Special thanks to summer associates Jared Pilner and Ilana Meyer for their contributions to this article.

On June 7, 2022, after months of written warnings, the U.S. Centers for Medicare & Medicaid Services (CMS) has levied its first fines nationwide on two affiliated Georgia hospitals for violations of CMS' Hospital Price Transparency Rule (the Rule), which took effect on January 1, 2021.

As discussed in our prior posts available here and here, the Rule requires hospitals to make public in a machine-readable form five categories of "standard charges" for all hospital items and services. In the case of the Georgia hospitals, CMS first provided a warning letter to each hospital and afforded it time to respond with supporting documentation. After more than four months from the initial warning, CMS again reviewed each hospital's website and found continued deficiencies. CMS then issued a Request for a Corrective Action Plan to each hospital. Neither hospital submitted a Corrective Action Plan. One hospital had offered to provide patients with estimates of a patient's expected out-of-pocket costs upon request by phone and/or email. CMS rejected the offer as noncompliant with the requirements of the Rule.

CMS imposed the civil penalties on Northside Hospital Atlanta and Northside Hospital Cherokee, fining the institutions $883,180 and $214,320, respectively, for the same five alleged violations:

  1. Failure for each hospital location to separately make public the standard charges applicable to that location;
  2. Failure to make public a machine-readable file containing a list of all standard charges for all items and services. Items and services include, but are not limited to, supplies, room and board, use of the facility and other items (generally described as facility fees);
  3. Failure to publish the required data in a single digital file that is in a machine-readable form;
  4. Failure to follow the naming convention specified by CMS, specifically:
    1. (ein)_(hospital-name)_standardcharges.[json|xml|csv];
  5. Failure to make available a consumer-friendly list of standard charges for a limited set of shoppable services.

The federal government said it resorted to the following penalties after the hospitals confirmed noncompliance and failed to respond to CMS' requests for corrective action. The higher penalties for 2022 reflect the enhanced penalties the Rule included when CMS amended the Rule in 2021.

  • Northside Hospital Atlanta was fined at a per diem rate of $300 for 121 days of noncompliance in 2021 (running from the date CMS re-checked the website for compliance after the initial warning), plus $10 daily times the number of beds times 158 days of noncompliance in 2022.
  • Northside Hospital Cherokee was fined $300 per day for 114 days of noncompliance in 2021, plus $10 daily times the number of beds times 158 days of noncompliance in 2022.

In June trade press, Foley & Lardner Partner Fred Geilfuss discussed a study in the Journal of the American Medical Association, which found that fewer than six percent of hospitals had fully complied with the Rule in the early months of its implementation in 2021. A report by PatientRightsAdvocate.org found 14.3 percent compliance one year after the Rule first became effective. Geilfuss noted that some larger hospital systems had initially made the calculus that the fines for noncompliance were "low," while the "possible impact on competitive harm" was viewed as potentially "much more significant."

The federal government said it has issued more than 350 warning letters and over 150 corrective action plan requests to hospitals as of early June. The Georgia hospitals have 60 calendar days from the date of CMS' most recent correspondence to pay the fines. Penalties will continue to accrue until the hospitals conform to the Rule.

For many in the health care space, these civil monetary penalties are a wake-up call that despite CMS' year and a half delay, enforcement is now here.

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