The New Hospital Price Transparency Rule and What it Means for You
Healthcare price transparency is not a new topic. It’s one that’s been around for years, slowly circulating between policymakers, providers, payers, health plans, employers, and the public. With all of these stakeholders interested in healthcare pricing, it’s been challenging to move forward with any clarity or effectiveness.
Price transparency in healthcare, is the “readily available information on the price of healthcare services that, together with other information, helps define the value of those services and enables patients and other care purchasers to identify, compare, and choose providers that offer the desired level of value,” as succinctly stated by the Healthcare Financial Management Association.1
So where are we legally on transparency requirements?
Moving Forward with Federal Legislation
Over the past several years, the pricing transparency discourse has picked up steam, resulting in new federal statutory requirements. First, the Affordable Care Act (ACA) requires all United States hospitals to establish and make public annually (or furnish upon request) a list of the hospital’s standard charges for procedures and services.2 By making this information public, individuals seeking hospital healthcare services would have access to the prices of procedures and fees.
On August 17, 2018, the Centers for Medicare and Medicaid Services (“CMS”) published new rules on hospital pricing transparency, as the agency believed that the current publication of such pricing was insufficient.3 Generally, the new regulations require all United States hospitals to publish their services pricing list annually, via the Internet, in a machine-readable format.
How Did You Access Hospital Pricing in the Past?
Before the Affordable Care Act, hospitals were not required to publish their pricing. Thus, for purchasing healthcare services in a hospital setting, or any other healthcare delivery setting for that matter, the consumer bought services without knowing the price. Could you imagine buying groceries, a smartphone, or a car without first knowing the price? This made the healthcare arena different than any other area of consumerism in the United States.4
To find out what a healthcare service costs, a patient usually had to wait until they received their explanation of benefits (“EOB”) in the mail, or via electronic delivery, after the health services were performed.5 An EOB details the medical services received, the cost of those services, the portion that health insurance covers, and the part that the patient will pay. The EOB will highlight detailed payment information under the patient’s health plan, such as the deductible amount, in-service and out-of-service fees, and any discounts negotiated for health services on behalf of the plan.
From an EOB, a patient can deduce the cost of the health service before insurance being applied, and the remaining amount owed after the application of health insurance. However, determining these amounts from EOB data is not straightforward.
How Does Pricing Work in Hospitals?
Hospitals maintain a “chargemaster” which is an internal accounting system that identifies the billable procedure codes for healthcare services and the costs of those services.6 Although some billing variances may occur hospital to hospital, the codes are outlined in the American Medical Association’s Current Procedure Terminology (CPT) System.7
Hospital procedures, services, and fees can be further adjusted by each hospital based upon a litany of factors.8 For example, the hospital’s specific operating costs can impact pricing. Is it a cancer or trauma hospital? How efficient is the hospital? Is the hospital non-profit or for-profit?
When setting prices, hospitals also look at the impact of technology on different services. Payor-mix is also considered, e.g., whether the hospital accepts Medicare patients or only private insurance patients. Further, hospitals consider health insurance pay models as well as competition when setting prices.
With the mix of legislation and continuing price negotiations from large health plans, in addition to the above factors, hospital pricing is a convoluted and cumbersome practice.
How Does the New Transparency Rule Change Hospital Pricing?
Effective January 1, 2019, the new CMS rule expanded upon the original ACA publication rule, giving hospitals a few more hoops through which to jump.9 The new CMS transparency rule improves the public’s access to hospital pricing by publishing the chargemaster annually on the Internet, or more often when changes to pricing occur. Additionally, the pricing must be announced in a machine-readable format, whether that is as the chargemaster itself or in another format that’s machine-readable.
To be machine-readable, the pricing information must be digitally accessible and can be downloaded into a computer system, such as an XML or CSV.10 A PDF does not fit these requirements. Although it is digitally accessible, it can’t be downloaded into a computer system.
5 FAQs Regarding the New Rule & Hospital Pricing Transparency
Q1: Which hospitals are required to comply with these new transparent pricing requirements?
