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What Healthcare Marketers Need to Know about Price Transparency Changes

Learn what price transparency rules you need to be following, what needs to be on your website and other ways you could be improving transparency for health consumers.

New rules established in 2019 have many healthcare marketers wondering how to tackle putting complex data on your websites. But what if you could go beyond compliance and provide real value?

“We believe the American people have a right to know the price of services before they go to visit the doctor.” – President Donald Trump

In January 2019, CMS rules requiring hospitals to share a file with chargemaster data for their services went into effect. This data is, at best, useless to consumers and, at worst, harmful as consumers may make important care decisions based on vastly overestimated or underestimated costs.

This was always framed by the administration as only the first step in its push for healthcare price transparency, so it should come as no surprise that an additional set of rules was finalized in the fall which goes into effect January 1, 2021.

Before we dive into what these new rules say, it’s important to note that there have already been legal challenges to the price transparency rule and it is likely there will be changes implemented before it goes into effect.

As of today, there are actually two new rules coming into play – one rule for hospitals and another for health plans.

Requirements for hospitals

Here are the highlights of the plan for hospitals:

  • Expand the “Standard charges for items and services” file from the existing rules. Remember the machine-readable file of “standard charges” that you posted in January? This rule maintains that file but expands the definition of “standard charges” to include:
    • Gross charges (as found in the hospital’s chargemaster)
    • Payer-specific negotiated charges
    • Discounted cash prices
    • De-identified minimum and maximum negotiated charges

  • In addition to the expanded definition of “standard charges”, CMS has created some other definitions to clarify some elements of the transparency rules:
    • Hospital – An institution that is licensed as a hospital by the state or locality. This means these rules apply to specialty hospitals such as cancer hospitals or children’s’ hospitals but not federally owned or operated facilities such as those run by Indian Health Services, VA hospitals, or Department of Defense facilities (these facilities also don’t negotiate prices.)
    • Items and services – “All items and services (including individual items and services and service packages) provided by a hospital to a patient in connection with an inpatient admission or an outpatient department visit for which the hospital has established a charge.”

      Basically, the list of “standard charges” must include all of the pieces for which the hospital has established charges, but not the pieces which it does not control such as third-party ambulance services or non-employed providers.

  • Provide a consumer-friendly online presentation for at least 300 shoppable services. CMS defines shoppable services as “a service that can be scheduled by a health care consumer in advance, and has further explained that shoppable services are typically those that are routinely provided in non-urgent situations that do not require immediate action or attention to the patient, thus allowing patients to price shop and schedule such services at times that are convenient for them.” For each service, the following data should be available:
    • Payer-specific negotiated charges
    • Discounted cash prices
    • De-identified minimum negotiated charges
    • De-identified maximum negotiated charges
    • 70 of the shoppable services are dictated by CMS. The remainder is selected by the hospital. If the hospital provides less than 300 shoppable services, then list all appropriate services that they do provide. If the hospital doesn’t offer all of the CMS selected services, then add more hospital selected options to get as close to 300 as possible.

Unlike the previous rule, CMS has added the additional requirements that these files and tools are displayed prominently, are easily accessible, and are presented without barriers such as paywalls or registrations.

The new rule also adds a mechanism for monitoring and enforcement. While monitoring will follow complaints to CMS, there is now a penalty for failing to publish this information with fines as high as $300 per day.

Requirements for health plans

A second proposed rule also adds price transparency for health plans, the highlights include:

  • Health plans must disclose negotiated rates for in-network providers and allowed amounts paid for out of network providers on a public website
  • In addition, health plans will need to offer a transparency tool to provide members with personalized out-of-pocket cost information for all covered services in advance. “This requirement would empower consumers to shop and compare costs between specific providers before receiving care…” according to CMS.

Compliance is only a beginning – using price strategically

The first piece of this puzzle is being in compliance, that’s only a minimum bar for what your organization can and should do through this process.

The esoteric and highly variable nature of reimbursements for healthcare services has taken away one of the key tools of marketers and strategists within our industry. Remember back to Marketing 101 – what’s the last of the 4 Ps of marketing? Price!

Understanding your organization’s prices and sharing that information with consumers may be a little scary, but it opens the potential for you to begin using pricing strategically.

This begins by rationalizing prices for services within your healthcare enterprise. As you get the information assembled to meet the new compliance requirements, you’re likely to find that the same services have very different costs from location to location. These variations have been the norm in healthcare but can you justify the variation in a consumer’s out of pocket costs when that information is publicly available?

Your organization will need to take the time to sort through its pricing information to ask, possibly for the first time, what the costs for a service really ought to be and, if those costs will vary for site to site, how will that be explained or justified?

From there, we now have the opportunity to think about how price can be used to influence consumer behavior. Do we bundle a set of services together to give consumers greater predictability? Do we offer discounts or waive deductibles to steer patients to underutilized surgical suite times or less busy outpatient surgery locations? Price transparency opens the door to increase your competitiveness in ways that weren’t previously possible.

Does this accomplish what health consumers really need?

As an industry, we’ve been pushing our patients to act like health consumers. Co-pays and deductibles have soared in an attempt to force health consumers to be more active in healthcare decision making. Consumers have responded and, after years of talking about the rise of health consumerism, are now directing billions of healthcare dollars.

The challenge that we face now is that consumers are often poorly equipped to make these important decisions. Information on the price of services is an important piece of the puzzle but, ultimately, if we only give consumers information on the price of services, they’ll make decisions based only on price. Which doesn’t necessarily benefit the patient or the organization.

I’ve long viewed transparency in healthcare as a three-legged stool – price, quality, and experience. This is the next stage or price rationalization.

  • Are you pricing services appropriately given your quality metrics relative to competitors?
  • Is the experience that you deliver for your patients up to snuff given your price?
  • What changes do you make if your three-legged stool is out of balance?

Healthcare has made great strides over the years in quality transparency through the publication of a variety of quality metrics and reports as well as in the area of experiential transparency in the publication of patient satisfaction survey information such as HCAHPS and CG-CAHPS.

What health consumers need is all of this data pulled together to support the care decisions that they need to make. Need a knee replacement? Wouldn’t it be great to understand the quality, price, and experience tradeoffs of one doctor or surgical center versus another? Maybe you’re willing to pay more to be pampered? On the other hand, maybe you’re willing to deal with an unpleasant doctor if the price is right?

But for that core question – does this give consumers what they need for price transparency? The answer is still no. This is a big step forward albeit one that’s likely to change and evolve before going into force next year. At the end of the day, this step on the road to price transparency still fails to get to what consumers really want – their expected out of pocket costs.

Additional resources on price transparency rules:

What Healthcare Marketers Need to Know about Price Transparency Changes