New Centers for Medicare and Medicaid Services (CMS) price transparency requirements for hospitals took effect Jan. 1: Hospitals must now publish their standard charges online.
In an age characterized by consumers’ ability to shop for virtually anything online, and to compare prices instantly, it’s remarkable that consumers of health care services have not enjoyed a similar ability to understand exactly how much they are paying for a specific hospital procedure or service.
The physicians, hospitals and other providers in your clients’ health insurance provider networks believe that, to an extent, the payers’ role explains the lack of transparency. When bills for services and explanation of benefits arrive in the patient’s mailbox, it’s after the event. The cost is already incurred. And, moreover, it takes a bona fide medical benefits expert to deconstruct the invoices.
Patients have learned to live with the fact that hospital procedure costs are shrouded in obfuscation. But, with consumers taking an increasingly empowered role in their own health outcomes, and, given the reality that many health plans are calling for bigger co-pays and higher deductibles, murky and ambiguous pricing can no longer stand.
Although consumers may not yet be broadly aware of the new CMS hospital price disclosure regulation, hospitals across the United States are aware. They have started to publish their charges.
So far, the way the information is posted varies widely and, not surprisingly, isn’t necessarily easy to digest. Spectrum Health,for example, posts its average charges. Rush University Medical Center simply posts a spreadsheet of its chargemaster.
The new CMS hospital price disclosure requirement is the first step by CMS toward putting stronger parameters around pricing transparency. Word will spread, and sooner, rather than later, hospitals will stop hiding their charges behind a curtain of opacity. Hospitals will need to adopt a far more consumer-friendly attitude. They’ll not only have to price competitively, but they’ll also have to show your individual health insurance clients, and your group health customers’ employees, why consumers should select them over competitors.
Hospitals will have to tell consumers what the consumers are getting, and at what price, and why their facilities are the best option.
Health insurance agents and brokers need to be aware of this shift, and of the new opportunities patients will have to vote with their feet, and with their wallets.
Opportunities for Hospitals
The new CMS price disclosure rules are also giving hospitals more information about the pricing environment.
Today, hospitals can easily compare their charges with other facilities’ charges. Hospitals can determine whether their standard charges are competitive, identify opportunities to better align with the market, and bring better information to negotiations with health plans.
Since consumers also have gained access to facilities’ charges, hospitals must consider the impact of their pricing moves on consumer behavior. If consumers see a high-cost service or procedure listed on the standard charge list, those consumers may seek care elsewhere, especially if they find a lower-cost facility. Or, those consumers may forego care entirely.
Hospitals will have to offer consumers more information about how to understand and prepare for their financial liabilities, in addition to the lists of standard charges.
St. Luke’s University Health Network and the University of Utah Health, for example, both offer out-of-pocket pricing tools that insured patients can use to estimate what they might actually pay for health care services.
The changes should make hospitals that adapt well to the new price disclosure requirement more appealing to, and more accessible to, your health insurance clients.
Heather Burger is a senior consultant in the healthcare practice at AArete. John Mollica is a manager at AArete, and Ravi Kumrah is a director. AArete is a consulting firm that uses data to help clients improve their performance.