With the new year came with a new rule from CMS requiring hospitals to post their standard prices online publicly in what CMS Administrator Seema Verma called a “first step” toward price transparency in healthcare.
Born out of a provision in the Affordable Care Act, the requirement forces hospitals to release a list of standard charges online and update the information at least once a year.
The idea, according to Verma, is to allow the spread and aggregation of this information to make shopping for healthcare a more consumer-oriented process.
“If patients don’t know the cost of care and cannot see costs across providers they can’t seek the lowest cost as they can in any other industry,” Verma said in a phone call with reporters. “The lack of price transparency has resulted in a system that doesn’t allow patients to make value-based decisions based on out-of-pocket costs.”
Critics, however, have said that these so-called chargemaster prices don’t accurately reflect what a majority of patients will pay for their care.
Not very useful, and may actually be misleading, to know “sticker prices” when that’s rarely the price that actually gets paid.
“Hospitals prices going public under new law, but is that a good thing?” https://t.co/aeD77KONbw via @nbcnews
— Martin Gaynor (@MartinSGaynor) December 30, 2018
Insured patients, which make up the bulk of the population, instead pay rates created through negotiation between their health plan and the health system, which generally include discounts from the standard price.
What nearly everyone across the board agrees upon is that the current healthcare pricing system is too opaque. This means that charges common procedures and tests like knee replacements and MRIs can vary wildly even among nearby hospitals.
What’s more is that hospitals and clinics are generally reticent or downright hostile to the idea of sharing pricing information with patients.
Michael Abrams, the managing partner of healthcare consultancy Numerof & Associates, was shocked at the lack of transparency when his firm performed a study that had secret shoppers call up hospitals to ask for the costs of common procedures.
In his mind, the CMS rule will hopefully create an environment that “legitimatizes discussions around pricing.” He added that “shining some light” around the apparent disconnect between actual out-of-pocket costs and chargemaster listings could also be a benefit in boosting transpreancy in healthcare.
“I think putting those prices out there – even with the acknowledgement that these aren’t the prices anyone pays unless they’re uninsured – may indeed still provoke conversations with hospital administrators,” Abrams said in a phone interview. “It could put administrator on the back foot and maybe they’ll be embarrassed enough to go further.”
Verma said that there was nothing preventing hospitals to provide more comprehensive pricing tools and pointed to health systems like UCHealth as a good example.
Colorado-based UCHealth developed a price estimate tool available through its online patient portal and mobile app that is able calculate out-of-pocket costs for insured patients taking into account their level of coverage and deductible.
Still, besides the requirement of the having the price list be “machine readable” there is little in the letter of the rule that governs how easily accessible the information needs to be for patients. Additionally, Verma said there exists no avenue to enforce the rule and no penalties for non-compliant hospitals.
The lack of teeth in the rule have led some hospitals to make it difficult to navigate to the posted list in prices or – in the case of Sacramento-based health system Sutter Health – publish the list in a format that is incomprehensible to the average person, but still technically “machine-readable.”
In response to new CMS rule requiring hospitals to post prices, @SutterHealth publishes in JSON format that reads like gobbledygook. Sutter justifies, saying it “complies with the rule.” Ridiculous behavior for nonprofit supposedly with a social mission.https://t.co/YbpcB9USNB pic.twitter.com/YLw4WxR35e
— John Arnold (@JohnArnoldFndtn) January 9, 2019
An analysis of hospital compliance to the price transparency rule from Clear Health Costs CEO Jeanne Pinder found a confusing lack of standardization in the way that the chargemaster prices where listed.
“The price lists we’ve seen are in a hodgepodge of different systems. Some are not alphabetized. Many use the shorthand used in billing systems. What is a “HC PL STNT DRG ELUT I/C W/PL SGL”? a “HC INS TIPS”? It costs $15,571 at Vanderbilt Health in Nashville. By leaving out any numerical coding, or by using their own coding systems, the hospitals might be observing the letter of the rule but not really being helpful,” Pinder wrote in a blog post.
In response, Pinder suggested a standardized reporting structure for healthcare data and expanding the pricing information required to be disclosed publically to include Medicare payment for procedures and cash prices and insurance-negotiated rates.
CMS said it has sought further information through RFIs on potential future requirements and enforcement actions for non-compliant hospitals.
Besides enforcement actions, Abrams said he’d like to see quality information available in a consumer-friendly format alongside pricing in order to give consumers more data points to make informed decisions about healthcare.
One example of the limitations of simple price transparency and what else needs to be done to actually help lead consumers to better healthcare choices can be found in the private sector.
When San Francisco, California-based Castlight Health was launched in 2008, it promised to offer a platform to share the prices negotiated by insurers, hospitals and physicians through data sharing contracts with payer organizations
What the company found was that pricing information was not enough. In order to guide people toward better care decisions, consumers needed objective data but also navigation tools to point them to the correct resources.
“(Patients) need personalized information. So just having generic information on price, generic information on providers, generic information on their benefits is of no use to anyone,” Kristin Mowat, Castlight’s senior vice president of corporate development, said in an interview last year.
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