Beyond Compliance with Hospital Price Transparency

Kevin Chmura
Hi, and welcome to this episode of Panacea’s podcast, Beyond the Bottom Line. Let’s talk healthcare, finance, revenue cycle and compliance. I’m your host, Kevin Shimura, CEO of Panacea Healthcare Solutions. Today we’re welcoming back Govi Goyal, our President of the Financial Services Division at Panacea, to talk about recent changes in the latest chapter in hospital price transparency. Govi, welcome back.

Govi Goyal

Thank you.

Kevin Chmura

So Govi, we’ve done a bunch of these together and as usual you maintain your position as a leading national thought leader on the topic of price transparencies. So rather than maybe bringing, you know, dragging you through and asking you a series of questions, maybe I’ll just open up the floor to you. I think people want to hear what you’re thinking about. Especially as it comes to the new machine-readable file requirements. You know, we had an awkward series of events that got us to where we are today. Maybe you could touch on that and maybe just talk about some compliance pitfalls. That you can see. And so rather than me getting in your way, I’ll turn it over to you and let you take it from here.

Govi Goyal

Yeah, absolutely. I think awkward is a good way to describe it. The timing is really good though. It’s another year. So we’ve got another year of new price transparency requirements. This time there’s not any changes to the consumer display or patient estimation system, but there’s certainly a decent amount of changes that are happening with the machinable file, which has really been a work in progress, I’d say over these last few years, but there’s been significant activity within the last year. So, in just a few weeks here, April 1st, CMS will begin enforcement of the new requirements that were laid out. In both the proposed and final rule for 2026. Technically these are effective January 1st, we’ve got a little bit of grace period which I think hospitals are taking advantage of it. So on the technical side of things, what we’re seeing is that CMS is really getting. What’s getting rid of the replacing the estimated, the current estimate allowed amounts with four new allowed amount fields. And these fields are the median allowed amount, the 10th percentile, 90th percentile and then the count of allowed amounts. And so I think it’s really important to kind of understand this part there and you know why. What does this really mean and why is this happening?

So as a kind of a refresher here, estimated allowed amounts by definition refers to the historical average payment that a hospital received for that given payer or plan and for that for that billing code. And it’s really applicable when you may not have a standard negotiate rate or you have a standard negotiate rate. But then that could be varied by other factors. So for example, you’re getting paid on a percentage charge on a DRG. We know that the gross charges could vary from patient to patient. There’s not a standard negotiated rate. So CMS came up with the estimated allowed amount, which is basically a second field for a negotiated rate when there is no standard. Or let’s say you have a scenario where you’re a hospital, you’re getting paid on a case rate for a given surgical procedure, but then there’s also the opportunity to get paid an additional amount if it’s a high dollar claim in the in the concept of stop lossless or lessor of, so that whole concept is not changing. CMS is not changing the qualifications, how you qualify a line item that would need in this case going forward for 2026 in April, now a median allowed amount. Really what’s changing here is the calculation itself. So instead of looking at a historical average, we’re now CMS is now asking hospitals to get to the median, the 10th and the 90th percentile and then also include the count of allowed amounts.

So the qualification process same, the calculations are changing and I think you hit the nail on the head there, Kevin. We have to kind of go back in time. We got to get in our time machine here. We don’t have to go too far back, but if we go back about a year ago and think about the executive order. That’s really where this all started. The executive order, it came out sometime, I think in February of 2025. And I think a lot of the healthcare industry was really unsure of how much of an impact it was.
We weren’t sure if this is just another opportunity for the Trump administration to bash the previous administration. Maybe they were including that as well, but we didn’t know if there was really teeth to it. The biggest thing that came out of that executive order was language that said no more estimates. We’ve got to start moving to actuals, and none of us really knew what actual meant. We also saw language around more enforcement. We kind of know what that, you know, that means. And so from there was a flurry of, you know, and you’ll use the word you said, awkward activity that happened. We did see a lot more warning letters and corrective action plans come out and that was kind of expected. But within 90 days of that executive order, we saw new guidance from CMS that came out. And this is really where it got really confusing for a lot of folks in there because that guidance basically said, OK, CMS is basically unhappy with the low reporting of estimated allowed amounts that are on the MRF. They were, I don’t know, you know how you can set a certain benchmark on it, but they were expecting to see a lot more results from the MRF and what CMS had instructed hospitals to do is if there’s no historical like remit activity, you know you can’t really calculate average. So, in those cases just put 9/9s as the estimated allowed amount, and it could be the case that there are certain hospitals that are abusing that or maybe that’s the way it was, but CMS was seeing way too many nines all over the MRF and so in their attempt to fix a problem, you call that problem a maybe a not complete enough file. I think what they ended up creating was a different problem. They created more problems with the file being accurate because CMS instructed hospitals out of that guidance and made us say, OK, stop it with the nines, you can no longer put nines. You now need to calculate what would an estimated allowed amount be. Even if we understand you don’t have any volume or remit data, but you just need to do it. And so that’s where there was a lot of pushback from the public, the industry, including other vendors and hospitals including HFMA. And we’re just trying to get understanding more, well, how would we actually do this? How do you, if you don’t have any historical data, how do you want us to calculate it? And you also go further away from standardization, which was also the executive order. So very quickly after that guidance came out, the OPPS came out, the proposal came out and that’s really when we saw CMS instruction to just get rid of it. Does this entirely replace the estimate allowed amount? No more estimates. Let’s move forward with these new four new allowed amount fields, the median, 10th, 90th percentile and the count of allowed amounts. And ultimately that is going to work out better. We can get kind of more into that.

