Something to Think About – Hospital Price Transparency

by Tom Dougherty, FACHE - 2/9/2020

HHS defends forcing hospitals to reveal negotiated rates

https://www.healthcaredive.com/news/hhs-defends-forcing-hospitals-to-reveal-negotiated-rates/571745/

The Centers for Medicare & Medicaid Services (CMS) recently issued a final rule requiring hospitals to release pricing information before providing services. Under the rule, hospitals must list standard prices for 300 “shoppable services,” as well as the lowest prices they will accept from consumers paying out-of-pocket for services.  According to CMS Administrator Seema Verma, the new price transparency rule will help patients by boosting quality and cutting costs.  Price transparency reinforces the administration’s commitment to consumer-driven healthcare.

The new rule is receiving tremendous pushback from the hospital industry. Hospital industry groups and others filed a lawsuit on December 4, 2019, to block the rule. The suit argues that the rule violates the First Amendment and causes disclosure of confidential information to third-party payers. It also alleges the Department of Health and Human Services (HHS) does not have the authority to enforce the rule. 

Both Democrats and Republicans support value-based reimbursement, price transparency, and the disclosure of quality information.  Price transparency has support from over 80% of voters.  As patients bear the brunt of healthcare costs amid rising deductibles, a push to inject more transparency into the healthcare sector so patients can make informed choices for care has gained steam.

Forcing confidential rates between hospitals and payers would be a landmark shift in the nation's healthcare systems, in which most patients have scant information on even estimated costs of care before receiving services. 

This is a challenging issue. The label “consumer-driven” significantly understates the seriousness and gravity that health care decisions can carry. Even with price transparency, the public will fall way short of the facts they need to make a fully informed decision. There is a big difference between a product that does not work properly and living with the health issues and pain if the outcome from an operation falls short.  Yet, to argue, consumers do not need to know the price, especially if they are going to pay, will not work.  

Hospitals should start now to get ahead of the regulation.  We are not suggesting you hospitals broadcast confidential rates reflective of volume discounts with insurers as the final rule mandates.  We are suggesting that hospitals explore whether there is an opportunity to expand consumer packages, publish pricing specific to individual consumers, and position your organization as consumer-friendly, ahead of any government mandates.

Now is the time to choose which pricing strategy will have the maximum market penetration for your facility - premium, penetration, value-based, etc.  A well-thought-out strategy will consider impacts on direct to consumer business, health plan negotiations, the hospital’s charity care, even the non-profit hospitals reporting of its community benefits on its Form 990.

Hospitals should focus on the 300 shoppable services, especially the list of 70 CMS-specified shoppable services, like CT scans, MRIs, spinal fusion procedures, removal of breast growths, hip replacements, etc. (see Final Rule).  Hospitals should explore opportunities to collaborate with their community physicians and medical staff to create direct-to-consumer bundles and financing.  Given the overwhelming support in Congress and the public for price transparency, opposing the regulation (which has some merit), without taking publically visible steps to assist consumers, does not enhance the industry’s image. Hospitals must position themselves as consumer-friendly.

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