New price transparency rules: 5 steps hospitals should take today

Initially, the Affordable Care Act required hospitals to provide their posted charges online effective October 1, 2014.  However, given the wide range of negotiated rates from non-governmental payers, it was rapidly determined that a hospital’s posted charges were not going to provide the intended outcome since it did not reflect accurately on the portion of the charges that would ultimately be the responsibility of the patient and/or guarantor.

And as such, on November 15, 2019, the Centers for Medicare and Medicaid Services (CMS) finalized policies that expand upon previous pricing transparency guidance from CMS and the directive under President Trump’s Executive Order “Improving Price and Quality Transparency in American Healthcare to Put Patients First.” These policies provide more specificity on what information hospitals need to make public. These include requiring hospitals to:

1. Publish a list of standard charges (including gross charges, discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated reimbursement) for all items and services1; and,
2. Publish the discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated reimbursement for at least 300 “shoppable” services – 70 CMS-specified, 230 hospital -selected2 (CMS-1717-F2, November 15, 2019).

Under this rule, CMS has authority to monitor and enforce hospital compliance and to assess civil monetary penalties (not in excess of $300 per day) for non-compliance. The effective date is January 1, 2021.

What should hospitals do now to be ready for implementation of this regulation? 

1. Assess chargemaster

Now would be the ideal time to evaluate your current chargemaster. Hospitals will want to review for obsolete codes, for items that have just been inflated over the years without a strategic pricing rationale and to identify any unexplained pricing variations. For example, are comparable items priced similarly?

Pay close attention to the pricing for “shoppable” services to determine if your hospital will be at a disadvantage amongst neighboring hospitals when this information is published.

Identify any unusually high price items that would not reflect properly against the hospital’s actual costs. More specifically, evaluate the price for items patients can easily compare, like over the counter medications and supplies. What is the markup percentage? Is it reasonable compared to neighboring hospitals, your costs and what you receive in reimbursement from non-governmental payers along with the patients and/or guarantors?

Best practices consist of evaluating your chargemaster annually to ensure it’s accurate, that all of the items departments need to charge are included and that obsolete charge codes are deactivated.

This is a great time to define the overall pricing and communication strategy that will provide talking points to the organization’s pricing philosophy. For example, is it based on cost or is it strategically priced to offset losses in mission-critical community services?

2. Assess quality scores

President Trump’s Executive Order challenges the various governmental agencies responsible for healthcare to standardize quality reporting. This is a perfect time to focus your clinical documentation improvement (CDI) program onto key quality indicators. You will want to coordinate the efforts across coding, quality, and CDI.

A focused effort on raising quality scores or increasing acuity levels will also help connect price with quality. It’s an opportunity to highlight the high quality of services provided.

In addition, as more governmental and non-governmental payers find ways to reduce costs, quality metrics will likely be the next significant wave that impacts a hospital’s ability to maintain proper margins.

3. Review all revenue cycle vendor contracts

Hospitals should assess whether they can comply with the new regulations with existing systems and services. Are your vendors contractually obligated to help you become compliant? If so, is there a plan?

If they are not contractually obligated, how will your hospital vendors assist you to become compliant?  Hospitals should determine the responsibilities of each internal team and outside vendor(s) to ensure a proper accountability structure is in place.

4. Review all payer contracts

Prior to the next negotiating cycle, review the payer contracts for any anomalies in core pricing philosophy.  Is there pricing in your hospital’s chargemaster related to a few payer specific pricing? Do you have services priced 20% – 50% higher than what the non-governmental payers made in reimbursement? As your hospital approaches negotiations with each non-governmental payer, it is in both the hospital and the payer’s best interest not to have any large variation in reimbursement for services and items.

Hospitals will need to evaluate the contract modeling capabilities to model payment for services and items based on the complexity levels of various plans. For example, does your hospital have one payer that pays 20% more than any other for a particular service?  Will this be considered a shoppable service?

5. Provide education, training and appropriate tools to your patient facing staff including patient access, customer service, and scheduling

Hospitals should evaluate their pricing or estimator tool. Does it return accurate information at the time of service? Is this tool being utilized at all access points?

Now is the time to start inservicing your customer service teams on the proper response to patient inquiries. They will receive questions from patients on pricing variations and they need to be prepared to answer them. They will also need to be able to explain that the reimbursement information provided does not take into consideration the patient’s responsibility due to the amount of their deductible that may have been partially/fully satisfied prior to a pending or recent visit at your hospital. Consider posting links from the hospital website to the payer’s websites so patients can easily navigate to their own plan to see what information the payers have available, especially with respect to the patient out of pocket costs.

Hospitals should add disclaimers that any information provided is an estimate and the patient’s actual invoices will be based on individual plan benefit information.

Conclusion

It is worth noting that CMS may not have the legal power to require hospitals to reveal prices they negotiate with insurers as recently reported in Modern Healthcare. Regardless of the legal challenges ahead, it is safe to state that price transparency will continue to make headlines and therefore many of the suggested steps in this article will likely help hospitals in dealing with this issue and improving financial/operational metrics overall.

For more information about their timely, valuable information and insights into policies, best practices and industry developments, visit mazars.us/hc.

REFERENCES

CY 2020 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule (CMS-1717-F2); https://www.cms.gov/newsroom/fact-sheets/cy-2020-hospital-outpatient-prospective-payment-system-opps-policy-changes-hospital-price;

Published on November 15, 2019

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.