Scroll down for our interactive penalty calculator.
Our data shows that as of August 2021, while 3,171 hospitals have made an effort to comply with price transparency legislation effective 1/1 of this year, only 1,181 hospitals have earned our 5-star rating indicating full compliance. We’re not the only transparency enthusiasts who noticed this - CMS (citing our data!) recently proposed modifications to the original rule to boost compliance. While the proposed modifications included several topics, the one that gathered the most attention in headlines was an updated financial penalty for non-compliance.
What was the previous penalty?
The previous penalty for non-compliance was $300/day for all hospitals, regardless of size, coming out to a maximum penalty of $109,500 a year. This might be a deterrent for small hospitals with lower revenue, but a quick look at the tens-of-millions-dollar margins of some hospital systems gives you an idea of why many hospitals haven’t rushed to post their prices. For the cost of a few C-sections or hip replacements surgeries, hospitals can afford to keep their prices veiled.
What is the new proposed penalty?
CMS is now proposing a higher penalty based on a sliding scale. Through their proposed rule, they ask for public comment on the methodology for this dynamic calculation. CMS has drawn upon stakeholders’ previous suggestions and proposed a scaled penalty based on bed count.
The updated penalties are described in the table below. The minimum is still $300 per hospital with 30 beds or fewer, but hospitals will be further penalized another $10 per day for each additional bed they have until a maximum of $5,500/day is reached.
CMS’ logic is as follows: because larger hospitals with more beds treat a greater number of patients, more people are negatively impacted by these hospitals’ non-compliance and hospitals should therefore be proportionately penalized. This makes sense, but how about hospitals with a lower bed count but a high volume of procedures (and significant revenue?)?
To account for this, an alternative that CMS considers is percent of net patient revenue. The minimum penalty would remain $300/day, but the sliding scale would be based on 0.1% of revenue up until a maximum of $5,480/day.
What do you think the penalty should be?
CMS is leaning towards using bed count for the penalty calculation but is seeking comment on the following questions.
- Should a sliding scale approach be adopted?
- Should this sliding scale be based on the number of beds?
- Is $300/day an appropriate minimum penalty?
- Should 30 beds be used as the ceiling for the minimum penalty before the sliding scale kicks in? (or, for example, should all hospitals up to 50 beds be required to pay a higher minimum?)
- Is $10/bed/day the appropriate penalty for hospitals with 31 beds up to 550 beds?
- Is $5,500/day the appropriate maximum penalty for hospitals?
- What additional factors (such as revenue) would be feasible for scaling a CMP amount? If revenue, what is an appropriate % of net patient revenue to base the penalty off of?
Penalty Calculator (Best viewed on Desktop)
Explore full-screen using the icon in the lower right of the visual
- Slide 1: Compare bed count-based penalties
- Slide 2: Compare %revenue-based penalties
- Slide 3: Compare bed count vs. %revenue-based penalties
- Slide 4: Visualization of bed count-based penalties