A1: These new requirements apply to all hospitals operating with the United States. No U.S. hospitals are excluded from complying with these new requirements.11
Q2: Which hospital procedures, services, and other items should be included in the new transparent pricing requirements?
A2: All hospital procedures, services, and other items must be included in the new requirements.
Q3: Is the hospital required to post their pricing in a specific format, other than machine-readable?
A3: No. As long as the production of the information correctly reflects the hospital’s current pricing, the hospital is free to publish its pricing in whatever format it so chooses.
Q4: Can hospitals provide additional pricing information above and beyond what CMS required of them?
A4: Yes. Hospitals may provide additional consumer-friendly information allowing patients to compare pricing between different hospitals and allowing patients to have a better understanding of their potential out-of-pocket costs for hospital charges.12
Q5: If a hospital is subject to state law pricing transparency requirements, are those hospitals exempt from the new CMS rules?
A5: No. Those hospitals must comply with both the state and federal (e.g., CMS) transparency rules.
How 3 Different Hospitals Changed their Pricing Transparency
Hospitals have been preparing for and making changes to comply with CMS’s new pricing transparency rules. Let’s look at three examples:
UAB Health System Goes Above and Beyond
UAB Health System (“UAB”), based in Birmingham, Alabama, intends to publish more than just their updated chargemaster online. According to their chief operating officer Dawn Bulgarella, as reported in Beckers Hospital Review, UAB wants to be more “patient-focused” by making their chargemaster more understandable.13
For example, UAB will provide documentation explaining medical terminology, how pricing works with health insurance and contact information for where patients can get more information. Additionally, UAB will introduce a price transparency tool to help patients make more educated decisions about their healthcare.
UAB met the January 1, 2019 deadline for the CMS rule; however, these additional consumer-friendly tools will take some time to develop. However, patients of UAB can look forward to further help down the road on pricing transparency.
Tufts Medical Center
In complying with the new requirements, Tufts Medical Center (“Tufts”) in Boston, Massachusetts, will focus on training their staff on providing proper guidance and resources to patients concerning the cost of services. In doing so, patients can make well-informed decisions about their healthcare services across Tufts different medical facilities.
Sharp HealthCare in California already complies with state pricing transparency rules. To comply with state law, Sharp must distribute their pricing to patients upon request as well as submit their chargemasters to the California Office of Statewide Health Planning and Development.14 However, Sharp says it will confirm that its annual publication of its charges satisfies the machine-readable requirements of the new CMS rule.
Are Their Provider Concerns about the CMS Rule?
According to a recent survey, 92 percent of healthcare providers are concerned about the public’s responses to the publication of hospital pricing under the new CMS rule. The providers in this survey expressed concerns over the creation of potential perception problems.15
Posting a hospital’s chargemaster will demonstrate the costs of services. However, it could be misleading in that the expenses published are before insurance. So, it’s difficult for a patient to look at the cost of a gall bladder surgery on the pricing sheet, for example, and know what the resulting out-of-pocket expense would be. The end cost depends not only on the hospital’s charges but also on that individual’s health insurance plan. Additionally, for a gall bladder surgery, there could be additional line-item charges that the general public wouldn’t know how to look up in the chargemaster.
Further, providers have commented that the CMS rule is vague and open to interpretation.16 Lack of clarity in a regulatory rule could lead to hospitals administering the publication of their pricing in a non-uniform way. It could also lead to different interpretations by courts and other administrative agencies when enforcing this rule.
The new CMS hospital pricing transparency rule is an excellent first step toward educating consumers on healthcare costs. Consumers should be informed about the costs of procedures and other healthcare services while they are directing their own healthcare decisions. Buying-blind is not a prudent, financially-wise approach.
By taking these first steps, however, consumers will also hopefully become more curious about the price of healthcare, thus increasing patient participation in healthcare decision-making. Hospitals, despite the complexity of pricing combined with insurance, must realize that they can shape the message on healthcare pricing for consumers through communication and education.