The other big change that we’re seeing with the with the price transparency this year is the attestation and this is creating a lot of, I think, disruption in the industry. A lot of, I would say a lot of hospitals are uncomfortable putting the name of a senior official CEO, whatever is on the on the file. This name is different from what hospitals are doing today with a text file. The name that goes in the text file, that’s more for answering technical questions. But the name that’s supposed to be on that attestation student is really the person that’s overall accountable, accountable for this file being accurate and complete. And so really kind of, we’re in this state of scrutiny and everything. It really puts a heightened a heightened level awareness to that to the hospital as they post the machine readable file.

Kevin Chmura

That’s a ton going on there and after all the work we did on just expected allowed amount over all that time and all the consternation that created and then to have the relief of the 9s. Only to have that taken away. It’s a little bit of whiplash, isn’t it? But as you said, I think it’s a great way to say it. The machine readable file is still a work in progress, right? And we’ll get it there at some at some point. Anything the hospital leaders should be thinking about that in terms of pitfalls and what’s going to trigger CMS warning letters?

Govi Goyal

Yeah, yeah, yeah, definitely. So right now CMS is, I think they’re going through different phases of enforcement levels. Currently they’re really looking at hospitals to comply with the accessibility requirements as I mentioned the text file. So
what CMS is planning on doing is at some point automating, and they might be doing it already, automating kind of their enforcement process where they’re going to be sending out these bots. And through the standardization process, each hospital is required to have a text file on the root folder of their website in which that allows CMS to in one place, a standardized location, be able to get a link to where your MRF is, see you know your date of last update, see who’s responsible for your file, and this will really allow CMS to automatically grab your file, and then subsequent to that; run, run it, run it through the what’s called the CMS MRF validator. So I would highly encourage hospitals if you haven’t already, you know, make sure you’re compliant with a text file, your MRF goes to the validator without any errors, you have price
transparency in the footer of your of your website and then just making sure your date of last update is within the last year. So those are some low hanging fruits that are easy to check now and make sure you get in shape.

I would think, you know, beyond that, it’ll be interesting to see how CMS evolves in their enforcement process. CMS did issue out an RFI right around the same time they issued that guidance back in May of 2025. And some of the questions they were asking the public in that RFI was, you know, how, how should we go about enforcing? What’s the best way to enforce? How do we, should we put definitions around what quality or what about accuracy and complete means? Do we want to add additional fields into the MRF? And so, I believe they’re reviewing the results of that, but I imagine at some point they could get more invasive and start asking for source data, asking for your chargemaster, your payer contracts because really until they have access to that type of information. They really can’t do a full compliance audit. They’re just really kind of left to running it through their validator.

Kevin Chmura

Yeah, the validator is it’s so important because it’s the easiest way to trigger that you’ve got a problem, right? And it’s not a really complicated check for anybody to go in and do so. So that’s great advice. So go, we’ve done, I don’t know, I don’t know how many of these we’ve done, but a lot. And I’ve asked you the same question every time and you’ve gotten it right every time. So I just want to point that out. So like I always do, I’m going to ask you to look in your crystal ball and tell us what you see coming for 2027 and beyond. And no pressure that you’ve never been wrong.

