Recently, CMS released the proposed fiscal year 2015 Inpatient Prospective Payment System (IPPS) rule for inpatient stays in long-term and general acute care hospitals.[1] Included among the regular updates to Medicare payment policies and rates are guidelines for compliance with the Affordable Care Act’s hospital charges transparency requirement.

Section 2718(e) of the Public Health Service Act requires that “[e]ach hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1886(d)(4) of the Social Security Act.”

In a section titled, “Requirement for Transparency of Hospital Charges under the Affordable Care Act,” the IPPS rule establishes that hospitals are to make public either a list of standard charges, or policies for allowing the public to view a list of charges pursuant to an inquiry. CMS encourages hospitals to help patients understand their potential financial liability and compare charges for similar services across facilities. Furthermore, CMS expects hospitals to update the information as often as appropriate, but at least annually.

Effective October 1, 2014, the proposed rule affirms that hospitals are responsible for establishing their charges and for determining how to make charges available to the public. A hospital is not required to publish, for example, the chargemaster itself.

These guidelines follow a series of recent transparency efforts by CMS. In early April of this year, CMS released Medicare physician payment data for the first time since 1979. In 2013, CMS released information on average charges for the 100 most common inpatient services and more than 3,000 hospitals across the country, as well as average charges for 30 outpatient procedures.[2] Intended, in part, to enable comparison, the data has generally revealed significant variation in hospital charges and Medicare payments. However, federal officials and healthcare analysts alike have emphasized that the data should be interpreted with caution: there are various potential explanations for the findings, many of which are reasonable. The same warning will likely hold true for information released under the IPPS rule, especially since negotiated rates between hospitals and insurers remain private, which emphasizes the importance of effective communication strategies.

Once CMS issues its final rule, there may be an increase at the state level of legislative and regulatory activity with respect to hospital charges and transparency. Currently, many states require the reporting of pricing information, but there is significant variation in features such as scope and proscribed platforms for disclosure.

CMS is accepting comments on the proposed IPPS rule until June 30, 2014. A final rule is to be issued by August 1, 2014.