New guidance makes hospital price transparency obligations more exacting

Hospitals will have to be more specific in the pricing information they provide under CMS’s updated price transparency instructions.

As part of a wide-ranging response to President Donald Trump’s February 2025 executive order on healthcare price transparency, CMS issued new guidance to hospitals and other industry stakeholders within the required 90-day window.

Changes to machine-readable files (MRFs) will place more responsibility on hospitals to provide the dollar amounts they charge for services. Hospitals have the ability to list prices in dollars “for most contracting scenarios,” CMS said in the guidance.

However, the update appears to “conflict with prior federal policy and impose unworkable expectations on providers,” said Shawn Stack, director of perspectives and analysis with HFMA.

One thing not made clear in the sub-regulatory guidance is the effective date with respect to enforcement of the new requirements. CMS did not immediately respond to a request for clarification.

A related question is whether hospitals will have to refresh their MRFs even if they have done so already for 2025, noted Joe Wisniewski, assistant vice president with Turquoise Health. There’s concern that the new requirements will simply apply as of May 22, the date the guidance was issued.

“Hospitals and their partners have already made major strides to expand pricing data across all payers,” Stack said. “Mandating this effort retroactively would impose a significant burden and require vendor dependency — without sufficient policy justification. We urge CMS to clarify the effective date, reconsider the approach and work with providers to ensure the policy remains realistic, transparent and aligned with prior guidance.”

Pinpointing dollar amounts

The emphasis on using dollar amounts to reflect prices was described in regulations drafted by the Biden administration for 2024, but there was more leeway to use estimated allowed amounts where actual amounts were tricky to calculate.

Going forward, “for items and services encoded in the MRF with a standard-charge methodology of a known ‘case rate,’ ‘fee schedule,’ or ‘per diem,’ CMS expects hospitals to calculate and encode a payer-specific negotiated charge as a dollar amount,” according to the new guidance.

If the negotiated charge is a percentage of a fee schedule that the hospital cannot access, the hospital can use an estimated allowed amount while noting the type of fee schedule in the appropriate MRF field. Examples of how to appropriately describe the fee schedule in MRFs are available from CMS.

If the standard-charge methodology is expressed as a case rate or per diem, hospitals are supposed to list the dollar amount for the service-package base rate, accompanied by the payer-specific negotiated-charge algorithm and an estimated allowed amount, if necessary.

Eliminating placeholder values

Hospitals could face compliance challenges in instances when the standard charge is based on a percentage or algorithm.

When a limited set of historical claims is available to determine the estimated allowed amount (e.g., under a new contract), hospitals previously have been instructed to encode nine 9s in the data-element field, indicating there is not sufficient data to compute the number.

However, CMS says it has determined via observation, feedback and a sample analysis of MRF files that hospitals are using that approach “much more frequently than expected.”

Thus, the agency says hospitals “should instead encode the average dollar amount the hospital has received for an item or service, derived from electronic remittance advice transaction data using data from items or services rendered within the 12 months prior to posting the file.”

Such an expectation is problematic, Stack said.

“The guidance instructs hospitals to encode values for encounters with no claims history — contradicting the longstanding definition of estimated allowed amount as a historical average,” he said. “If no claims exist, an average cannot be calculated, creating a clear compliance contradiction.”

Similarly, language in the new guidance indicates a single claim can serve as the basis for determining the estimated allowed amount.

“Suggesting that a single claim constitutes an average raises concern about the analytic basis of these changes,” Stack said.

He also foresees HIPAA-related issues stemming from the possible increased use of placeholder values that hospitals previously were encouraged to avoid.

Next steps for transparency

In conjunction with the new guidance, CMS sent out a request for information (RFI) on ways to promote hospital compliance with accuracy and completeness standards regarding price transparency. Since 2024, hospitals have had to formally attest that the information in their MRFs meets such standards.

As recommended in a 2024 Government Accountability Office (GAO) report, however, CMS could go beyond ascertaining technical compliance with price transparency rules to assessing whether the price information in MRFs is accurate and complete.

Comments on the RFI are due by July 21.

In addition to being a matter of compliance, price transparency increasingly is seen as a vital business practice. Half of consumers are willing to switch providers for a better administrative experience, and the share rises to almost three-quarters among those younger than 35, said Deirdre Ruttle, chief revenue officer with InstaMed.

“People don’t have multiple perspectives based on [different] industries,” Ruttle said. “When you think about a restaurant experience or a hotel experience, you understand what things are going to cost, and you understand that when you leave, you’re going get charged. Healthcare has needed to adopt a lot of those practices.

“Thinking about the consumer experience from other industries, [the key] is making sure the financial component of healthcare is communicated, whether that’s a verbal conversation, whether that’s communicated in an email, a text or whatever. And then how do you take things that aren’t consumer-friendly out?”

For example, paper-based payment processes should be phased out to a greater degree.

Most people “have a cell phone that’s within arm’s reach,” and they expect to use it for scheduling appointments and making payments, Ruttle said.

Other stakeholders affected

In keeping with Trump’s executive order, CMS released new information about the MRFs provided under the separate transparency rules for health plans. A new template will be available starting Oct. 1, with plans required to start using the template by Feb. 2, 2026.

A goal of the new template, or schema, is to streamline file sizes that have been described as being unwieldy to the point of rendering the files unusable for stakeholders who lack supercomputer-caliber technology. New templates will better promote the exclusion of duplicative data and unnecessary data fields, along with providing better context for the data and clear disclosures of applicable provider network information.

Health plan transparency initially was supposed to incorporate prescription drug pricing, but litigation, stakeholder confusion and operational challenges stymied implementation of that aspect. CMS, the IRS and the Employee Benefits Security Administration now are looking to push forward with the requirement and have issued an RFI to help formulate an approach.