Skip to main content

Analysis

4 Ways Hospitals Should Prepare for the Price Transparency Rule Next Year

By Jack O'Brien  
   July 30, 2020

Healthcare stakeholders break down what the rule will mean for health systems and how provider executives should adapt.

About a month ago, a federal judge upheld a final rule issued by the Trump administration mandating two price transparency measures for hospitals.

The final rule issued by the Centers for Medicare & Medicaid Services (CMS) will require hospitals to provide patients with easily accessible information about gross changes, payer-specific negotiated charges, discounted cash prices, and "deidentified" minimum and maximum negotiated charges.

Additionally, the final rule also mandates that hospitals publicly display negotiated charges for 300 shoppable services on their websites in a consumer-friendly manner. 

Failure to comply with the final rule, which is slated to go into effect on January 1, 2021, will result in monetary fines of $300 per day. The American Hospital Association and three other hospital associations said they will appeal the ruling.

Rule part of larger transparency push

Caroline Znaniec, a managing director in the healthcare practice segment of CohnReznick LLP, a New York­–based advisory, assurance and tax firm, tells HealthLeaders that she wasn't surprised by the court’s ruling last month, noting that CMS has been "honest and open" about the goals of the price transparency measures. 

She says that there is a short turnaround time to meet the rule's deadline and she hopes that CMS will consider a six-month delay in enforcing its penalties, but says the administration is going "full-speed ahead" with policy.

"That's what CMS is looking for: the ability for hospitals to look at themselves and at their competitors, to have payers take a look at where charges may be, and where there might be some advantages as far as the hospital side and the payer side," Znaniec says.

"But also, CMS has been clear in saying that they hope this data becomes a value in helping to lower costs … and to provide the data out there for vendors … to create patient estimation tools for patient consumer experience. That's one of the other objectives of the transparency: have patients be more aware of what they're purchasing."

Related: Court Upholds CMS' Hospital Price Transparency Final Rule

While the rule goes through the courts, Congress is looking to codify the rule into law as Sen. Chuck Grassley (R-Iowa), chairman of the Senate Finance Committee, has proposed in the Healthcare PRICE Transparency Act.

With these developments occurring amid the coronavirus disease 2019 (COVID-19) outbreak, and a deadline fast approaching at year's end, it's important for hospital leaders to know how the rule will affect their business model.

Healthcare stakeholders break down what the rule will mean for health systems and how provider executives should plan for the policy change at the start of 2021.

1. Present the “value story”

Jeff Leibach, a director with Guidehouse's healthcare strategic solutions team, tells HealthLeaders that regardless of the legal fate of the final rule, hospitals need to be prepared for more price transparency in the future.

"There's going to be mounting pressure on hospitals to share their prices and reimbursement rates; that pressure is going to continue and not dissipate," Leibach says. "We think that hospitals ought to be proactive and think about where are they vulnerable, where are their risks that need to be managed in terms of rates that might be too high, and rates that they need to renegotiate because they offer a differentiated or premium service."

Leibach says he has advised his hospital clients to focus on telling the "value story" about the services offered by their organizations as they face increased downward pressure around compliance issues. He says that hospitals should be consumer-friendly and engage patients in financial conversations that focus on the primary question: What is a procedure going to cost? 

Related: Price Transparency Is Coming. How Will You Prepare

Leibach also urges providers to be proactive in negotiating and rebalancing their revenue strategy rather than waiting for payers to steer services away or for patients to choose lower-cost options. 

The one-year delay ultimately benefits payers and large employers more than providers, Leibach says, because it's going to put pressure on higher-priced and higher-reimbursed providers in a disproportionate way.

"There's a broader value story that the providers need to be able to tell, whether it's their academic missions or the communities they serve, and how commercial reimbursement supports the communities they serve more broadly," Leibach says. "It's a challenging conversation, but it's one that needs to be talked about. Unit price doesn't live in a vacuum in our healthcare system; it lives in a carefully balanced world."

