Biden’s outpatient pay rule may be mixed bag for provider competition


The Biden administration caught the healthcare industry’s attention with its plan to slap hospitals with fines of up to $2 million for violating price transparency rules.

Health systems have been slow to follow new federal requirements that require them to publicly disclose the prices they charge for medical services, spurring federal officials to ratchet up the pressure on them to get in line. Many hospitals have seemingly taken a wait-and-see approach to the rule amidst the leadership change at the White House. But the Biden administration shows few signs of backing down on price transparency.

“It’s not going away,” Morgan Lewis partner Susan Feigin Harris said.

That has hospitals on their heels.

“We are deeply concerned about the proposed increase in penalties for non-compliance, particularly in light of substantial uncertainty in the interpretation of the rules,” Stacey Hughes, executive vice president at the American Hospital Association, said in a statement.

Since the rule took effect in January, hospitals’ compliance has been all over the map. More than 80% of 500 randomly selected hospitals did not publish the charges negotiated with third-party payers, half didn’t disclose any negotiated rates at all, and around 40% did not disseminate discounted cash prices, according to a Patient Rights Advocate analysis conducted from May to July. The overwhelming majority of hospitals did not post all payer-specific and plan-specific negotiated rates.

Just 6% of hospitals met all the rule’s requirements.

But that could start changing, as CMS clarifies the rules and hospitals scramble to avoid drawing the ire of regulators.

“The larger the penalty, the more of a priority it becomes,” Feigin Harris said.

In the proposed rule, CMS asked the public to comment on best practices for online price estimator tools, plain language descriptions of shoppable services, standardizing machine-readable files and ways to identify and highlight hospitals doing price transparency well.

The agency could also set new, minimum transparency standards for hospitals to avoid penalties in its final rule later this year, said Anne Phelps, U.S. healthcare policy and regulatory leader at Deloitte.

Price transparency could evolve into a competitive issue after the companion insurer rule takes effect in January. Hospitals may increasingly market their quality and patient experience alongside pricing information, Phelps said.

“Payers will put the information out there,” she said. “Hospitals will want to tell their own story.”

Hospitals backed CMS’ plan to halt the Trump administration’s controversial phase-out of the inpatient-only list, a group of services that Medicare will only pay for if they’re done in the inpatient setting due to their medical complexity.

“Along with physician judgment, the IPO list serves as an important tool to indicate which services are appropriate to furnish in the outpatient setting,” America’s Essential Hospitals CEO Dr. Bruce Siegel said in a statement.

They were also thrilled by the agency’s decision to walk back the number of services that Medicare allows ambulatory surgical centers to carry out, painting it as a bulwark for patient safety.

“Hospital outpatient departments are held to higher regulatory standards and are often the best setting for patients with the most severe chronic conditions,” Hughes said in a statement.

But hospitals aren’t out of the woods yet, as the Biden administration is still deciding whether to eliminate or scale back the inpatient-only list in the long term. In addition, Medicare could still allow ambulatory surgical centers to perform more procedures if they meet the agency’s proposed criteria.

“It’s not a complete pullback,” Phelps said. “They’re probably going to reissue the changes with different criteria and guidance.”

Even so, both moves should give health systems more time to prepare for any future changes and alleviate some administrative burden for hospitals in the near term, said Brigit Kyei-Baffour, associate principal at consultancy Avalere Health.

“There are some provisions in this proposed rule that keep in mind the financial and cost considerations for providers and facilities,” she said.

Hospital groups and many experts had argued against ending the inpatient-only list, claiming the move could jeopardize quality and safety because many of the procedures are high-risk. Hospitals also worried about how the move would affect their finances since it would likely lead to more treatment in lower-cost settings.

“When a procedure is taken off the IPO list, it tends to be generally healthier Medicare beneficiaries, with shorter lengths of stay whose care migrates to the hospital outpatient department, leaving the sicker and more complex patients as inpatients,” the AHA said in its comments on last year’s proposed outpatient pay rule.

But the Trump administration claimed the quality and safety concerns were overblown, with former CMS Administrator Seema Verma at the time noting that commercial payers already pay for such services outside the inpatient setting.