More than a third of North Carolina hospitals are noncompliant with a federal price transparency rule, alleged a February report from the nonprofit Patient Rights Advocate. But some in the industry space disagree with the finding.
Starting Jan. 1, 2021, federal regulations required hospitals to provide pricing information online in two ways: a machine-readable file with standard charges, and a consumer-friendly display of shoppable services.
The Centers for Medicare and Medicaid Services enforces the rule. Hospitals’ compliance nationally has increased over time, from only 27% of hospitals fully meeting website criteria in early 2021 to 70% in fall 2022, CMS spokesperson told Carolina Public Press in an email.
CMS closed cases with 36 NC hospitals from 2021 to 2023 concerning allegations or issues of noncompliance that were resolved.
Regarding the overall assessment from Patient Rights Advocate that many North Carolina hospitals are noncompliant, nonprofit Healthcare Financial Management Association said the report is incorrect and the public should rely on CMS’ determination of compliance.
Betsy Johnson Hospital in Dunn is the only hospital in North Carolina so far that CMS has fined. The Harnett County hospital, owned by Fayetteville-based Cape Fear Valley Health, has faced fines of more than $99,500 for not complying with the rule.
While the hospital currently does have an estimator tool, “we are actively working to ensure that we enhance these resources to meet the requirements” as well as to comply with evolving rules, Chaka Jordan, vice president of marketing and communications for Cape Fear Valley Health, told CPP in an email.
“We are fully committed to meeting these requirements and enhancing transparency in health care pricing and regret any inconvenience caused by our current noncompliant status,” Jordan said.
Price transparency in NC
The Patients Rights Advocate’s report is not the only indication of concern about North Carolina hospital pricing and price transparency.
The state treasurer’s office released a fall 2023 report that found hospitals across the state inflate median commercial prices by more than 700% of Medicare rates for some common services.
On average, a little more than half of the 140 hospitals across the state disclosed commercial insurance prices across 16 common shoppable services, according to the report, and hospitals levied price markups of “up to 1,120% on routine care and basic services.”
Because of varying prices, some patients are paying thousands more just by going to one hospital over another, according to the report. Price transparency regulation is supposed to combat that, but “many North Carolina hospitals are hiding their prices,” the report said.
Dale Folwell, state treasurer, said he hasn’t seen progress on this issue since releasing the report.
“This is the biggest transfer of wealth in my lifetime from people who make money on the backs of sick people,” Folwell said.
Folwell’s report also referenced a Duke University School of Law study that revealed, from 2017 to 2022, North Carolina hospitals brought almost 6,000 lawsuits against patients and family members to collect medical debt.
Barak Richman, one of the researchers and a professor at Duke Law, told CPP by email that “very few” hospitals have complied with the price transparency regulations.
“It is not because the regulations are too onerous, it’s mostly because the penalties of noncompliance are minimal and enforcement has been inconsistent,” he said. “It also reveals how dedicated our health care institutions are to business models that rely on non-transparency.”
In response to questions about the state treasurer’s report and the PRA report, the North Carolina Healthcare Association said in an emailed statement that North Carolina hospitals “have put significant effort into posting pricing information online to help patients estimate their costs.”
“We would encourage you to rely on information from CMS for reporting on price transparency rather than a group that does not determine compliance,” the association wrote.
Measuring compliance
Medical debt across the U.S. is a huge issue, said Cynthia Fisher, Patient Rights Advocate founder and chairman, and price transparency helps by allowing consumers to compare hospitals and know what the fair price should be for a service.
“It’s ridiculous that we have to sign a blank check whenever we get care, that we will pay whatever they choose to charge us,” she said. “Can you imagine going to a car dealer and signing a blank check?”
PRA checks for compliance according to regulation in its reports, she said, and such as the machine readable file, or MRF, being available and properly formatted. That’s important so tech developers can use the files to create programs for consumers to compare one hospital’s prices with another, she said.
Within that, hospitals should include prices for different types of plans with different insurance companies in its MRF, she said, because prices can vary for each plan.