For more information regarding the new pricing transparency rule or to speak with someone about educating your employees and their family members about the impact of this new rule, please give us a call at 800.967.3709 or click this link to schedule a free consultation.
1 HFMA Price Transparency Task Force, Price Transparency in Healthcare 2014, Healthcare Financial Management Association, accessed 13 January 2019 <https://www.hfma.org/PriceTransparencyInHealthCare>
2 Hospital Price Transparency 2018, American Hospital Association, accessed 13 January 2019 <https://www.aha.org/issue-brief/2018-05-04-hospital-price-transparency>
3 Centers for Medicare and Medicaid Services; Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2019 Rates; Quality Reporting Requirements for Specific Providers; Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs (Promoting Interoperability Programs) Requirements for Eligible Hospitals, Critical Access Hospitals, and Eligible Professionals; Medicare Cost Reporting Requirements; and Physician Certification and Recertification of Claims, 83 Fed. Reg. 41,144 (August 17, 2018) (codified at 42 C.F.R. Pts. 412, 413, 424, 495), accessed 13 January 2019, <https://www.federalregister.gov/documents/2018/08/17/2018-16766/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the>
4 Livingston, Shelby, Is the Price Right? Solving Healthcare’s Transparency Problem 2017, Modern Healthcare, accessed 13 January 2019 <https://www.modernhealthcare.com/reports/achieving-transparency-in-healthcare/#!/>
5 Elmblad, Shelley, Understanding an Explanation of Benefits (EOB) Statement 2018, The Balance, accessed 13 January 2019 <https://www.thebalance.com/what-is-an-explanation-of-benefits-1293685>
6 Tompkins, Christopher P., Altman, Stuart H., and Eilat, Efrat, The Precarious Pricing System for Hospital Services 2006, Health Affairs, accessed 13 January 2019 <https://www.healthaffairs.org/doi/10.1377/hlthaff.25.1.45>
7 CPT Purpose & Mission, American Medical Association, accessed 13 January 2019 <https://www.ama-assn.org/about/cpt-editorial-panel/cpt-purpose-mission>
[viii] Tompkins, Christopher P., Altman, Stuart H., and Eilat, Efrat, The Precarious Pricing System for Hospital Services 2006, Health Affairs, accessed 13 January 2019 <https://www.healthaffairs.org/doi/10.1377/hlthaff.25.1.45
9 Centers for Medicare and Medicaid Services; Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2019 Rates; Quality Reporting Requirements for Specific Providers; Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs (Promoting Interoperability Programs) Requirements for Eligible Hospitals, Critical Access Hospitals, and Eligible Professionals; Medicare Cost Reporting Requirements; and Physician Certification and Recertification of Claims, 83 Fed. Reg. 41,144 (August 17, 2018) (codified at 42 C.F.R. Pts. 412, 413, 424, 495), accessed 13 January 2019, <https://www.federalregister.gov/documents/2018/08/17/2018-16766/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the>
10 Frequently Asked Questions Regarding Requirements for Hospitals To Make Public a List of Their Standard Charges via the Internet 2018, Centers for Medicare and Medicaid Services, accessed 13 January 2019 <https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FAQs-R>
13 Gooch, Kelly, How Hospitals Are Preparing for CMS’s Price Transparency Change 2018, Becker’s Hospital CFO Report, accessed 13 January 2019 <https://www.beckershospitalreview.com/finance/how-hospitals-are-preparing-for-cms-price-transparency-change.html>
15 Lagasse, Jeff, Healthcare Providers Concerned, Unsure How to Address CMS Price Transparency Final Rule 2018, Healthcare Finance, accessed 13 January 2019 < https://www.healthcarefinancenews.com/news/healthcare-providers-concerned-unsure-how-address-cms-price-transparency-final-rule>
16 Gooch, Kelly, How Hospitals Are Preparing for CMS’s Price Transparency Change 2018, Becker’s Hospital CFO Report, accessed 13 January 2019 <https://www.beckershospitalreview.com/finance/how-hospitals-are-preparing-for-cms-price-transparency-change.html>