Since January 2021, U.S. hospitals must share clear, accessible information online about the standard charges for the services provided to improve healthcare price transparency. Unfortunately, however, compliance with CMS regulations has been lacking.  

As of last summer, and more than two and a half years after the enforcement date, only about a third of hospitals fully complied with hospital price transparency requirements.  

The lack of compliance and challenges in using the published data led CMS to update the mandate for hospital price transparency in November 2023. The changes won’t just help improve compliance rates. They will help strengthen efforts to access and analyze this valuable healthcare price data for patients and other stakeholders. 

Updated hospital price transparency regulations 

One of the most significant developments starts on July 1, 2024, when hospitals must use standardized access and data schemas. CMS developed these changes with public input and indicates this will improve the ability of hospitals to comply, make it easier for the public to access the data, and improve CMS’ ability to enforce the requirements.  

The updated requirements address several areas, including making additional data available, using a standard data template, attesting to accuracy and completeness, and making data easier to find. A few key themes emerged from the long list of changes.  

  • Share new data and changing data; For standard charges, there are several updates, including:
    • Separate payer and plan: Rates negotiated with payers must be shared related to the payer and the specific plan in separate data elements. Separation lets hospitals avoid naming plans separately for the same payer as long as the payer-specific negotiated charges are the same for each plan in the category.
    • Share charge rates and amounts: The published digital file must indicate whether the payer-specific charges are in dollars, percentage charge, or some algorithmic calculation (such as an average dollar amount the hospital has historically received from the payer) to support the contracting methods hospitals use with payers. Rates must also include descriptions of the contracted rate type, such as fee schedule, percent of total billed charges, per diem, etc.
    • Make charges understandable: CMS also finalized a new consumer-friendly ‘estimated allowed amount’ to represent non-dollar rates as the average dollar amount, such as when the hospital has historically received from a third-party payer for an item or service to address the use of algorithms in payment amounts.
    • Provide uniform identification of the source: Today, hospitals must share information such as hospital name, license, location(s), and address(es) under a single hospital license where standard charges apply on their website, now they must add this information directly in the data files.
  • Use a standard data template: Now, there is a standard CMS template to create machine-readable files (MRF) to share charge information publicly and a common data dictionary. The use of MRFs is similar to the payer requirement from the Transparency in Coverage rule. Using a template makes the data uniform and easier to use so researchers can compare it with other hospitals and payers. Hospitals have additional flexibility and may use a standardized CSV format or JSON data schema. CMS set up a GitHub repository with details on the data format. The CMS template effort will also include work to prevent files from becoming too large—a significant issue early on for payers in their transparency compliance.
  • Attest to accuracy and completeness: CMS will require hospitals to affirm the accuracy and completeness of standard charges included in a published machine-readable file (MRF). The MRF is a single digital file, so machines can process the standard charge information in a way similar to payer requirements. These complement CMS enforcement strategies, including warnings and penalties.
  • Make data easier to find and access: For the data to be helpful, they must be found. Hospitals must now make the data accessible from their websites in the footer labeled “Price Transparency,” which links directly to a webpage with MRF access. Hospitals need to ensure a .txt file is included in the root folder of the public website, and it must identify the URL for the MRF file and the website that contains the MRF link.

Compliance and enforcement for new changes 

CMS estimates that these additional requirements will cost hospitals under $3,000 on average to implement. CMS is also building on recent enforcement changes to help ensure hospital compliance with new steps and shorter timeframes for corrective action for noncompliance. The government will also publish data on how well hospitals have complied and whether they have been fined for noncompliance.  

Regulatory enforcement will start January 1, 2024, with requirements, such as .txt files, making a good faith effort, and footer links. The bulk of the requirements must be implemented by July 1, 2024. Notable exceptions are the use of the estimated allowed amount standard charge data element, modifiers that may change the standard charge and their descriptions, and drug unit and type measurements. CMS will require compliance with these last few elements starting January 1, 2025. Full details on the changes to hospital price transparency requirements are available online with timeline details on page 208.  

The importance of price transparency 

The lack of available information on healthcare pricing makes it challenging for people to compare and save—especially in a market where people pay more out-of-pocket for care. People aren’t making decisions on the price of care alone. Other healthcare stakeholders need the data too.  

CMS established these ground-breaking requirements for hospitals, and related rules for payers, to share rates publicly and address the need for greater transparency. The complexity of the data and lack of compliance make it challenging for organizations to use rates data from hospitals and payers for: 

  • Informed decision making: Transparent pricing allows both parties to make more informed decisions. Payers, such as insurance companies, employer groups, or individuals, can compare costs across different providers, enabling them to choose services that offer the best value for money. On the other hand, providers can use pricing information to position themselves competitively in the market.
  • Healthcare cost management: For payers, understanding the cost structure of medical services helps in budgeting and managing healthcare expenses. For providers, knowing the market rates for various services helps in setting competitive yet profitable prices.
  • Enhancing negotiations: Price transparency aids in negotiations between payers and providers. Payers can negotiate better rates when they have access to comprehensive pricing information. Similarly, providers can justify their pricing based on the quality or uniqueness of their services. 

As an aggregator of healthcare price transparency data from hospitals and payers to help healthcare stakeholders make sense of and use the data, Clarify Health is familiar with the challenges of data quality and accessibility. Our approach from the start has been to make pricing data more usable. These changes to hospital price transparency requirements should streamline data access and make comparing payer and hospital rates easier.