PRA found 16 North Carolina hospitals noncompliant in the recent report, but CMS recorded resolving compliance cases with eight of them.
Those facilities with differing assessments from the government and the nonprofit include five run by HCA Healthcare including Angel Medical Center and Highlands-Cashiers Hospital in Macon County, Mission Hospital in Asheville, Mission Hospital McDowell in Marion and Transylvania Regional Hospital in Brevard.
The other three are Duke Lifepoint-run Frye Regional Medical Center in Hickory, Duke University Hospital in Durham and the WakeMed Raleigh Campus.
Fisher said she doesn’t know exactly how CMS regulates the rule, but the discrepancy between governmental action and the nonprofit report could be because of when PRA checked hospitals’ compliance versus when CMS did.
The difference could also likely be because CMS is more relaxed and ambiguous in what full compliance means for hospitals, said Ge Bai, a professor of accounting and health policy and management at Johns Hopkins University who researched the regulation.
CMS has fined 14 hospitals nationwide for noncompliance since the rule passed.
Bai said having third-party reviews of regulations like this is good, so CMS can gather feedback and possibly change regulation.
“I think it’s a very healthy dialogue,” she said. “Through this process, CMS can improve and the organization can learn, and hospitals can kind of adapt.”
Price variation is also an issue, Bai said, down to within different plans in the same insurance company at the same hospital.
Insurance companies aren’t always incentivized to negotiate as aggressively as they could for the lowest price possible, as they get a bigger cut when a consumer spends more, she said.
Bai said most hospitals will give patients an estimate of the cost, but that’s not always straightforward to compare between different hospitals. That’s why third-party platforms need to exist for consumers to compare prices, she said.
The initial costs of developing online tools and files to comply with the rule may be “daunting” for some small hospitals, but the fines for noncompliance are also not that high, she said.
Disagreeing with price transparency report
Not everyone thinks this type of criticism of the hospital industry’s price transparency measures is constructive.
Healthcare Financial Management Association, a professional membership organization for health care financial executives and professionals, said in a statement that while price transparency is important, the Patient Rights Advocate report was “irresponsible” and “incorrect.”
PRA’s focus on the machine-readable file is “misleading,” because it’s not supposed to be consumer-friendly, said Shawn Stack, director of policy and analysis at the organization. What really matters are the price estimator tools and list of shoppable services, which do have to be readable for patients, he said.
It’s often “an honest mistake” when hospitals don’t comply with the price estimator tool, Stack said. For example, if a hospital’s price estimator tool requires a patient’s personal information, that’s noncompliant because the regulation says the estimator tool or list of shoppable services should be offered without requiring personal information.
PRA’s assertion that hospitals do not post all of their contracted plan rates on the MRF is “very, very false,” Stack said. Hospitals aren’t required to document the plan names on the MRF until July 1, 2024, he said.
It’s also not possible for PRA to know whether a hospital is failing to list one of its plans, Stack said, because business contracts between insurance companies and hospitals are private. For example, if Aetna operates in a city and offers five types of plans there, Stack said PRA may be assuming every hospital should have contracted rates with every one of those five plans – although specific plans may be exclusive to a select hospital or network in a community.
“That’s not how any business works, and that’s definitely not how health care works,” he said.
Insurance companies, or payers, can get special pricing based on volume or quality for services with hospitals, which is part of why price variation exists, Stack said. However, some instances of “questionable” prices where a service could be much more costly at one facility versus another exist, he said, which may be where competition plays into setting market prices.
Hospitals do want to work with patients paying for their medical services through financial assistance programs, Stack said, but many patients are afraid or don’t know how to ask for help. Paying collection administration costs is expensive for hospitals, and they don’t want to pursue collecting huge amounts of debt, Stack said. That’s why there needs to be tools that help patients get assistance, he said.
PRA’s report could support a “dangerous narrative” by making people afraid to access care if they can’t trust their hospitals’ prices, Stack said.
