Hospitals must prepare for price transparency, experts say

Although more court fights lie ahead, industry experts say hospitals shouldn’t delay developing a strategy for sharing negotiated insurance rates with the public.

A federal judge last week ruled CMS could mandate hospitals to disclose their negotiated rates because it weighed the concerns of providers and payers, evaluated the evidence and explained its decision. The American Hospital Association plans to appeal the case, but with the rule taking hold in five months, hospitals can ill afford to rely on the courts to come to the rescue.

Hospitals have said it would be logistically and technically difficult to comply with the new regulations, but the main issue is putting millions of data points into a useful format for consumers, not posting pricing information in a machine-readable digital format. A health system with the necessary in-house expertise could meet the basic requirements of the regulation in a matter of weeks or months, said Paul Shorrosh, founder and CEO of AccuReg, a revenue-cycle management vendor.

But for small and rural providers that lack IT resources, compliance will be a heavy lift, noted Delphine O’Rourke, a partner at law firm Duane Morris.

Based on an informal poll of clients, most hospitals don’t seem to have prepared for the rule, or they’re in the early stages, said Becky Greenfield, associate attorney for law firm Wolfe Pincavage.

Many hospitals have “just kind of waited for the lawsuit” to wrap up, Shorrosh added.

Now that the deadline is just around the corner, all but the largest health systems will likely need to partner with a reliable vendor because they don’t have the time or resources to develop and test a solution. Hospitals must create a machine-readable file that includes their so-called “standard charges” for all items and services, including a description of each item and service and any associated accounting or billing codes. They also need to make public 300 “shoppable” services in a consumer-friendly way. Since many hospitals already provide estimates of out-of-pocket expenses, CMS won’t make them start from scratch if their existing tool gives consumers real-time estimates for the shoppable services without making them log in.

“The key for hospitals is to find the right business partner because there have been so many broken promises,” said Deborah Vancleave, vice president of revenue cycle for the Mosaic Life Care system, based in St. Joseph, Mo.

That could be easier said than done because there could be a “bandwidth problem” as hospitals rush to team up with a rather small set of vendors, said Matt Muhart, executive vice president and chief administrative officer for Memorial Healthcare System, based in Hollywood, Fla. Even trustworthy vendors could falter as their client lists grow, and they scramble to meet the deadline.

But helping patients understand and use the newly available data will be the greatest challenge.
“Those are not skills or capabilities that your average hospital has ever really invested in,” said Fred Bentley, managing director at Avalere Health.

CMS’ examples of how hospitals could display information for consumers “works OK for a hospital that has one contract with one payer,” said Scott Davis, administrative director of reimbursement and revenue integrity for Memorial Healthcare. But it will become exponentially more difficult as the complexity of health systems and payer relationships grow.

“I don’t think CMS really knows what they want,” Davis said.

Experts doubt consumers will use information about negotiated rates to understand their out-of-pocket costs or shop for services.

It will be up to hospitals to figure out how to make that information useful since consumers will hold them—not regulators—accountable. Providers need to make it clear to consumers that negotiated rates and out-of-pocket estimates are different. They also need to make sure the estimates provided for shoppable services are as close as possible to price ultimately paid by consumers.

“Nobody likes getting a bill that’s $800 more than what (the hospital) estimated,” Shorrosh said.

Hospitals should also look for a vendor that’s prepared to adjust to changing contract rates and analyze data about out-of-pocket cost estimates to improve their accuracy, Shorrosh said.

“The problem is sometimes we don’t have historical data,” Vancleave said. “Hospitals will have to get better at capturing and using data and continually update their pricing indexes.”

Shorrosh said hospitals could use the opportunity to increase their pre-service and point-of-service cash collections by allowing patients to self-estimate and self-pay using credit cards or other payment methods. Providers could roll that into a financial assistance system to automatically let patients know if they qualify for discounts, charity care, loan programs or payment plans. That could help hospitals save money on collections costs.

It might also allow health systems to engage and build trust. “That’s really being supportive and helpful to the patient,” Shorrosh said. “No patient likes being chased by collections.”

Hospitals may strategically increase or decrease chargemaster rates to protect reimbursements pegged to chargemaster prices, but they’ll need to be careful about how they do it, Greenfield said.

“The chargemaster piece is all about optics because the data is essentially meaningless,” she said.

Although the Trump administration’s stated goal is to give consumers price information to help them make informed decisions, the underlying motivation is likely to increase competition. CMS’ proposed rule targeting insurers seems to be a better fit for helping consumers because it compels payers to give personalized out-of-pocket cost information for all covered services, which is what consumers care about, experts say. It’s harder for hospitals to provide that information.

Giving consumers information about negotiated rates is “like saying ‘I’m going to tell you how much a bolt is going to cost and then you’re going to figure out how much that new car is going to cost you,’ ” O’Rourke said.

Experts say it’s essential for competitors and third parties to understand how much hospitals charge for services to boost competition, spur innovation and drive down healthcare costs in the long term. Competing hospitals, nontraditional providers, regulators, researchers and app developers will eventually be able to use the data to better understand markets, develop new products and services, and price their products and services.

But it’s an open question whether the regulation will lower costs, especially in the short term. Increased transparency will probably cause prices to level out, but there may not be a decline in costs because the regulation doesn’t address the key drivers of cost growth, Bentley said.

With the deadline looming, some hospitals may opt to pay fines rather than follow the new rules. But CMS probably won’t penalize most health systems if they make a good faith effort to follow the rules, even if they don’t meet all the requirements by the Jan. 1 deadline, experts say.

Several industry watchers argue that it’s time for hospitals to stop fighting and start making changes because price transparency is coming whether they like it or not.

Health systems should refocus their resources instead of spending “their money on lawyers and lobbyists,” said Cynthia Fisher, founder and chair of Patient Rights Advocate, a nonpartisan group that advocates for price transparency in healthcare.