 28, 2022, which found only 14.3 percent were in compliance.

This ongoing recalcitrance may suggest the penalties are still not high enough to enforce compliance. The fines on the 114 bed Northside Hospital Cherokee in Canton, Georgia, totaled $214,320. The fines totaled $883,180 for the 536 bed Northside Hospital Atlanta, which reflects how the fines scale up with the bed count. While nearly a million dollars is real money, it’s 0.03 percent of Northside Hospital Atlanta’s $2.5 billion in net patient revenue reported on Medicare cost reports for 2021. That’s a small price to pay to buy time and keep the public from viewing what might be embarrassing data.

Noncompliance may also reflect hospitals betting on not getting penalized due to CMS’s limited enforcement resources. The fact that CMS issued fines to only two hospitals this week suggests noncompliance has so far been a safe bet for the 6,000 or so hospitals subject to the rule.

CMS is no doubt taking the best enforcement approach they can with their limited resources. It’s likely more fines are in train now that the framework for these first fines has been approved and applied.

However, these fines were only issued after CMS sent out warning letters in the spring of 2021, followed by letters to the hospitals in the fall demanding a corrective action plan, which the hospitals ignored. CMS even held a technical assistance call with the hospitals in January followed by an e-mail on Jan. 24, 2022, to both hospitals again requesting a corrective action plan within 10 days. They failed to submit a plan.

It’s not clear how many other hospitals followed the same obstinate course, which appears to have effectively cornered CMS into imposing these fines. It’s likely other hospitals are playing more cooperative and yet still not complying. That’s the lesson from the poor showing on compliance reviews conducted by PatientsRightsAdvocate.org.

Due to CMS’s resource limitations, they could use some help with these noncompliant hospitals. That’s why American Experiment recommended passing legislation in Minnesota to empower the state to enforce the federal requirements. Bills were introduced in both the Minnesota House and the Senate to adopt this policy, but it did not find a successful path to passage during the regular session.

Price transparency took a historic leap forward during the Trump administration and the Biden administration has taken concrete actions to carry these policies forward. There remains a role for states to aid in these efforts. Health care is local, after all.