Fisher of PRA said that, despite Stack’s statement claiming otherwise, PRA does understand the MRF. Fisher noted that many financial managers in health care exist to help hospitals put profits over patients.
“The only people who are complaining about having to show these files and show us prices is the hospital insurance industry and all the middle players in between,” she said.
PRA encourages the government in its enforcement, Fisher said, and sees PRA’s role as a consumer watchdog looking at the hospital pricing files.
Price transparency enforcement
CMS enforces the price transparency rule through evaluating public complaints, reviewing other entities’ analysis of noncompliance and internally auditing hospital websites. The agency prioritizes more severe cases of noncompliance. If a hospital doesn’t comply after warnings and a corrective action plan, CMS issues a penalty.
As of Feb. 29, 2024, CMS reviewed around 2,000 hospitals alleged to be noncompliant, according to an agency spokesperson. More than 600 of those were found compliant and the agency issued over 1,200 warnings to those who weren’t. The spokesperson wrote 975 hospitals received case closure notices after addressing previous deficiencies.
Hospitals are usually responsive, so CMS has been able to close more than half of cases after a warning and more than 99% complied after completing corrective action plans, the spokesperson wrote.
In response to questions about the PRA report, the CMS spokesperson said over email the agency doesn’t comment or speculate on external reports, but regularly reviews them to inform enforcement.
However, the spokesperson wrote that MRF’s are not consumer-friendly and hospitals use different methods for establishing standard charges, so directly comparing hospital standard charges may not always be useful.
“As such, attempting to use hospital standard charges in isolation, without additional contextual information, can result in erroneous conclusions and comparisons,” the spokesperson wrote.
Because hospitals have different services and some data values in the MRF may not be applicable to a hospital, the absence of certain information doesn’t always mean the file is incomplete, the spokesperson said.
“We cautioned users of the files who choose to view MRFs in human-readable formats from concluding that a hospital is noncompliant solely based on blanks or the hospital’s use of ‘N/A,’ (or other indicator(s) specified by CMS in prior guidance),” the spokesperson wrote.
Stack said new regulations around the MRF starting July 1 will help by standardizing the files.
The CMS spokesperson said the new regulation will require hospitals to affirm their MRFs are accurate and complete. Hospitals must also include payer and plan names starting then, as well as the method used to establish the standard charge, the spokesperson said.
Hospital responses
In addition to the five HCA-owned hospitals of the Mission Health system in Western North Carolina that CMS had said were compliant by PRA found noncompliant, HCA’s other North Carolina hospital, in Spruce Pine, was also deemed noncompliant by PRA. CMS has not weighed in on that hospital so far.
In response to why PRA found Mission Health’s hospitals noncompliant, Mission Health spokesperson Nancy Lindell said in an emailed statement that the facilities implemented the federal requirements in January 2021, including a patient payment estimator tool and contracted rates with third-party payers in one of the machine-readable file formats.
“I would encourage you to rely on information from CMS for reporting on this topic rather than a group that does not determine compliance,” Lindell wrote.
She also pointed to a statement from the American Hospital Association.
Duke Health officials responded to the PRA report with an emailed statement saying that, contrary to the report, the hospital is in compliance.
“Duke Health is committed to price transparency for our patients and the public,” officials wrote. “We provide a robust suite of online tools that comply with applicable federal requirements.”
Duke Lifepoint Healthcare, which owns Frye Regional Medical Center, also responded by email saying all Duke LifePoint Hospitals were compliant at the time of the fall 2023 audit, and pointed to resources on Frye’s website.
“While we cannot be certain about the PRA’s findings and the discrepancy between our hospitals listed as fully compliant and noncompliant in the report, we assume the wrong files may have been downloaded during their audit,” a spokesperson wrote.
WakeMed responded over email, “We are not certain how this advocacy group makes their determination, so it’s important to rely on CMS for reporting on this topic since it is the official agency to determine compliance with the federal regulations.”
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License. You may republish our stories for free, online or in print. Simply copy and paste the article contents from the box below. Note, some images and interactive features may not be included here.
