Healthcare Business News

CMS proposes long-delayed price transparency rule

By Joe Carlson
Posted: May 1, 2014 - 5:00 pm ET

The CMS, years behind schedule, finally is proposing rules that would force all U.S. hospitals to publicly reveal how much they charge for every service they provide.

But the proposal, included in the 1,688-page Medicare proposed inpatient payment rule unveiled late Wednesday, is unlikely to cause price-transparency advocates to pop any Champagne corks just yet.

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That's because hospitals are required to tell the public only what they charge—not the rates that are actually paid by private insurers. Charge information is widely seen as less useful to consumers than data on the actual prices negotiated by insurance companies, especially because high-deductible health plans sharpen consumer interest in insurers' negotiated rates. Typically, real hospital prices are undisclosed percentage discounts off their charge rates.

However, Medicare officials are standing by the validity of charge data because it shows the wide variability in hospital base pricing. It's also particularly applicable to the uninsured, who are often billed for a hospital's full charge.

“We are continuing to pursue opportunities to report on hospital charging practices,” CMS officials wrote on page 803 of the 2015 inpatient payment rule (PDF). The rule noted that Medicare last year published charge rates and average Medicare payments for the top 100 inpatient and top 30 outpatient procedures at each Medicare-receiving hospital.

A January 18 cover story in Modern Healthcare noted that the CMS hadn't taken any steps to implement the little-noticed, 56-word price-transparency provision in the 2010 law titled “Standard Hospital Charges,” buried in Section 2718e of the consolidated Patient Protection and Affordable Care Act.

The provision technically went into effect in September 2010, but experts said hospitals wouldn't be expected to comply until the CMS published the regulations unveiled Wednesday.

The law says every hospital must, at least annually, make public a list of its charges for “items and services” provided at the hospital, including the charge rates for Medicare's severity-adjusted diagnosis related groups, known as MS-DRGs.

The transparency rule, which would go into effect Oct. 1, essentially puts the onus for publishing the DRG charges on hospitals themselves.

“We are providing hospitals with the flexibility to determine how they make a list of their standard charges public,” the CMS proposal says. “We encourage hospitals to undertake efforts to engage in consumer-friendly communication of their charges to help patients understand what their potential financial liability might be.”

Follow Joe Carlson on Twitter: @MHJCarlson

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