It’s been over 6 months since the CMS price transparency mandate for hospitals went into effect, but scrutiny has revealed spotty compliance and enforcement. The objectives of price transparency are made clear by CMS:

  1. to provide a comprehensive machine-readable file with all items and services
  2. to provide a display of shoppable services in a consumer-friendly format

These objectives are meant to increase healthcare competition, thus driving down the cost of healthcare across the board. Healthcare has remained one of the few services that consumers engage in with no foreknowledge of prices – except that it is expensive. Penalties for healthcare organizations for non-compliance with the CMS price transparency rules can be $300 per day per hospital until compliance is reached. CMS has the authority to audit hospital websites and evaluate complaints from consumers as well. 

stethoscope on hospital desk

So, how many hospitals have accomplished these objectives? And how easy is it for patients to better make informed healthcare decisions? It appears that lack of standardization in the industry and lack of specificity in the CMS directive are creating confusion and discrepancies.  Many barriers still exist for a successful price transparency initiative – both on the hospital revenue cycle side and the consumer side. 

Acknowledging industry barriers

  • Price comparisons are difficult because services are not always “apples to apples.” Some hospitals include both facility and professional fees in their estimate, and some do not. The CMS rule is not specific in this regard.  This makes comparisons challenging even when selecting the same billing code.
  • Many hospitals do not differentiate between outpatient and inpatient care.  For example, some surgeries or procedures can be done either way, and the price is significantly different. If this piece of information isn’t specified, it can be exceedingly difficult to know if the comparison is valid. 
  • Hospitals define price differently.  Hospitals use different terminology.  For some, the “standard rate” is the hospital’s gross charge.  For others it is the average charge, or median charge, or estimate.  In some cases, hospitals only provided the Medicare Advantage average rate.  Lack of standardization presents real problems when trying to compare rates. Some hospitals may take advantage of this to present their prices in the best possible light, using the terminology that is best suited for the scenario.
  • Prices may change. As healthcare organizations learn about what other organizations charge, they “could try to negotiate higher rates to match their competitors, especially in more highly concentrated markets.” 

doctors in trauma center emergency room

Acknowledging consumer barriers

  • Many of the highest ticket healthcare expenses are emergency expenses. This, of course, makes it is difficult to plan or shop around for. 
  • Listed rates may not reflect out-of-pocket costs like deductibles and copays.  Also, transparency tools only provide the basic service; if additional services are added on, then the cost may vary dramatically. 
  • There may be geographic price differences – even within the same region of the country.  One study found that a knee or hip joint replacement in the Houston, TX area could cost as little as $28,815, or as much as $45,775
  • There may be technological difficulties including tools that are not user-friendly. A Wall Street Journal investigation found that some websites by hospitals had code that prevented the machine-readable file from appearing in online searches. Other sites had the price transparency buried deep into the webpage with several click-throughs to get there.

Aiming for consistency

It looks like for both data providers (healthcare organization) and data users (patients), price transparency is not-so-transparent. Primacy inconsistencies so far include:

  • how the files are formatted
  • level of detail in payer names and markets
  • which billing codes are used
  • what the price includes, or how it is measured

It’s crucial for patients attempting to compare prices across different markets, hospitals, or even within the same city to consider these factors in their research. It’s even more crucial for healthcare organizations to tackle such concerns as these, especially as they continue to shift toward value-based care. 

Doctor with digital healthcare

Looking ahead 

A second set of rules is scheduled to take effect in 2023. This initiative will require insurers to provide rate and cost-sharing estimates for common services. The joining of the hospital and payer sides in accurate reporting of prices provides some optimism for the future that this may work after all. It certainly will require a village. 

Other comparison tools that evaluates care quality, outcomes, and patient satisfaction have been met with waves of criticism. This includes the strategies behind the star rating system and the comparisons between small rural hospitals and large systems

How will price transparency work itself out to become a successful tool for both patients and organizations? It very well may depend on consumers continuing to place pressure on this issue, as they look for “choices based on value” while organizations seek ways to “differentiate [their] brand from other competitors.”

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