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Analysis

Enforcing Hospital Price Transparency: Is $300 Max Daily Fine Big Enough?

By Steven Porter  
   November 15, 2019

If a hospital were to be assessed the maximum penalty for an entire year, it would owe $109,500 for failing to comply.

The final rule on hospital price transparency issued Friday by the Centers for Medicare & Medicaid Services allows the agency to impose civil monetary penalties for those that fail to comply, but some proponents of the policy worry these relatively minor fines may be an insufficient enforcement tool.

In other words, the mandate for hospitals to disclose the rates they negotiate with insurers has teeth—but they may be mere baby teeth.

A hospital that fails to comply with the final rule, which is slated to take effect in 2021, faces a maximum fine of $300 per day, even if the hospital is violating multiple requirements of the policy, according to the final rule.

"The technical term for that is 'chump change,' " Kaiser Family Foundation Executive Vice President for Health Policy Larry Levitt wrote in a tweet Friday. "I wonder how many hospitals will just pay the fine."

Although the scope of the final rule has broad implications, this enforcement mechanism "is quite weak," Levitt said.

If a hospital were to be assessed the maximum $300 penalty for an entire year, it would owe the government $109,500 for failing to comply with this final rule during that year. (The amount will be updated annually with a cost-of-living adjustment multiplier, according to the rule.)

Health Care Cost Institute (HCCI) President and CEO Niall Brennan, MPP, said that sum amounts to "an infinitesimal rounding error for hospitals."

In HCCI's comment on the proposed rule—the proposal included the same $300 max daily penalty as does the final version—Brennan praised the rule's monitoring methods and enforcement actions as "appropriately varied and iterative," but he said typical hospitals may see $100,000 as a small piece of their total revenue.

"We worry that many stakeholders will view the noncompliance penalty as a new business expense rather than an incentive to comply with the transparency requirements," Brennan wrote.

For its part, CMS acknowledged in the final rule that stakeholders had expressed concerns about the penalty amount. While some comments on the proposed rule called for higher penalties, others pushed for lower penalties or no penalties at all.

Paying more than $100,000 in fines might be chump change for large hospitals, but such penalties could prove overly burdensome for small hospitals, especially critical access hospitals, some commenters argued, according to the CMS summary of the comments, which noted that some called for a sliding fee scale.

Officials rejected calls for a sliding fee but said they will continue to consider the topic and may revisit a scaling methodology in future rulemaking.

After considering higher and lower dollar amounts, CMS officials settled on the $300 maximum, figuring they had struck an appropriate balance, according to the rule.

"We believe this amount to be sufficient to prompt hospitals to timely and properly display standard charges in both machine-readable and consumer-friendly formats in accordance with the requirements of this final rule," the document states.

Furthermore, the rule's regulatory impact analysis estimates that its provisions will cost each hospital about $11,900 to implement, so the maximum penalty for noncompliance is steeper than the total estimated cost of compliance, the rule states.

Some commenters said CMS lacked legal authority to impose the penalties. The agency disagreed. Hospitals have already vowed to challenge the final rule in court.

Related: CMS Issues Final Rule on Hospital Price Transparency, Pushes Effective Date to 2021

Related: Timeline of Trump's Push for Healthcare Price Transparency

Related: Hospitals Vow to Sue Trump Administration Over Price Transparency Final Rule

Correction: An earlier version of this story stated incorrectly that the maximum penalty for a Leap Year would be $109,500. That sum is the maximum penalty for a non–Leap Year. The maximum penalty for a Leap Year would be $109,800.

“We believe this amount to be sufficient to prompt hospitals to timely and properly display standard charges in both machine-readable and consumer-friendly formats in accordance with the requirements of this final rule.”

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The maximum penalty has been criticized as a 'rounding error' in the context of hospitals' balance sheets.

The agency said it believes the penalty strikes the right balance and offers a sufficient compliance incentive.


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