CMS Hospital Price Transparency: Everything You Need to Know

CMS Hospital Price Transparency: Everything You Need to Know

Key Details Related to This Ruling

By Morgan Atkins

On November 15, 2019, the final price transparency rule was issued by CMS. It went into effect on January 1, 2021. Here's what hospitals need to know about the goal of this ruling and what they have to do to achieve compliance. 

The Cliff Notes 

A couple of key points hospitals should keep in mind:

  • All hospitals must participate, though it’s not applicable to federally owned hospitals (VA, IHS, Tribal)
  • Prices must be updated annually

There are two essential parts to the ruling:

Part 1: Hospitals must share a comprehensive list of standard charges. The list must be in a single machine-readable file format. 

Part 2: Hospitals must share a consumer-friendly list of 300 shoppable services. 

  • CMS lists 70 services that must be included in the 300; hospitals can select the other 230
  • There’s no requirement for how to post this list, i.e., a machine-readable format is not required. And the listing requirement is waived for hospitals already providing internet-based price estimator tools for patients.

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Here’s a detailed summary of the ruling from the Department of Health and Human Services: “This final rule establishes requirements for hospitals operating in the United States to establish, update, and make public a list of their standard charges for the items and services that they provide. These actions are necessary to promote price transparency in health care and public access to hospital standard charges. By disclosing hospital standard charges, we believe the public (including patients, employers, clinicians, and other third parties) will have the information necessary to make more informed decisions about their care. We believe the impact of these final policies will help to increase market competition, and ultimately drive down the cost of healthcare services, making them more affordable for all patients.”

The Goal of this New Rule

The intention is to inform patients, increase market competition, and ultimately lower the cost of healthcare services for patients. The goal is to also help reduce out-of-pocket expenses, which have drawn criticism and scrutiny in recent healthcare discussions. These out-of-pocket expenses particularly impact the uninsured (about 26.1 million people), those on high-deductible health plans, and coinsurance costs.

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Key Definitions

As is often the case with new regulations, there are key new terms that are helpful to understand. Below we’ve defined several that we’ve noted to be important.

  • Shoppable service - services that can be scheduled by a healthcare consumer in advance. See the of this post for a list of shoppable services.
  • Standard charge - the regular rate established by the hospital for an item or service provided to a specific group of paying patients; to qualify as a “regular rate,” the rate must be formalized in advance (through hospital contracts or fee schedules) and there must be an identifiable group of patients for whom that rate would usually apply
    1. Gross charges from charge masters
    2. Payer-specific negotiated charges
    3. Standardized discounted cash prices offered to self-pay patients before any individualized discounts
    4. Maximum third-party negotiated charges for a given item or service without identifying the specific payer (de-identified maximum negotiated charges)
    5. Minimum third-party negotiated charges for a given item or service without identifying the specific payer (de-identified minimum negotiated charges)
    • 5 categories of standard charges for hospitals to disclose:
  • Machine-readable file - The five types of standard charges must be published in a single machine-readable file format, which can include a CSV, JSON, or XML file. 
  • Base rate - rates that are the non-adjusted, final payment received by the hospital for a packaged service. It should include all possible permutations of cost based on each individual situation.

Why Compliance is Important

Curating this pricing list is no small task for hospitals, but the hassle and time commitment is likely inevitable, as the CMS will be auditing hospitals for compliance starting in January 2021. Hospitals will be fined $300 a day for non-compliance. On a more positive note, this list will likely be very helpful for patients, who long to be more informed consumers. Patients will appreciate efforts taken by hospitals to be as upfront as possible about the rates they charge care.

The Takeaway

The price transparency rule was designed to empower patients to make savvier healthcare decisions. If you have questions about navigating this regulation, or if you're interested in learning more about how Stratasan's products offer price transparency, schedule a discovery call with one of our experts today. 

 

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