Former HHS Deputy Secretary Eric Hargan on Why Hospitals Should Comply with Price Transparency

"It's the people that recognize the shape of things to come and help participate in it … who will have a chance to shape what goes forward," Hargan says.

Editor's note: This is part one of a two-part interview with Eric D. Hargan, former deputy secretary of the U.S. Department of Health and Human Services.

Rate hikes are coming for hospitals that aren't compliant with the CMS price transparency rules, but according to Eric D. Hargan, former deputy secretary of the U.S. Department of Health and Human Services (HHS), as well as its former chief regulatory officer, that shouldn't have come as a surprise to hospitals, given that it's been embraced by two consecutive—and very different—presidential administrations.

"You've got two administrations coming from two different parties and operating [with] pretty different overall policy directions in many, many different ways," he tells HealthLeaders. For hospital executives, that agreement should signal that "the political stars" are aligned on price transparency.

That means that any revenue cycle leaders who've been hoping that this issue would somehow fade away or that the new Biden administration would scrap it altogether, shouldn’t hold their breath, especially since Biden is continuing—and even bolstering—the Trump directive.

"Ask [Biden and Trump] on most things, one would say X and the other one would say not X. But when they both say, 'Yes, price transparency, let's put it in an executive order each of us signs,' you should take that as a pretty strong clue that the government is very much aligned on this issue," he says.

Hargan is currently the founder and CEO of a consulting firm, The Hargan Group, and recently joined Amino, a digital healthcare guidance platform, as a company advisor. In that role, Hargan and his firm will provide policy and strategy support to Amino as it develops software and solutions to help clients comply with price transparency and the No Surprises Act.

As one of the architects of the price transparency rule, Hargan has spoken to a lot of hospital leaders both during his HHS tenure and since and has heard their concerns. But he doesn’t think simply ignoring the rule and accepting the fines for noncompliance is the right course of action for those who don't think the rule is useful.

Here are three reasons why Hargan thinks compliance is the best course of action for hospitals.

1. The fines are going up

"If you just simply say, 'I'm not going to comply, forget about it. I'll take the fines,' the government may take that as a signal that, well, I'm not getting compliance, I'll just go ahead and increase the fines until I get compliance," he says. "That's not really a situation where you want to be."

Indeed, CMS said in its final Outpatient Prospective Payment System (OPPS) rule for 2022 that the fines are going up. It said it will set a minimum civil monetary penalty of $300 per day for hospitals with 30 or fewer beds. Hospitals with more than 30 beds will be charged $10 per bed per day, which will cap at $5,500 daily, and the maximum total penalty amount would be $2,007,500 per hospital.

2. You'll have more credibility to tell the government what's wrong with the rule

"I wouldn't say we put out a rule that we thought was a bad rule," he says. "We put out what we thought was the best rule that we could do."

However, he does acknowledge that the rule may not be perfect and says there's only one way for hospitals to prove that to the government: By earnestly trying to put the rule into practice and learning firsthand where it can be tweaked and improved.

"When the government approaches a new area and a new rule, I won't be surprised that it wasn't perfect," he says. "In implementation, when it's intelligently engaged in by industry, [hospitals can say] this doesn't work, or this section doesn't work. That part doesn't work. This is too costly. This takes too long. This absorbs all our staff."

He points, as an example, to the CLASS (Community Living Assistance Services and Supports) Act, a voluntary long-term care insurance program, which was ultimately scrapped in 2011 by the Obama administration.

"HHS tried very much to implement that," Hargan says. "And then they finally threw their hands up and said it just doesn't work."

For the government to learn that a rule doesn’t work, though, hospitals need to earnestly and wholeheartedly try to implement it, and not with a "ham-fisted attempted implementation that was always going to fail," he says.

Only then, Hargan believes, will hospitals have real authority with the government in illustrating exactly how and why the rule doesn’t work.

"You can't act until you know what the problem is. And the problem doesn't show up until there's an attempt to implement," he says. "That's where you get credibility in re-approaching this rule."

3. Participating hospitals may have a say in the next generation of price transparency rules

Participating in what Hargan calls the "first generation" of these rules, also allows hospitals to get a say in what a revamped rule might look like.

It "allows people to have a seat at the table and determine where these things are going to go in the future because I don't anticipate this is the last word on this issue," he says. "Being at the table is the best place to be early on. And I think it's early on. It's my best guess we're early on in that process and it's going to persist over [presidential] administrations, just like value-based care did."

In other words, the price transparency rule is just one part of a larger trend in healthcare that's not going away, and hospitals that participate early will be in the best position to shape what that rule and other rules look like in the future.

"It's the people that recognize the shape of things to come and help participate in it … who will have a chance to shape what goes forward," Hargan says.

Stay tuned for part two of this series where Hargan discusses what he envisions as the future of price transparency and healthcare costs, as well as how the No Surprises Act fits in.