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Analysis

Price Transparency: Why Disclosing Negotiated Rates Is Sticking Point for Hospitals

By Alexandra Wilson Pecci  
   July 14, 2020

A Waystar expert breaks down CMS' hospital transparency rule and shares action items for revenue cycle leaders.

Two weeks after a federal court upheld CMS' hospital transparency rule, which hospitals must be in compliance with by January 1, 2021, one of the plaintiffs in the case—the American Hospital Association—asked CMS to delay the effective date because of the COVID-19 crisis.

Although stakeholders agree that better price transparency is important for consumers, there is disagreement about what price transparency should look like on a practical level. For providers, one of the rule's biggest sticking points is the requirement to disclose negotiated payer rates.

HealthLeaders asked Ric Sinclair, chief strategy and product officer at Waystar, to explain the ins and outs of the rule, to share why revealing the negotiated rate is so troubling to providers, and to provide action items for revenue cycle leaders as they prepare to comply with the rule.

HealthLeaders: Why are hospitals and health systems fighting this rule so hard?

Ric Sinclair: Hospital providers care tremendously about the patient experience and empowering patients to make informed healthcare decisions. Hospitals believe transparency is good and necessary, but the final rule requirements seem to fall short of providing patients with true out-of-pocket information.

A recent poll of our clients found that while 70% of providers support the intent of the mandate, more than half believe there are more cons than pros with the current legislation. Not only are hospitals concerned that the mandate will introduce widespread patient confusion, but there is also major concern of the administrative lift that will be required for compliance.

Hospitals already spend enormous amounts of time and resources on administrative tasks and the final rule requirements will further burden teams that are already stretched thin, diverting resources from patient care.

This concern is only exacerbated by the ongoing strain of the COVID-19 crisis and it is not surprising that 34 hospital associations across the U.S. recently signed a petition for [the U.S. Department of Health & Human Services (HHS)] to delay the effective date.

HL: What exactly will hospitals be required to do that's different than what they're doing now?

Sinclair: Under the Affordable Care Act, hospitals are currently required to disclose a list of standard charges for procedures, but these prices are often different from what patients actually pay. The new rule has two key components:

1. Comprehensive Machine-Readable File: Providers must disclose five types of standard charges, which include gross charges, negotiated rates with insurers, minimum and maximum negotiated charges, and discounted cash prices.

2. Consumer-Friendly Shoppable Services: Provide a list of "shoppable services" for 300 items and services in consumer-friendly terms.

HL: Why is the revealing of negotiated rates such a sticking point?

Sinclair: Hospitals worry that revealing negotiated rates could result in unintended consequences that negatively impact negotiations with health insurers. Nearly 20% of U.S. GDP is spent on healthcare, and disclosure of negotiated rates could result in anti-competitive behavior with insurers that potentially drive up prices for patients.

There is also concern that disclosing negotiated rates would cause more confusion for patients, who simply want to know their expected out-of-pocket costs without getting lost in the details of standard charge data.

HL: What do hospitals and health systems want to do instead to provide price transparency to patients?

Sinclair: Healthcare providers want to do the right thing for their patients, which is a solution that would make out-of-pocket prices easier to understand without discouraging patients from seeking care.

One alternative to the HHS rule would be to provide patients with estimated out-of-pocket costs rather than a full list of negotiated and discounted rates. The [American Hospital Association] is urging CMS to collaborate with hospitals, doctors, insurers, and patients to develop policies that truly create transparency around costs, and not burden patients with potentially confusing charge information.

HL: How easily will hospitals and health systems be able to make the January 1 deadline, assuming the new rule stands?

Sinclair: Many hospitals and health systems have already started working towards compliance since the final rule was released in November 2019, but the deadline will still pose a challenge. In a poll of Waystar's clients, more than half said they are currently in early planning stages or executing on price transparency strategy.

However, many providers worry that the COVID-19 crisis will delay their progress. Compliance with the price transparency rule will not only be complex to implement and maintain, but it also requires investment in technology. Hospitals will need to compile and synthesize large amounts of data on negotiated rates, and then translate this data into searchable information that consumers can find online.

The pandemic has already placed a strain on hospitals' administrative capabilities, especially with the shift to providing virtual care. It will definitely be challenging for many providers to meet the deadline, which is why so many are looking to outside help to meet the final rule requirements.  

HL: Bottom line: Is this rule a good thing for patients?

Sinclair: Ultimately, yes—patients should have the information they need to make healthcare decisions in their best interest, and the mandate is a step in that direction.

That said, this ruling won't be the silver bullet that suddenly lowers the rising cost of healthcare or makes it easy for patients to fully understand their out-of-pocket expenses.

Meeting the requirements of this mandate will be an iterative process, and there will probably be bumps in the road but, overall, increased price transparency will benefit patients and providers, and we, along with our providers, believe price transparency is the right thing to do.

HL: What action items should revenue cycle leaders, in particular, be working on right now?

Sinclair: Revenue cycle leaders should assemble a multidisciplinary price transparency task force to evaluate and execute on the strategic, technical, operational, and legal considerations to be compliant on January 1, 2021. 

It is also important that leaders review their current processes and see where technology and automation can truly streamline workflows and supercharge staff [performance]. Removing administrative burdens such as monitoring claims status or prior authorization submissions can help providers free up resources to work on their price transparency strategy without sacrificing the quality of patient care.

Alexandra Wilson Pecci is an editor for HealthLeaders.


KEY TAKEAWAYS

Hospitals worry that revealing negotiated rates could negatively impact negotiations with health insurers.

They are also concerned that the mandate will lead to patient confusion about true out-of-pocket costs.

The COVID-19 pandemic has already strained hospitals' administrative capabilities and resources and the compliance requirements could add to that burden.


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