Govi Goyal

Right. Wow. So, what I like to do is think about, you know, why, why is CMS going about some of these recent requirements? It gives you an indicator of what they’re likely going to be doing in the future. And so we talked about why the new requirements, the median, the 10th, the 90th, the count allowed amounts, why that’s replacing the estimated allowed amount and we get it right. It’s kind of like median home prices, right, versus looking at average the median is going to give is going to give you more of an accurate amount because it’s not gonna be skewed by outliers: statistics 101. But CMS is really wanting, you know, this is really if you think back about the intent of price transparency, it’s really to provide consumers with informed choices to drive down the cost of healthcare. And so what CMS is looking for is really for consumers to use the machine readable file, which we know is really not happening today, although we do have some statistics in place and we’re running it for certain hospitals and we are seeing an increase, an uptick in the number of users using the machine readable file. It’s a little bit tricky to kind of get some more context if it’s really patients that are shopping around, but for example if I was, if I was a consumer, a patient says I need to go in for a colonoscopy and I had the option of either choosing hospital A or hospital B. If I go, now colonoscopy might not be the best example because that’s actually required in a consumer display or patient estimation system, but let’s hypothetically say it was a service I was looking at and it was not, it was not in the consumer, it was not part of the shoppable services, but it was a schedulable service and I need to, I need to find out, you know, what my potential out of pocket would be. If I’m using two, if I’m looking at two different MRFS from different hospitals, if both of them say $5,000 is the median allowed amount, that alone is not really helpful, right? I mean, OK, great. So, these hospitals are roughly the same distance from me. Quality scores are same. They’re both in my network and I have a high deductible, so I’m looking at this amount. I’m going to pay most of it. It’s both $5000. So where do I go from here? What CMS really is looking for is for consumers to leverage additional fuel types like the 10th percentile allowed amount the 90th percentile and the count. Let’s say hospital A has a range the 10th percentile is 3000, but the 90th is 12,000 it’s super high and there’s only three allowed amounts, whereas the other hospital B has, let’s say maybe $7000 as the 9th percentile and it has 30. It has 30 allowed amounts. Which hospital am I going to be more confident, right? Which hospital has more reliability? And so clearly if I’m a consumer and I want to have some more confidence, I’m going to trust maybe hospital B. It’s got more data and there’s a there’s a tighter bell curve around that. I think that we’re probably a little bit further. It’s probably a stretch before we get there. This was this is always meant to be the consumer-friendly expected allowed amount that kind of changed over time and now we’re calling it the median.
So I say all of this because I do think one of the biggest changes we’re going to see going to 2027 is that CMS is going to expand. They’re going to expand that patient estimation system or consumer display to all scheduled services. It’s not just going to be 300 because they’re going to realize this is, this is challenging for consumers to use them or not.

Other things that are happening here in in 2027 likely to happen beyond, I would say, and there’s bills, you know, so there’s the there’s a few Senate and House bills out there that are hinting at price transparency to extend beyond hospital locations right now, you know, freestanding imaging centers, laboratories, physician practices and they, with the exception of Minnesota, are kind of off the hook. They’re not required to comply with the same requirements as hospitals and so there could be more pressure and eventually at some point that’s a federal thing that they all have to comply with an MRF and a consumer display or patient estimation system. We’ll likely see. I don’t know one likes this one, but the payers have to update their files on a monthly basis. You could see how it could get challenging for a patient or someone to use an MRF that’s 10/11 months old and they’re not sure if the rates are still effective and how that changes their out of pocket or if they’re using it for negotiations, how it could impact reimbursement rates. So, we might see more frequent updates of MRF. Those are some things I think are likely to happen. Probably not, probably a gradual, maybe not immediately going to monthly, maybe a quarterly basis or maybe some kind of grace period as well.

Kevin Chmura

Something great to think about as always. I mean there’s a lot of room for expansion into other areas for machine readable file compliance and then frequency could really be a challenge for a lot of people. So Govi, thank you for joining me today and for sharing your insights on this important topic. As always, your expertise and perspective are incredibly valuable, and I know our listeners gained a lot from this conversation. For those of you who would like to explore this topic a little further, Govi will be presenting a webinar entitled Beyond Compliance with Hospital Price Transparency on Thursday, April 16, at noon Eastern. He’ll go into more detail and offer additional guidance. You can register by scanning the QR code on your screen or by visiting the Panacea website.

Thanks for listening, and we hope you’ll join us for the webinar.