Show Me the Price List!

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Compliance with CMS rules requiring hospitals to publicly post prices shows road to transparency is not always so clear

by Philip Qualo, J.D.

In an effort to empower healthcare consumers and further White House initiatives focused on making patients a priority, the Centers for Medicare and Medicaid Services (CMS) finalized a rule in August 2018 that included a requirement for hospitals to post their price lists online. Specifically, the rule requires hospitals to publicly post their charges online in a machine-readable format on annual basis. The mandate stems from the 2019 Inpatient and Long-Term Care Hospital Prospective Payment System (IPPS/LTCH PPS) Final Rule. Although this new rule has only been in effect since January 1, 2019, efforts by hospitals to comply with the rule are showing that transparency is not always a synonym for clarity as many healthcare consumers struggle to locate these price lists or even understand them.

Although the primary intent of the rule is to encourage patients to make informed decisions about their medical care, price transparency also provides employers and plan sponsors who offer self-funded health coverage with more opportunities to contain costs. It arms self-funded health plans with the information necessary to make cost effective decisions regarding provider requirements and maximum allowable charges. It also provides employers and plan sponsors with the information necessary to implement cost containment incentives that encourage utilization of hospitals that provide quality care at a reasonable price.

The transparency rule could help to curb the rapidly rising costs of healthcare services overall. According to the 2018 UnitedHealthcare consumer sentiment survey, patients are price shopping more today for healthcare services than ever. The survey indicated that thirty-six percent of Americans used the Internet or a mobile app to comparison shop for healthcare during the past year. That is more than double from fourteen percent in 2012 (according to another UnitedHealthcare study). As more consumers are becoming price savvy with their healthcare needs, the requirement to publicly post price lists could encourage hospitals to compete with each other and reconsider their pricing when faced with competitor price lists that offer similar quality services at a lower cost.

In order to reap these rewards, however, it is imperative that hospitals make good faith efforts to comply with the rule in a manner that furthers the ultimate goal of providing all consumers with more than just a price list, but rather a clear and accurate accounting of true healthcare costs. That said, many healthcare providers have expressed serious concerns about the new rule. According to a recent survey of 150 healthcare participants conducted by PMMC Healthcare Business Insights, approximately 92 percent of healthcare providers are concerned about how their charges will be perceived by the public.

Critics of the transparency rule have argued that a lack of specific guidance regarding the location and content of publicly posted lists will allow providers to demonstrate bare minimum compliance with the rule in ways that would undermine the goal of true transparency for the average consumer. For example, the rule does not specifically require that hospitals prominently display their respective price lists in a manner that would promote its availability. Hospitals could potentially post their price lists in a manner that would make the list generally inaccessible to consumers with less than savvy computer skills. The rule has also been criticized for not requiring hospitals to organize the content of price lists to ensure procedures and prices are displayed in easy to understand terms so that the average individual (i.e., one without a background in healthcare) could easily understand.

You Have the Right to Know the Price
When facing any policy issue, it helps to take a step back and run it through the lens of common-sense. Can you imagine going to the grocery store, getting the groceries you need for the week, but never knowing the price of your items until a week later when the store sends you a bill? Sadly, that’s how health care works every day.

~Seema Verma, Administrator of the Centers for Medicare & Medicaid Services

In response, CMS released additional guidance in October 2018 that clarified, among other things, the definition of machine-readable and what items and services furnished at the hospital must be included on the publicized list. CMS opined that price lists must contain the hospital’s standard charges for items and services provided. The guidance also confirmed that hospitals are free to choose how to make the standard charges public on the Internet. In regards to format, CMS advised that hospitals can use whatever format “as long as the information represents the hospital’s current standard charges as reflected in its chargemaster.” CMS also defined a machine-readable format as “a digitally accessible document but more narrowly defined to include only formats that can be easily imported/ read into a computer system (e.g., XML, CSV).” The recent guidance from CMS also encouraged hospitals to go beyond the bare minimum requirements of the new rule as it noted that hospitals are not restricted from posting additional quality price transparency information. In fact, the federal agency encouraged hospitals to provide consumer-friendly communication regarding hospital charges; however they did not make this a requirement.

As the January 1, 2019 deadline has now passed, the lack of a specific definition of “consumer-friendly” communications has resulted in hospitals demonstrating compliance with the new rule in a non-uniform manner which has created some confusion. For example, some have chosen to prominently display a link to their price lists on their homepage along with contact information for any individuals with questions about the listed prices. Others have done the opposite and buried their price lists so deep into their website that they only could be located through a Google search. In a review of several hospital price lists that have been posted since January 2019 there appears to be a consistent theme – a lack of organization and the use of diagnostic codes, acronyms and medical terminology only a claims administrator or medical professional would understand. One price list I personally reviewed was hundreds of pages long. In navigating through the novel length price list I conducted a general word search in an attempt to find the price of common procedures in layman’s terms with very little success.

The CMS price transparency rule is a shift in the right direction toward empowering self-funded health plans and healthcare consumers with information necessary to make informed decisions. Before we can reap the benefits of this rule price lists need to be more than just “transparent”, they need to be clear, easily accessible and presented in terms that the average American can understand. Without uniform guidance on how to accomplish this, we have only just begun our journey to true price transparency has just begun. As with any new law or regulation, there is sure to be further guidance from CMS as the agency audits compliance with this new rule and responds to requests for additional information. Therefore, as transparency continues to be molded by CMS, with hospitals and healthcare providers leading the trend, we can expect to see additional requirements, or at minimum a uniform best practices guide, that mandates where the price lists must be posted on a hospital’s website and how the content of the list should be communicated. More importantly, we can expect to see resources and guidance developed to educate healthcare consumers on how to understand and use the information to make the decisions regarding their healthcare. Only when price transparency becomes synonymous with price clarity will the benefits of the newly-effective CMS requirement make a positive impact on healthcare pricing overall.

Philip Qualo, J.D., joined the The Phia Group, LLC in June 2018. In his current role as a Compliance and Regulatory Affairs Consultant, Philip provides consulting services to employers, third-party administrators, brokers, and vendors on an array of topics focused human resource and employee health benefit plan compliance. He proactively monitors the legal and regulatory environment to identify legal, regulatory and compliance-related gaps and advises internal and external stakeholders on areas of risks.

He earned his J.D. from Villanova University School of Law and his B.A. in both Philosophy and English from Loyola University Maryland.  Philip’s professional experience has ranged from practicing employment law, specializing in disability litigation, to managing federal grants and advocating for underserved communities on behalf of National Alliance on Mental Illness (NAMI).