On July 24, 2019, President Trump announced an executive order to improve price transparency in healthcare. On Nov. 15, 2019, CMS released a final rule on hospital price transparency. Within a month, hospital associations and hospitals filed a lawsuit to block the transparency rule, and legal challenges continue. The U.S. District Court for the District of Columbia upheld the rule in June 2020, but plaintiffs filed a second appeal.
Hospitals are resisting this rule, at least in its current form, because the information they are required to disclose is valuable—not just to patients, the intended beneficiaries of the rule, but to competitors and insurance carriers too.
Assuming the rule goes into effect as planned, healthcare providers have to make serious strategic decisions about their pricing and managed care contracting structures now that their competitors and third-party payers will be privy to more information.
What is required by the rule?
There are two key components hospitals must disclose publicly and prominently on their websites:
standard charges and negotiated rates: a machine-readable, consumer-friendly
list of all services provided, and the prices charged. “Charges” is defined as
both the price billed for the service and the amount paid by insurance/patients
for the services for the purposes of this rule. Providers will have one price
or charge for a service but will accept differing amounts for payment depending
on contracted rates with payers. The rule lists the following elements as
necessary information to include:
- Gross charge: the charge for an item on the Charge Description Master. The CDM is a listing of service offerings, procedures, supplies, drugs, etc. Gross charge is the price billed for each of these line-item services.
- Payer-specific negotiated charges: the contracted rate of payment negotiated between the hospital and payer for the specific service.
- De-identified minimum negotiated charges: the lowest of these payer-specific negotiated rates of payment.
- De-identified maximum negotiated charges: the highest of these payer-specific negotiated rates of payment.
- Discounted cash prices: the payment rate a patient would pay for a service if they pay cash or don’t have insurance (or choose not to have the provider bill their insurance for the service).
comprehensive list of 300 shoppable, common services: CMS defines 70 required
services that must be included, and the provider selects another 230.
- Providers can meet this requirement with an internet-based price-estimator tool.
- This list may contain bundles, as in a grouping of line items from the first requirement, that make up a service package or offering.
How should providers respond to the requirements?
Failure to comply with the requirements may trigger financial penalties—currently up to $100,000 per year per hospital—and land a provider on a noncompliant listing that could lead to negative press. Additional financial penalties, including loss of payment from government payers, are also possible.
Providers that comply will be making public their privately negotiated payment rates with payers. Patients savvy enough to navigate the information made available will be able to make more informed decisions about their care. Competitors and payers also will have insight into information they can take advantage of and they will be better equipped with analytical tools and resources to do so.
Providers will need a strategy that answers these questions:
- What do I need to do to meet the requirements
for Jan. 1, 2021?
- What do I select for my 300 shoppable services?
- How do I build my machine-readable list of CDM items with the prices and payment rates?
- How do I adjust after Jan. 1, 2021?
- How can I take advantage of the information my competitors are required to post?
- Do I change my 300 shoppable services now that I know what my competition has shared?
- How can I use information from my competitors in negotiating with payers? How can I protect myself from payers gathering the information to use in negotiations with me?
- Do I work with payers to shift my reimbursement so I can lower my prices?
The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.