How to thrive in a price-sensitive market

1. "Standard charges": Each hospital must maintain a list of "standard charges" for all inpatient and outpatient services. These charges do not need to be payer-identifiable. CMS has said the charges can be posted directly from the chargemaster or can appear in another form, as long as they are reflective of charges present in the current chargemaster.

   CMS has not clarified whether "standard charges" should be interpreted as median charges for a service, mean charges for a service, or minimum/maximum charges for a service, so each hospital is free to interpret "standard charges" and act accordingly.

2. Posted online: Beginning January 1, 2019, each hospital in the United States must have posted its list of standard charges online (presumably on the hospital website). Charges must be formatted so that they are machine-readable (that is, easily analyzed by a computer). For example, charges posted in an XML or CSV format are acceptable, whereas charges posted in a static PDF are not.
   
   
3. Updated annually: Moving forward, each hospital must update its online list of charges at least once a year.

CMS hopes charge posting requirement will spur broader price transparency efforts

The new requirement has provoked criticism from providers who feel that charges—which generally exceed expected patient contribution, sometimes by several order of magnitude—will mislead patients who are seeking price information.

In fact, CMS seems to be fully aware that chargemaster prices will be of little practical use to patients. In the FY 2019 Inpatient Prospective Payment System Final Rule, the agency encourages hospitals to implement meaningful price transparency strategies, including working with payers and other third parties to post more helpful patient-centered price information.

All hospitals are required to post charges online

In the recently released FAQ, CMS notes that the new requirement is based on the Public Health Service Act, which impacts all hospitals operating in the United States. Accordingly, every U.S. hospital is required to post standard charges online beginning January 1st—including those, apparently, that are not reimbursed by Medicare. The requirement applies even to those hospitals that already provide more comprehensive price transparency information than charge detail.

Exceeding requirements likely represents competitive advantage for early movers

Payers, providers, and third party organizations are likely to scrutinize this publicly available charge data and incorporate it into consumerist and pricing strategies (see graphic above). And CMS' statements so far indicate that the new requirement may be the first in a series of requirements enforcing price transparency—although questions remain about the nature, enforcement, and authority of future regulatory changes in this direction.

We suggest that finance leaders view the current charge reporting requirement as an opportunity to develop a holistic strategy for price transparency that serves Medicare and commercially insured patients alike. While there is little benefit to being a first mover when it comes to reporting charges, hospitals can see benefits from getting out in front of the pack with meaningful transparency efforts that provide patients, payers, and referring providers with the price information they need to make care decisions.

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