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December 11, 2018

On Jan. 1, your hospital must post its charges online. Here are 6 things you need to know.

Daily Briefing

    By Jackie Kimmell, Senior Analyst

    Beginning January 1st, CMS is requiring all hospitals to post their standard charges online.

    Many hospitals plan to respond by simply posting their chargemasters on the hospital website. However, the vague language of the requirement has caused confusion about what exactly hospitals will have to do to comply, along with speculation about CMS' broader price transparency efforts.

    So what impact should hospital leaders expect? The Daily Briefing spoke with Advisory Board's Rachel Sokol, practice manager of the Health Plan Advisory Council; Robin Brand, senior director within the Revenue Cycle Advancement Center; and Kenna Hawes, senior analyst within the Data and Analytics Group, to find out.

    The financial info patients want throughout their care journey—from pre-care through billing and collections

    What CMS' price transparency rule means for providers

    Sokol, Brand, and Hawes round up six main takeaways for providers ahead of the price transparency rule's January 1st implementation deadline.  

    1. Nobody—including CMS—thinks this charge data will be informative for patients

      The prices on a hospital's chargemaster usually are not reflective of actual costs or reimbursement. Chargemaster list prices serve as a starting point for hospital negotiations with private insurers and for determining costs for patients who are uninsured or out-of-network.

      Therefore, Advisory Board's experts said posting these charges online is unlikely to help patients determine how much they need to pay for their care. Indeed, these prices are usually meaningless to insured patients as their financial obligations vary widely based on payer-provider contracts. For example, patients who have met their deductible will bear different cost-sharing responsibilities than patients who have not. As a consequence, in the worst-case scenario, posted charges could lead patients to avoid important health services based on price misinformation.

      This confusion could be particularly pronounced in the outpatient space, since outpatient visits generally encompass a number of varied charges. A patient undergoing outpatient surgery, for instance, might look up the price of the surgery but not the cost of the anesthesia or the physician time—and end up with a flawed estimate.

    2. The burden is on providers to go 'above and beyond' to make the requirement meaningful

      Given the high probability for patient confusion, Brand said, the "onus is on providers to make sure they are not posting garbage. They have to have patient-centered tools to accompany this information to make sure it isn't meaningless."

      CMS is encouraging providers to add consumer-friendly and patient-focused transparency tools and go above and beyond the requirement. According to Hawes, this encouragement shows CMS likely wants to do more to force price transparency, but faces restrictions in actually requiring hospitals to create these patient-centered tools. "They're slowly moving providers in this direction and hoping that providers will choose to do more," she said.

      Brand said that CMS' encouragement isn't the main reason why providers should prioritize transparency, however. Rather, there's a clear financial benefit to providers from investing in consumer-friendly tools. According to Brand, "having patients understand their financial responsibility is an essential component of the modern revenue cycle. This is not a fluffy consumer experience thing, this is whether or not we get paid." She added, "I think there is a pretty sophisticated way to do this, and people are starting to think strategically about how to support financial navigators and how to build careers for them in the organization." She hopes this requirement will spur provider action on this front.

    3. It may be an uphill battle getting patients to proactively use these tools

      Patients should be able to understand their financial obligations and plan for them, but true price shopping may be harder to encourage than CMS presumes. Seema Verma, CMS administrator, expressed her hope in discussing this requirement that more freely available charge information would make shopping for health care services like shopping in other industries. "If you're buying a car or pretty much anything else, you're able to do some research. You're able to know what the quality is. You're able to make comparisons," she said, "Why shouldn't we be able to do that in healthcare? Every health care consumer wants that."

      Yet, in actuality, Sokol said, very few patients are truly shopping online for health care prices. Through her research speaking with health plan executives, Sokol has heard that even when prices are posted online, with tools to help patients understand them and what they will owe, patients rarely use them. She estimates that, of all the major health plans that offer price estimation tools, only about 10% of members are actually trying to shop based on price. Many instead turn to their physician for this information—and meet a dead end as their physician usually doesn't know about the cost himself or herself.

      Price shopping is especially rare for inpatient care decisions, as most patients will already meet their deductible through an inpatient stay, and therefore won't have much impetus to choose the lowest cost provider.

    4. But the solution to increased consumer use could come from better—and probably third party—price transparency tools

      Therefore, while it still may be an uphill battle getting patients to use these tools, Advisory Board's experts say making more pricing data both publicly available and accessible is an important first step to increasing consumers' use.

      In fact, CMS' decision to require hospitals to post charges in a machine-readable format (versus allowing them to be in a PDF or other static layout) indicates that officials are hoping the data can be used to create new and better price transparency tools.

      Brand predicts these solutions will likely come from the private market, perhaps through apps which could collate and display pricing information for customers. She said there are likely companies who will want to comb through this information and create tools for consumers that could be more appealing than those offered by health plans (perhaps because they have no stake in the patient's finances or decisions).

    5. The change is unlikely to have competitive downsides for providers in the short term...

      Sokol acknowledged that "there's some risk" for providers in being the first to post their prices online because contracts with payers are often based on percentages of standard charges, but overall she doesn't foresee any great competitive disadvantage for providers by posting their prices online, especially since every hospital will have to do so.

      That thinking is supported by market trends in California and Colorado, two states that have passed similar legislation on a state-wide level. Hospitals in Colorado—where legislation passed last year requires them to post self-pay prices for their 15 most common DRGs—reported few market changes in prices (and, notably, little patient traffic to the price pages). Rather, these standard charges might simply be too out of touch with the labyrinthine maze of complex provider-payer negotiations to truly be a meaningful basis on which to compete.

    6. ... but long-term, it might indicate more aggressive moves to come
    7. Hawes believes that CMS' push for hospitals to post chargemasters likely forestalls future, more aggressive price transparency moves by the agency. But for any future regulatory action to have a meaningful impact on provider behavior, Hawes said the agency would need increase enforcement. So far, CMS hasn't been clear how, or if, they'll enforce the online posting of hospital charges. It's also not clear if they'll check the validity of the charges posted.

      The key thing for providers right now, according to Brand, is to keep those posted prices up-to-date. CMS will require annual updates to hospitals' posted standard charges, but currently many organizations don't have a system in place to conduct annual chargemaster revisions.

    What hospitals should know going forward

    CMS’s charge reporting requirement is a very small first step toward price transparency, but it does cement that Medicare's focus on price transparency is here to stay, Advisory Board experts concluded.

    Looking forward, it's worth seeing how much CMS continues down this path and expands their scope (they've requested comment on a similar proposal for physician payments in the MPFS final rule). Broadening transparency to ambulatory or physician office settings would likely have a greater impact on patient behavior, Sokol said, as patients are more price sensitive in these arenas.

    Want to learn what over 1,000 patients who had recently undergone non-emergency surgery told us about their financial experience and preferences? If you're a Revenue Cycle Advancement Center member, download our research note from Q4 2018 to learn more.

    Not a Revenue Cycle member but want to prepare for the future of price transparency? Make sure you download our other related research reports to learn:

    Follow the patient financial journey—from pre-care through billing and collections

    Follow the patient financial journey, from pre-care through billing and collections. Learn a patient's questions and fears that arise at each step, and what tools and support your revenue cycle program must proactively provide.

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