2. Comply with the rule

Transparency efforts are gaining momentum at both the state and federal level, which means that hospitals shouldn't expect these efforts to backtrack, says Becky Greenfield, associate attorney at Wolfe | Pincavage, a Miami-based law firm.

Greenfield tells HealthLeaders that hospitals need to start thinking about how to comply with the price transparency rule, though she acknowledges that most provider executives aren't as focused on this issue given the recent surge in COVID-19 cases across the country. 

Related: How One Health System Is Making Prices Transparent

Most provider organizations are under financial strains and finding a vendor that can help meet compliance goals is both time-consuming and expensive, according to Greenfield, as is finding internal administrative resources to field questions and retrieve historical data.

"Based on my conversations with hospitals across the country, [executives] are generally in the beginning stages and trying to find partners to make this happen. It's not clear to me that they'll make the January 1 deadline at this point," Greenfield says.

3. Reassess outlook on rule and business practices

In conversations with hospital leaders, Znaniec says some CFOs have indicated a willingness to accept the $300 per day penalty rather than complying with the rule. Znaniec says this is a "shortsighted" approach to price transparency that will not only cost the provider organization monetarily but will also lead to publicly shaming online by CMS.

Znaniec says she has tried to get CFOs to reassess their outlook on the rule, use it to improve certain aspects of the business, and understand the evolving consumer expectations about healthcare, which have been already heightened due to the pandemic.

"I think a lot of CFOs just haven't taken the opportunity to take a time-out, sit back, and reassess where they're at," Znaniec says. "I think, at first glance, it's frightening to some because they feel like they have to reduce their charges and, in the human mind of finances, it's, 'I reduce my charges, I reduce my revenue,' and that's not necessarily the case in healthcare."

4. Shop for vendors now

Echoing concerns about the year-end deadline for complying with the price transparency rule, Paul Shorrosh, CEO of AccuReg, a revenue cycle management (RCM) company based in Mobile, Alabama, says it might be “impossible” for many provider organizations to meet the requirements.

"There's no way that IT department can find the resources to take them off their day job, and say, 'I want you to build this machine-readable file and this cost estimator within five months, fully tested and deployed. It's just too complex," Shorrosh says.

Outside of the largest, most sophisticated health systems, Shorrosh says provider organizations should be RCM vendor shopping now.

Editorial: A Lack of Price Transparency is One Reason Healthcare Costs so Much

In addition to addressing operational changes to the business, forward-thinking hospital executives should be investing in price-checking software that interfaces with payers and simplifies the user experience.

If a hospital already has a cost-estimator system, Shorrosh suggests that leaders ask the vendor if it has a public-facing feature, then test it, and evaluate whether it meets CMS requirements.

Shorrosh notes that revenue cycle leaders are looking to increase collections and improve consumer experience. He says that to win over more patients, health systems have to become more digitally oriented for consumers. This will also create financial efficiencies for the organization by accurately displaying prices on the front end for consumers and reduce costs to collect on the back end.

Bipartisan support for transparency 

The bipartisan support for price transparency is a sign that there’s a desire among both lawmakers and consumers for market-based healthcare, according to Hadley Heath Manning, director of policy at Independent Women's Forum, a conservative nonprofit policy organization.

Manning says that both President Donald Trump and former Vice President Joe Biden share a focus on promoting price transparency to help healthcare consumers, which means that regardless of how the election turns out in November, this policy will continue to be supported by the next administration in 2021.

She adds that this final rule will demonstrate which providers are of higher or lower value, and will help consumers make more informed decisions.

"[Price transparency] is not an end in itself; it's a means to an end," Manning says. "You [enact] transparency not just for the sake of transparency, which is an inherently good thing. But it's a good thing because it offers patients more financial security and control. And, ultimately, we hope [it] drives down healthcare costs."

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


Get the latest on healthcare leadership in your inbox.