Come January 1, CMS will begin enforcing new price transparency requirements for hospitals. Experts doubt that these regulations will do much to help patients shop for care, but they are optimistic that increasing the amount of publicly available pricing data will help tech companies develop tools that simplify pricing for patients.
The post Hospitals Are Facing New Price Transparency Requirements, But Will They Truly Help Patients Shop For Care? appeared first on Above the Law.
On January 1, the Centers for Medicare & Medicaid Services will begin enforcing new price transparency requirements for hospitals, including mandates to post more detailed information on the cost of drugs and the expected reimbursement amount from health plans.
These changes seek to provide more clarity for patients, but the experts interviewed for this article doubt they will make much of a difference when it comes to helping consumers shop for care. However, they have optimism that increasing the amount of publicly available pricing data will help technology companies create tools that simplify pricing for patients.
One expert even predicted that healthcare providers may begin to adopt a more demand-driven pricing model, in which providers set different prices for various buyers of healthcare, facilitated by price transparency. And just maybe, he thinks there could be a future in which price transparency leads providers to contract directly with employers without having insurers in the middle.
There are three main changes that hospitals need to prepare for come January 1, said Joe Wisniewski, the assistant vice president of channel sales at price transparency software startup Turquoise Health
The first is that they need to post “drug unit of measurement” and “drug type of measurement.”
This means that hospitals’ price transparency information will have to include how a medication’s quantity is measured, such as by milligram or milliliter, as well as specify the format, such as tablet or injectable. In other words, instead of just listing “Medication A – $200,” hospitals will need to specify “Medication A, 50 mg vial (injectable) – $200.”
“In the old model, in theory, I can post a truckload of Advil, a jar of Advil, or one pill of Advil. I probably wouldn’t be following the spirit of the rule, but in theory, I could post it however I wanted to post it, as long as that code was there,” Wisniewski remarked.
The second change hospitals must prepare for is adding modifiers to their codes. Modifiers are two-character alphanumeric codes tacked on to a procedure or service code to provide extra details about the service being provided.
For example, the modifiers “LT” and “RT” indicate whether a procedure was performed on the left or right side of the body. Another common modifier — modifier 95 — denotes that a service was provided via telehealth, Wisniewski pointed out.
The final new piece of information CMS is requiring hospitals to post is the “estimated allowed amount” — which refers to the anticipated reimbursement amount that a hospital expects to receive from a health plan for a particular service.
Wisniewski has little confidence that these changes will make a meaningful difference in Americans’ ability to shop for care. The average patient does not understand what a modifier is, nor are they well-equipped to perform calculations for complex drug pricing information, he noted.
“A lot of this is just getting this data organized so that even industry experts can understand the price of healthcare. American healthcare pricing is just so complicated,” Wisniewski declared.
The way this price transparency works in healthcare is utterly different from other industries, he added.
“The best analogy I can give you is that shopping for healthcare is like if you showed up at the car dealership — and instead of being told the Prius was $35,000, you had to look through files telling you the seat belts are 300 bucks, the engine is 10 grand, and you have to sit there and add it all up. That’s an unfair responsibility to put on a patient,” Wisniewski remarked.
Another healthcare expert — Hal Andrews, CEO of market research firm Trilliant Health — noted that CMS’ regulations only apply to hospitals, excluding other settings like physician offices, urgent care centers and ambulatory surgical centers.
He pointed out that about half of hospital admission arise from the emergency department.
“Absolutely nobody on their way to the hospital in the ambulance checks out the price transparency website,” Andrews remarked. “So for half of the hospital visits in the country, price transparency doesn’t matter at all because people are in an emergent state — they’re in a crisis. Even if it did make sense, hospital visits are about 10% of the total visit volume in the country.”
Essentially, the regulations represent a drop in the bucket in terms of healthcare utilization and corresponding price transparency.
Even though CMS’ new price transparency requirements are unlikely to make a strong impact on patients, hospitals still need to take these new mandates seriously.
Another healthcare expert suggested thathospitals won’t be able to implement these changes in the slow, haphazard way they have approached previous price transparency requirements.
“The old logic for hospitals was to send over a machine readable file that they were making messy on purpose. They just didn’t really want to deal with this, and they were doing the bare minimum. I think that’s going out the door — the market is moving fast enough transparency is a hot enough topic. There’s enough private equity getting into this space, and there are enough new companies popping up that health systems will have to play ball,” said Charlie Byrge, senior vice president of revenue at Tendo, a healthcare platform seeking to simplify patients’ care journeys.
Both Byrge and Wisniewski think hospitals’ disclosure of more detailed billing information will help tech companies to step in and create solutions that make pricing information more patient-friendly.
In other words, the more healthcare pricing information is publicly available, the more companies like Tendo and Turquoise can develop tools that truly empower patients. Hospitals are bogged down with responsibilities related to patient care and facility operations — they can’t be expected to translate complex billing information into easy-to-understand estimated costs all on their own, Byrge noted.
Wisniewski of Turquoise pointed out that hospitals’ price transparency compliance has improved over the last couple years.
CMS’ price transparency rule went into effect on the first day of 2021, and hospitals had a difficult time meeting the requirements for the first couple years. A JAMA study published in June 2022 showed that fewer than 6% of U.S. hospitals were fully compliant with CMS’ rule.
But now most hospitals are compliant with the rule — even after CMS began enforcing new requirements this year, such as the use of a CMS-mandated template for hospitals’ machine-readable files. About half of hospitals were able to meet CMS’ latest requirements in about four of five months, Wisniewski said.
“We’re seeing faster response times from both hospitals and payers to stricter rules, which means we’re getting better data on the service level for individual codes. So if [CMS] can keep getting them to post faster and get more rates online, that means there’s more pricing available for folks to start to bundle it and make it accessible to consumers,” he remarked.
Hospitals’ pricing data may not be useful to consumers yet — but the fact that they have even posted this information is a “massive step forward” given “a lot of hospitals still proudly display a fax number on their websites,” Wisniewski added.
Byrge of Tendo said that he thinks hospitals may need to start thinking about pricing differently.
“I think health systems have to start thinking about their pricing from a consumer mindset, rather than the old legacy fee-for-service type model that they do today,” Byrge declared.
In the future, he envisions a healthcare marketplace where providers can set different prices for different types of payers — such as cash-paying patients, health plans and employers. He thinks technology platforms could facilitate this marketplace dynamic, letting patients compare prices and services in real-time.
This type of marketplace leads to bulk purchasing, meaning employers might negotiate with providers for a set volume of services — such as a package of surgeries, wellness visits or diagnostics — at a lower rate, Byrge said.
He also predicted that more health systems could explore direct contracts with employers or patients, bypassing traditional insurance companies.
“What we’re hearing in the market is that a lot of our health system partners are frustrated with their contracts with large health insurers. They’re going in and out of being in-network with United, Cigna and Aetna, because they’re constantly fighting over rates — and they want to go with what they call direct-to-employer or direct-to-patient contracts, which is 100% fueled by price transparency. If you have transparency in the pricing, you can create direct contracts directly with the patient,” Byrge explained.
The marketplace model Byrge described may seem like a faraway fantasy, but he thinks this is the direction that healthcare pricing needs to take going forward — getting the data out in the open in the first step.
Photo: sorbetto, Getty Images
