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4 Things to Know about CMS Price Transparency Proposal

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4 Things to Know about CMS Price Transparency Proposal

As consumers become more actively engaged in their own healthcare decisions, they’re also becoming more price-sensitive and socially savvy—and hospitals are feeling the squeeze to provide better information about their costs. In April, in an attempt to empower patients, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule requiring hospitals to post a list of their standard charges on the internet.

Though regulators have yet to define the term “standard charges,” the pricing transparency provision is designed to help patients make price comparisons before they receive care, so they’re not surprised by out-of-network bills for physicians who provide services at in-network hospitals, or facility and physician fees for emergency room visits.

The rule has important symbolic value, further affirming the agency’s increasingly patients-first, value-based approach to regulating healthcare. While clearly a step forward for consumer-centricity—an imperative now that patients are often also the primary purchasers—the proposal asks as many questions as it answers, and with good reason. Many hospitals feel ill-prepared to give patients individualized information about their out-of-pocket costs, and would also need to educate staff to support the culture change. Price reporting laws exist in a handful of states, including California, Texas, North Carolina, Colorado and Florida, but the requirements vary widely, and their existence seems to be doing little to make it easier for consumers to obtain price estimates.

About 3,330 acute care hospitals would be affected by the proposed CMS rule, for discharges occurring on or after Oct. 1, 2018. Here are the four most important things to know about the pricing transparency recommendations:

1. Compliance could be relatively easy. As proposed, hospitals could comply by posting their chargemaster or its equivalent on the internet—and wouldn’t have to publish actual payments received and the financial responsibility of individual patients. With or without regulation, pricing transparency is fast becoming a business imperative in the face of growing competition coming from retail clinics, freestanding surgery centers and walk-in medical facilities. About half of Americans search for price information before receiving care.

2. Making information meaningful to consumers will be hard. Hospital prices are already available online to consumers in 30 states. Many health plans also make price comparison tools available to beneficiaries. More than 60 online resources are available to help consumers shop around for their care. Hospitals themselves often provide pricing information in some form. But usage of the information is very low because consumers mostly find it misleading (e.g., didn’t account for tests a physician might order during a visit), confusing (e.g., difficult to make apples-to-apples comparison of providers) or irrelevant (e.g., their co-payment was not affected). Gross charges don’t reflect the final total patient responsibility, a figure arising from negotiations between providers, payers and patients. And studies have yet to show a correlation between hospital prices and clinical quality or reputation. Many factors other than cost drive healthcare decisions, including how engaged patients are in their own care and how well their care teams collaborate. Some of that may be answered by a companion effort by the CMS, as referenced in the proposed rule, to revamp the Meaningful Use program—now referred to as “Promoting Interoperability”—to emphasize measures that require the exchange of health information between providers and patients, and incentivize providers to make it easier for patients to obtain their medical records electronically.

3. This is only the beginning. To inform the final rule, and future regulatory proposals and guidance, CMS is seeking public input on the proposed rule by June 25. The agency wants to learn about the barriers preventing providers from informing patients of their out-of-pocket costs, changes needed to support greater transparency about patient financial obligations, the role providers should play in the initiative and how the CMS should enforce the requirement. It is also interested in knowing how standard charges should be defined, what pricing transparency information stakeholders would find most useful, and how best to help hospitals create patient-friendly interfaces so consumers have the data they need to compare providers.

4. It is possible to get ahead of the regulatory curve. Hospitals can take their top 10 outpatient procedures and calculate the gross charge for accounts over a one-year period. They could use this information to could craft a public message related to the “total charge” for those procedures. Uninsured patients could use the gross charge to calculate their amount due by applying the hospital’s uninsured discount amount, which should be publicized. Wrap conditions around the gross charge numbers to protect yourself from challenging situations that come up frequently, like when the procedure scheduled is not the eventual procedure performed. For example: A chest MRI may be scheduled, but the radiologist, based on his or her expertise, saw a need for a chest and an abdominal MRI.

The industry still needs to figure out how to make healthcare services more “shoppable” in general. Less than 7 percent of out-of-pocket healthcare spending by consumers is for high-cost, frequently needed services that can be scheduled in advance.

Hospital pricing transparency is a topic likely to stay on the radar of both federal lawmakers and payers for some time to come. Given that inpatient programs represent only 19 percent of total healthcare spending, health systems can expect mounting pressure to produce price information wherever they happen to meet patients along the care continuum.